Foreign Tourists Return... Macau Stumbles, but Korean Casinos Thrive [Weekend Money]

1. 1.95 Million Foreign Tourists in May, Up 19% Year-on-Year
2. Macau Casino Revenue Down... Korean Casinos Maintain Relative Advantage
3. Samsung Securities: "Domestic Operators' Valuation Premium Should Be Expanded"

Exterior view of Lotte Tour Development Dream Tower Casino

As foreign tourists return, the outlook for Korean casino stocks is also changing. Foreigners-only casinos, which had been sluggish for a while, are now regaining growth momentum thanks to the rebound in inbound tourism.

What is particularly interesting is that the trend in Korea is diverging from that of Macau. In June, Macau—the leading casino market in Asia—saw its total casino gross revenue fall by 12% compared to the previous year. In contrast, Korean casino operators performed relatively well, buoyed by an increase in foreign tourists. Analysts in the securities industry have even suggested that domestic casino companies deserve a higher valuation premium than their Macau counterparts.

On July 4, Samsung Securities projected that, given the structural growth of inbound tourism in Korea, domestic casino operators would continue to outperform their Macau peers in the second half of the year.

Foreign Tourists Choosing Korea Over Japan

Yonhap News Agency

In fact, in May, the number of foreign tourists visiting Korea reached 1.95 million, up 19% from the same period last year. Cumulatively, from January to May this year, the total reached 8.72 million, marking a 21% increase year-on-year. By nationality, Japanese tourists rose by 21%, while Chinese tourists increased by 25%, driving the overall growth.

The main reason for the increase in foreign tourists in the first half of the year was the depreciation of the won, which made traveling to Korea more price-competitive for foreigners. Additionally, the deterioration of relations between China and Japan prompted some Chinese tourists to choose Korea as an alternative destination instead of Japan.

The inbound tourism growth trend is likely to continue in the second half of the year. The visa-free entry program for Chinese tour groups has been extended, and Japan has raised its tourism departure tax from 1,000 yen to 3,000 yen as of July. Japan has also tightened requirements for single-entry visas and introduced policies to curb overtourism. As travel to Japan becomes more burdensome, there are expectations that some of the tourism demand will shift to Korea.

Casino Operators See Rapid Growth in Earnings

Casino operators posted better-than-expected results in June. Despite concerns that summer vacation demand might be pushed back and that betting demand could be dispersed by major sports events such as the World Cup, Korean casino companies broadly benefited from inbound tourism growth.

The most notable performer was Lotte Tour Development. Lotte Tour Development’s casino drop amount in June was 266.2 billion won, up 10% from the same period last year. The drop amount refers to the total value of chips exchanged by customers to play casino games and serves as a leading indicator of casino revenue. Total revenue in June rose 36% to 48.7 billion won, while the hold rate—a measure of the percentage of money the casino retains from games—climbed 3.5 percentage points year-on-year to 18.3%.

The growth trend is even more pronounced for the second quarter as a whole. Lotte Tour Development’s casino drop amount for the second quarter amounted to 760.6 billion won, a 14% increase over the previous year, and revenue climbed 34% to 147.1 billion won. These results surpassed market expectations (consensus), setting a new quarterly record for casino revenue.

GKL also posted rapid growth. GKL’s drop amount in June was 327.8 billion won, up 9% year-on-year, and revenue increased 7% to 37.2 billion won. For the second quarter, the drop amount rose 15% to 1 trillion won and revenue climbed 19% to 120.5 billion won. Compared to the first quarter, which was flat year-on-year, the pace of growth picked up significantly from the second quarter onward.

Macau Fades, Korea Rises

The main reason domestic casino stocks are receiving greater attention is the comparison with Macau. Macau’s casino gross revenue growth was 6% in April and 7% in May, but it turned negative with a 12% drop in June. On a second-quarter basis, it declined 0.1%. The growth rate of visitors to Macau slowed from 11% in April to 3% in May, and it is believed that the World Cup drew away some of the betting demand, dampening casino demand.

In contrast, Korea continues to see robust growth in inbound tourists, with expectations for further increases in foreign visitors in the second half of the year. While Macau faces a slowdown in casino-specific demand, Korea is benefiting from the broader trend of tourism recovery.

There is also a growing argument that valuations deserve to be reevaluated. The expected price-to-earnings ratio (PER) for domestic casino operators is an average of 13 times for 2026 and 10 times for 2027. The average for Macau operators is projected at 12 times for 2026 and 9 times for 2027. With double-digit revenue growth continuing, there are expectations that the premium for domestic companies could expand further. Lee Hyeyeon, a researcher at Samsung Securities, explained, “Given the ongoing structural growth in inbound tourism to Korea, domestic operators’ relative earnings advantage over Macau will continue in the second half of the year. Their valuation premium should also expand.”

This content was produced with the assistance of AI translation services.