Asian casinos will try just about anything to attract Chinese gamblers

Vincent Yu  / Associated Press

Mainland Chinese visitors gather at the lobby of the Galaxy casino in Macau

Bloomberg (by Liza Lin):

At the oceanfront Ramada Plaza hotel on South Korea’s Jeju island, about a hundred Chinese gamblers huddle around felt-topped tables, wagering as much as 5 million won ($4,500) at baccarat. Shouts in Mandarin — “Beautiful!”, “Good!” — ring out as bettors with winning hands slam their cards on the green table-tops.

Asian casino operators from South Korea to Australia are pulling in China’s gamblers as the country’s corruption crackdown scares many away from Macau, the world’s biggest gambling hub. They are capitalizing on a downturn in the city’s gaming industry, which last month suffered its worst drop ever.

Operators such as Paradise Co. in South Korea are hiring Mandarin-speaking staff and offering VIP treatment including free flights, limousines and hotel stays to big spenders. Echo Entertainment Group Ltd. of Sydney and NagaCorp Ltd. in Cambodia cater to the junket operators who organize trips for Chinese gamblers with perks such as higher commissions, lower taxes and private jets.

Premium mass players can be recognized as VIP players and treated better than in Macau,” said Lee Hyuk-Byung, vice chairman of Paradise, in an interview in Seoul. “And we have other attractions in Korea such as culture, fashion, food.”

Macau casino revenue fell last year for the first time and may decline another 8 percent this year, according to analysts surveyed by Bloomberg. By contrast, South Korea and the Philippines will grow 16 percent and 33 percent respectively this year, gaining from the spillover of Chinese gamblers, Deutsche Bank analyst Karen Tang wrote in a note.

Plastic Surgeons

President Xi Jinping has urged Macau, the only place in China where casinos are legal, to diversify from gambling. Macau’s government imposed more scrutiny over junket operators, as mass market gambling also weakened amid China’s economic slowdown, and new restrictions on visas and cigarette smoking.

The anti-corruption measures are discouraging some people from traveling to Macau, and as a result we are seeing a slight shift in travel from Macau to other destinations,” said Aaron Fischer, a Hong Kong-based analyst at CLSA Ltd. “Vietnam and Philippines will likely benefit as they are the closest. Korea will pick up people in the northern parts of China.”

Gamblers who bet at least $50,000 at Paradise’s casinos qualify for freebies usually available only to VIP players, Lee said. In Macau, the minimum needed to get similar perks from junket operators is about $500,000, according to CLSA data. The company also draws Chinese gamblers to the celebrity-obsessed country by touting its pop culture and offering recommendations of top Korean plastic surgeons, Lee said.

Operators have more risqué offerings too. A gambler who exchanges 300,000 yuan ($48,000) worth of chips can receive free flights to Jeju, tours with a Mandarin-speaking guide, and the companionship of a “third-tier” Korean actress or model, according to an e-mailed brochure from Shanghai-based tour operator CNS. A CNS travel agent, who would only give her name as “Xiao Qi”, confirmed the services when contacted by phone.

Shanghai and Shenyang

It’s illegal for foreign companies to advertise casino operations in China and Paradise avoids public solicitations, Lee said. Its staff reaches out to high-stakes gamblers recommended by existing customers and makes frequent trips to major Chinese cities including Beijing and Shanghai, he added.

Companies are able to sidestep China’s ban on casino marketing by advertising non-gaming aspects such as a concert or entertainment show held on its venue, said Grant Govertsen, an analyst at Union Gaming Group in Macau.

Junket operators own restaurants, night clubs, they sponsor golf tournaments and other getaways,” Govertsen said in an interview. “There is plenty of stuff a junket could advertise in a mass-market sort of format.”

Still, foreign operators’ efforts to attract China’s gamblers have caught the notice of local authorities, which announced last month a crackdown on representative offices that “attract and recruit Chinese citizens” to casinos.

Peking Duck

Manila’s members-only Signature Club in Melco Crown Entertainment Ltd.’s City of Dreams casino has entrance signs in both English and Chinese, while Mandarin-speaking staff direct guests to cashiers, shops, and restaurants. The neighboring Solaire Resort and Casino owned by Bloomberry Resorts Corp. has suckling pig and Peking duck on the menu, catering to Chinese palates.

There are a lot of excuses to go the Philippines; we always promote the Philippines not on the casino but the whole package,” Cristino Naguiat, chairman at gaming regular Philippine Amusement & Gaming Corp., said in an interview.

Even with the crackdown in China, we still had higher volume in terms of gross gaming revenue and in terms of junket and VIPs,” he said last month in Manila.

Too Many Chinese

South Korea is preparing to welcome more Chinese gamblers after tourist arrivals from the country rose last year to 6.1 million, with new casinos planned including at Incheon Airport.

On Jeju island, junket operators have set up shop to offer gambling chips on loan, a service common in Macau that helps bettors sidestep China’s limits on taking currency out of the country.

