Paradise City, a US$1.4 billion integrated resort in Incheon, includes an arty take on the traditional Korean bath house.Muhammad Cohen

A recent article by The Innovation Group’s Michael Vanaskie examines the casino cluster effect in spurring extraordinary tourism and gaming revenue growth in Macau and Manila. Naturally, other jurisdictions are trying to emulate that success, including Incheon in South Korea, where Paradise City opened its initial phase nearly two years ago and two more integrated resorts are being developed. With IRs done right, Incheon, about an hour from Seoul, could become a regional cluster for gaming and more.

Korea’s first casino operator, Paradise partnered with Japanese electronic game specialist Sega Sammy to create US$1.4 billion Paradise City, the first IR on the Korean peninsula. Paradise leads South Korea’s foreigner-only casino market – only one of the country’s 17 casinos is open to Korean nationals – and Paradise City sits on the doorstep of Incheon International Airport, the gateway to Korea, handling more than 60 million passengers annually.

After a slow start, Paradise City revenue has climbed since Phase 1-2 opened in September featuring a retail plaza, boutique hotel, Northeast Asia’s largest nightclub, art museum and East meets West spa. Thawing relations with China, following frost tied to the 2017 deployment of THAAD missile defense system, have helped, with Chinese arrivals up 15% last year nationally from their 2017 nadir. Uptick aside, Paradise City president and CEO Pyung-yong Park says he’ll welcome IR neighbors.

Caesars Entertainment’s casino resort, due to open in 2021, is a 15 minute drive from the airport. “Since Caesars new IR will be the first and only internationally branded integrated resort in the region, its debut will add a differentiated IR option,” Caesars president of international development Steven Tight says.

Caesars Entertainment expects to open its Incheon IR in 2021.Caesars Entertainment

“Furthermore, as evidenced by other markets such as Las Vegas, Macau and Singapore, an IR fosters innovation in tourism products – new shows and attractions, better rooms, higher quality services which attract more visitors.”

At the opposite end of airport from Paradise City, U.S. tribal casino operator Mohegan Gaming and Entertainment is due to open Inspire, dubbed an integrated entertainment resort or IER. In December, Inspire signed a deal with Paramount Pictures – Titanic, Friday the 13th, Star Trek – to create a theme park.

South Korea’s largest indoor sports and concert venue with 15,000 seats, Inspire Super Arena will try to duplicate the success of Mohegan Sun Arena, located at the casino resort midway between New York and Boston, using Mohegan’s U.S. entertainment promoter Live Nation to provide acts. Scheduled to open in phases from early 2022, Inspire will also have a private air terminal, indoor climate controlled water park and pool area, plus the biggest hotel ballroom in the Incheon/Seoul area.

U.S. tribal operator Mohegan Gaming and Entertainment has added a Paramount Pictures theme park to its Inspire project, now expected to open in early 2022.Mohegan Gaming and Entertainment

“This is a combination of integrated attractions that just doesn’t exist in market today,” Mohegan Gaming CEO Mario Kontomerkos says. “Inspire is the perfect catalyst to spark Incheon’s transformation into the industry’s next major entertainment hub.”

Innovation’s Vanaskie cautions there’s more to creating a cluster effect than simple addition: under their monopolies, Macau and the Philippines had dozens of casino but no clustering benefits.

Competition helps, and Vanaskie measures that in terms of investment. Macau operators poured more than US$23 billion into projects over the 10 years from the 2004 opening of Sands Macao. Annual gross gaming revenue grew from around US$5 billion to US$45 billion.

In the Philippines, starting with the 2010 opening of Resorts World Manila, there’s been roughly US$5 billion invested. GGR has risen from US$700 million in 2009 to US$3.6 billion last year.

Landing International’s Shinhwa World combines a theme park, K-Pop and convention center on Korea’s popular Jeju Island.Landing International

The other key factor for Vanaskie is a solid tourism base. Macau attracted 9 million visitors in 2004 and went to 15 million in 2013. The Philippines recorded about 3 million visitors in 2009, up to 7.1 million last year.

Incheon is likely to see investment on a similar scale to the Philippines, depending on how quickly Paradise City and Inspire fire up their second phases – Inspire envisions a 2025 opening for the Paramount park. On the tourism side, Korea attracted 13.3 million visitors in 2017 – the majority of them via Incheon, analogous to the Philippines and Manila – down 3.9 million from 2016 due to China tensions, and 15.3 million last year. If Incheon’s envisioned investments are made, Philippine level growth could lie ahead for Korea’s foreign casino GGR, an estimated US$1.6 billion last year.

Vanaskie’s paper also notes that clustering isn’t the only option for revenue and tourism growth by gaming. Singapore used a pair of stand-alone iconic IRs to make its gaming bones. On Korea’s popular Jeju Island, Shinhwa World and Jeju Dream Tower are reprising the Singapore model Korean style with investment approaching US$3 billion. The Korean gaming pie should grow, but who’ll get the biggest pieces is no sure thing.