A proposal by Korea’s government to increase the contribution rate foreigner-only casinos must pay to the Tourism Promotion and Development Fund from 10% of revenue to 15% could hit profits by as much as 37% in 2026 alone and result in a major scaling back of capex investment, according to industry analysts.
As reported by Inside Asian Gaming, the proposed contribution hike forms part of a broader reform plans that would also include a new license renewal process and a prior approval system for changes to major shareholders with the aim of shifting from the existing licensing system to one based on greater oversight and periodic reviews.
With casino stocks having plummeted in the days since the news first broke, industry analysts have warned that such a hefty increase would not only damage recent investor confidence in the sector but hurt the ability of operators to protect themselves from rising regional competition in the gaming tourism space.
“If the contribution rate to the Tourism Promotion and Development Fund is raised from the current 10% to 15%, this year’s profit estimates will decrease by 29% for Paradise, 21% for Lotte Tourism Development, and 37% for GKL compared to previous estimates,” said Ji In-hae, analyst at Shinhan Investment & Securities, as quoted by The Korea Economic Daily.
“Although there are no precise guidelines yet, a deterioration in investor sentiment and increased uncertainty regarding future earnings outlooks are inevitable, so we are uniformly lowering the target share prices for the three foreign-owned casino companies.”
Lee Ki-hoon, analyst at Hana Securities, added that the impact would be most heavily felt in the short-term by Paradise Co and Grand Korea Leisure (GKL) rather than Jeju Dream Tower operator Lotte Tour Development, because the latter is subject to the Special Act on Jeju Island rather than the Ministry of Culture, Sports and Tourism.
As such, “Immediate concerns are excessive. However, if investors worry that the contribution rate to the Jeju Tourism Promotion and Development Fund will also be raised, there is no way to dispel those concerns.”
Analysts also pointed out that foreigner-only operators have invested heavily into their facilities in recent years in an effort to boost appeal ahead of the 2030 opening of Japan’s first integrated resort, MGM Osaka, warning that this capex spend could now be forcibly cut back.
“Beyond the deterioration of performance for domestic foreign-owned casino companies, a blow to the industry as a whole is inevitable,” said KB Securities’ Choi Yong-hyun.
“From a mid-to-long-term perspective, the domestic foreign-owned casino industry is in a situation where it must prepare for competition with Japanese integrated resorts in four years.
“The investment scale of the integrated resort development project in Osaka, Japan, which aims to open in the fall of 2030, is … overwhelmingly larger than that of domestic companies.”
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