South Korean tourism hits record highs amid casino sector struggles

South Korea is seeing a significant surge in international tourism, with cumulative foreign visitors reaching 17.11 million through September, a 21.5% increase compared to the previous year. Foreign card spending in the tourism sector has jumped 47.7% year-on-year, totaling approximately 15.94 trillion won. Growth is driven largely by Asian markets, particularly China, which saw 5.47 million visitors, followed by Taiwan and Japan.

Despite the overall boom in visitor numbers, South Korean casino stocks, including Paradise, Lotte Tour Development, and GKL, have faced significant downward pressure. Investors are concerned by a combination of factors: the seasonal off-peak period, a strengthening Korean won, and potential regulatory changes. Specifically, the government is considering raising the Tourism Promotion and Development Fund contribution cap for foreign-only casinos from 10% to 15%, which could significantly impact profitability.

Additionally, capital regulations in China regarding offshore trust income have dampened the spending sentiment of high-rolling Chinese VIPs. While visitor volume is increasing, the average spending per person has shown signs of decline in certain segments.