Paradise Co, Korea’s leading operator of foreigner-only casinos, recently released its financial results for the second quarter of 2024 (2Q24). While the company reported some areas of robust performance, particularly in the Japan VIP and mass gaming segments, overall results were mixed, reflecting both growth and challenges.
Financial Performance Overview
The company’s 2Q24 financial results revealed a significant drop in net profit attributable to controlling interests, which fell by 50.5% year-on-year and 43.9% quarter-on-quarter, settling at KRW14.5 billion (approximately US$10.6 million). This sharp decline was largely due to increasing comp costs associated with the VIP business and other operational challenges.
Despite the decline in net profit, Paradise Co’s total casino sales across its properties in Seoul, Jeju, and Busan showed a sequential improvement. For the quarter, casino sales reached KRW112.0 billion (US$82 million), marking a 9.5% increase from the previous quarter. However, this was offset by a year-on-year decline of 16.7%, indicating the complex dynamics at play within the company’s operations.
Performance by Property
When broken down by location, the results provide a more nuanced picture. At Paradise City, the integrated resort in Incheon co-owned with Sega Sammy Holdings, total sales for the quarter grew by 20.1% year-on-year, reaching KRW131.4 billion (US$96.3 million). Within this, casino sales surged by 24.7% to KRW102.5 billion (US$75.1 million), demonstrating the property’s ongoing strength.
However, the financial success at Paradise City was tempered by a decrease in profitability. The property’s EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) fell by 11.5% to KRW25.1 billion (US$18.4 million), while net profit plummeted by 59.3% to KRW6.25 billion (US$4.58 million). These declines suggest that while sales are up, the costs associated with maintaining and growing the business have also increased, impacting the bottom line.
Japan VIP and Mass Gaming Segments Drive Growth
One of the standout aspects of Paradise Co’s 2Q24 performance was the continued strength in the Japan VIP and mass gaming segments. The company reported a 31.9% increase in drop amounts from Japan VIPs compared to pre-COVID levels, indicating a robust recovery and growth in this crucial market. Similarly, the mass gaming segment saw a 52.5% increase in drop amounts, further highlighting the expanding interest and participation from non-VIP patrons.
These segments have become increasingly important to Paradise Co’s overall strategy, especially as they help to offset some of the challenges faced in other areas. The company also noted that its May “soft drop” – the amount of cash exchanged for chips by customers at the table – reached an all-time high, underscoring the strong demand in these segments.
The Cost of VIP Business Growth
However, the company’s success in growing its VIP business has come at a cost. The report highlighted increasing comp costs associated with attracting and retaining high-rolling VIP customers. These costs, which include complimentary services and incentives offered to VIPs, have risen as the company works to enhance its competitive edge in this lucrative market.
While the growth in VIP participation is a positive sign, the rising costs associated with it present a challenge for maintaining profitability. This balancing act between driving revenue growth and managing expenses will be crucial for Paradise Co as it moves forward.
Comparisons with Pre-COVID Performance
Comparing the 2Q24 results with pre-COVID performance provides additional context for understanding the company’s current position. Group-wide casino sales were reported to be 12.8% higher than in 2Q19, a significant achievement given the global impact of the pandemic on the gaming and hospitality industries.
However, not all segments have fully recovered. The VIP segment, while showing signs of improvement, is still at 78.2% of its pre-COVID levels. This partial recovery indicates that while there is progress, there is still work to be done to bring the VIP business back to its full potential.
Paradise Co will need to carefully navigate the challenges and opportunities presented by its current performance. The company’s strong results in the Japan VIP and mass gaming segments suggest that there is potential for continued growth, particularly if these trends can be sustained and expanded.