INTERVIEW 'Kangwon Land will become multi-purpose vacation resort'

A bird's-eye view of Kangwon Land in Jeongseon, Gangwon Province. Courtesy of Kangwon Land

CEO Lee Sam-kul

Ex-vice interior minister and CEO outlines growth vision beyond casino operations

By Lee Kyung-min

Kangwon Land will continue efforts to transform itself into a multi-purpose, high-end vacation resort that can accommodate people of all ages with different leisure interests in all seasons, an initiative under the CEO Lee Sam-kul, whose growth vision prioritizes sustainability of the state-run casino operator, long criticized for promoting gambling.

“The healthy, long-term survival of the state-run entity will be on the line unless we prepare new business models that can overhaul the dominant negative public perception about the province, which is blessed with the gift of nature and warm-hearted people,” the former vice minister of the interior ministry added.

Kangwon Land opened in 1998 as a casino to revitalize the local economy following the closures of mines ― the region's key growth driver. It has since built a resort with a golf course, hotel rooms, a water park and ski slopes. Almost 90 percent of its revenue is generated by casino operations.

“It's about the future, not about how much money we make each quarter,” Lee said in an interview with The Korea Times at the company's headquarters in Jeongseon, Gangwon Province, July 28.

His vision faces clear limitations, due largely to a single, three-year term limit. Opposition from unionized workers and stakeholders with varying interests in the region reluctant to change, pose a substantial stumbling block. However, a leader should, in his view, outline a goal that can last even after he is out of the picture.

The casino is currently the biggest source of Kangwon Land's profit. But any sense of complacency, he stressed, must be overcome by efforts to identify new sources of sustainable growth.

“I'll leave sooner or later, but I want to be remembered as a person who asked hard questions and worked together to find answers for the future of this firm,” said Lee whose term as CEO began in April last year. “That will be more than enough for me and the very least I can do during the short period I'm here.”

Its casino operation brought in about 697 billion won ($530 million) in sales last year, accounting for 88.5 percent of the firm's total revenue. The remaining 11.5 percent came from resort operations.

Lee plans to raise the figure to 20 percent by 2030, mostly by stepping up the development of forest-related healing and therapy programs, enhancing amenities for visitors including pet owners and establishing historical tourism sites. Also to be fortified is overseas business expansion.

The most challenging aspect, Lee added, is people associating Kangwon Land only with gambling addicts, as depicted in movies and TV shows.

“Anyone who visits this place would understand how different the resort is from the one they had in mind,” he said. “The casino is only a part of the activities available here. It also has a ski resort and a water park just like other vacation facilities, only better.”

Southeast Asia

Kangwon Land signed a memorandum of understanding (MOU) with La Vogue Boutique Hotel & Casino, in Sihanoukville, Cambodia, July 28, to bolster cooperation in sharing profits from the operation of KL Saberi, a slot machine made by the Korean casino operator.

The cooperation, Lee said, will lay the groundwork for the domestically developed machine to expand in Southeast Asia.

The sales of 40 slot machines will spur the Korean entity's business presence overseas, put on hold for years due to the coronavirus pandemic, which left their research and development (R&D) efforts in stagnation. The machine has 21 games, and researchers will develop nine new games for Southeast Asian consumers.

Robust financials

Kangwon Land's net income in the second quarter of this year stood at 37.5 billion won, a much-awaited surplus following three dreadful quarters of losses.

Sales totaled 311.5 billion won, up 53 percent from a year earlier. Operating profit surged to 69.9 billion won.

Income from casinos amounted to 280.1 billion won, while earnings from non-casino businesses stood at 31.4 billion won.

Operating costs were 241.6 billion won, up 20.2 percent from the year before, due to increased contribution to funds set up to develop the abandoned mine areas and tourism promotion.

Underpinning the robust turnaround was a spike in the number of visitors after the lifting of casino business restrictions, coupled with a recovery in demand for tourism amid eased social distancing rules.

The operating hours for casinos were raised back to 20 hours per day as of April 18, up from 14 hours per day when social distancing measures were stricter.

Spending on energy in the first half was cut by 2.5 billion won, compared to 2019, enabled by the effective use of energy storage systems (ESSs) to lower consumption.

Upbeat outlook

Local brokerages maintain an upbeat outlook for Kangwon Land, mostly due to the easing of social distancing rules.

KB Securities said in a June 28 report that third-quarter earnings will see a meaningful turnaround, buoyed by the lifting of gathering bans and operating hour cuts.

“Social distancing measures were completely lifted in April,” the report said. “Restrictions on the number of people allowed in as well as side betting were eased in May, and a sales recovery from May will push up third-quarter performance.”

Similarly, IBK Securities expects the firm's earnings performance will improve in the quarters to come.

“The daily average of visitors rose to around 5,000 in the second quarter, a recovery of about 60 percent of the pre-pandemic figure of 8,000,” the report said.

Hana Securities said the firm's operating profit in the third quarter is expected to surge to 133.6 billion won, up 446 percent, year-on-year, close to 139.2 billion won logged in the same period in 2019.