Competition between the island’s eight foreigner-only casinos has led to a flourishing of more than 100 unlicensed junket operators and their agents on the island, said Seo Won- Seok, a hotel and tourism management professor at Kyunghee University in Seoul.

As Chinese gamblers become more important, there’s a need to better regulate the growth of the junket operators that bring them, he said.

Our casino industry may be too dependent on the Chinese market and that means there is always risk from China’s government policy,” Seo said. “I think that’s the downside — too many Chinese in Korea.”

 

 

Chinese wealth transforms South Korea’s Jeju Island

Wall Street Journal/NY Times:

When Kim Ho-san opened an apparel store on South Korea’s southernmost resort island of Jeju in 2012, she was well-positioned to benefit from a rising flow of Chinese tourists.

Six months later, the 36-year-old was asked by her landlord to leave. As visitors from China drove up sales, the property owner told her he wanted to run his own shop on the site to cash in, she says.

Since then, the number of Chinese visitors to Jeju has soared, bringing wealth and jobs but also generating tension among locals, as well as some resentment toward the tourists. Locals say scuffles occasionally break out between Koreans and Chinese visitors in shops and bars.

A surge in property investment from China is also reshaping the local economy and juicing land prices. Condominiums, hotels and casinos are springing up around the island—a development welcomed by local officials eager to boost the sleepy island economy but opposed by some residents and businesses. One Korean-run hotel has erected a banner to deny rumors that it had been bought by Chinese after it was boycotted by some locals.

A map from Kim Tae-il, a professor at Jeju National University, based on data from the Jeju government, shows land owned by Chinese developers or individuals in Jeju.
A map from Kim Tae-il, a professor at Jeju National University, based on data from the Jeju government, shows land owned by Chinese developers or individuals in Jeju.

Land owned by Chinese individuals and developers on Jeju, known for its white beaches, volcanic landscape and clean air, more than doubled last year. One catalyst is South Korea’s offer of permanent-resident status for big foreign investors on Jeju, allowing them the same medical, education and employment benefits as South Koreans.

Kim Tae-il, a professor at Jeju National University, likens it to a real-estate frenzy in Hawaii in the late 1970s among Japanese investors who bought skyscrapers, condos and other property as the yen surged against the dollar.

The Chinese have come to town and have started buying without worrying about price—just like the Japanese did in Hawaii,” he said.

Reflecting rising incomes and eased travel restrictions, the Chinese were the world’s largest group of outbound travelers last year, taking more than 100 million trips outside the mainland. Research firm CLSA expects that figure to double by 2020, an attractive potential economic boost for countries that can lure in Chinese travelers.

South Korea has been particularly welcoming for Chinese visitors to Jeju, exempting them from visas needed to visit other parts of the country. The popularity of South Korean pop music and TV dramas in China and a gradual appreciation of the Chinese currency has also helped draw visitors. So has geography: Jeju is a one-hour flight from Shanghai and 2½ hours from Beijing. “The major reason for most people to travel to Jeju is that it’s visa-free. And the price for group travel is so cheap,” said Willa Wu, a Hangzhou, China, businesswoman who has traveled to Jeju several times.

The number of Chinese visitors to Jeju jumped 58% to 2.9 million people last year, almost a half of a record 6.1 million Chinese tourists to South Korea in 2014. In another move to jump start the local economy, authorities eased investment rules in February 2010, giving permanent residency to foreigners who purchase property worth at least 500 million won ($450,450) in designated districts and who keep them for five years.

Until tourism transformed Jeju, it was a sleepy island dedicated mainly to farming and fishing. So many men left the island for better jobs that the predominance of women was one of the three things the island was most known for. The other two were wind and volcanic rocks.

As South Korea’s economy exploded, the island became a favorite destination not only of South Korean honeymooners, but also for school trips. (Most of the 304 people killed in a ferry accident last April were students headed to Jeju.)

For a time in the last several years, Jeju was especially welcoming to the Chinese, whom officials thought could help vault the island from a regional destination to an international one.

Although South Koreans have long ensured that Chinatowns did not form in their cities, Jeju became the first province to give one of its busiest shopping districts a Chinese name. Baojian Street was named after a Chinese health care product company that brought 11,000 employees to Jeju on incentive tours in 2011.

Lisa Xue, 60, a Chinese tourist on a recent visit, said she and others were attracted to the island by its proximity — just a two-hour flight from Beijing — while wealthy Chinese saw it as a good place to buy property.

But in the last year or so, local news media and critics began accusing Chinese real estate investors of “encroaching upon” Korean land. They also complained that most of the Chinese tourists were brought to Jeju by Chinese tourist agencies and not only violated some social mores, but often stayed, ate and shopped in Chinese-controlled hotels, restaurants and shopping centers.

In a survey of 1,000 islanders last year, 68 percent said the growing number of Chinese tourists did not help Jeju’s development.