The Macroeconomic Determinants of International Casino Travel: Evidence from South Korea’s Top Four Inbound Markets

Abstract

This study investigates the macroeconomic determinants behind the number of foreign visitors to Korean casinos arriving from major source countries, namely Japan, Mainland China, Hong Kong SAR and Taiwan. Using monthly data from 2006 to 2016, we utilized a Structural Vector Autoregression (SVAR) model to investigate the dynamic effects of macroeconomic factors on the number of casino visitors. Estimation results supported the conclusion that visitors from Japan and Mainland China-who account for approximately three quarters of the total number of foreign casino visitors-were affected by macroeconomic or financial indicators such as changes in oil prices, exports and exchange rates (Japan), exports and short-term interest rates (Mainland China). In contrast, visitors from Hong Kong SAR did not seem to be influenced by any of these factors. We also found that the MERS (Middle East Respiratory Syndrome) outbreak in Korea in 2015 had a significant adverse effect on casino visitors from all regions. Implications and suggestions for future studies are provided along with the results of this study.

The impact of the Middle East Respiratory Syndrome coronavirus on inbound tourism in South Korea toward sustainable tourism

“…According to the Korea Culture and Tourism Institute (2015), it is briefly estimated that the MERS outbreak caused a decrease in about half of the country's 332 travel agencies, with 1.53 million fewer international visitors compared to June through September of the previous year. In addition, few academic studies have investigated the impacts of the MERS on the tourism industry in Korea (Shi & Li, 2017;Song, 2016;Suh & Kim, 2018). For example, Shi and Li (2017) examined the impact of MERS on the arrival of international tourists from China to Korea.…”

“…However, little estimation has been conducted related to the impact of epidemics on inbound tourism demand (Song & Lee, 2010), and only a few studies have shown the impact of MERS on inbound tourism using a rigorous methodology (Shi & Li, 2017). Instead, studies have examined the impact of MERS with a particular focus such as on the Chinese tourists to Korea (Shi & Li, 2017); on the number of tourists to Jeju Island (Song, 2016); and on casino visitors to Korea (Suh & Kim, 2018). Although these studies emphasized the negative impact of MERS on the tourism demand, rather less attention has been paid to the overall impact of MERS on Korea's inbound tourism demands using forecasting methods throughout the MERS period.…”

Performance drivers in the casino industry of South Korea

“…During the past two decades, as the casino and gaming industries have become mainstream and experienced incredible development (Suh and Kim ), casinos the world over have had to adapt to such rapid growth. At present, the gaming industry is active in the USA, Canada, the Asia Pacific region, Latin America, Europe, the Middle East, and Africa (Kim et al ), and international gaming proceeds are projected to rise due to a particular upsurge in gaming in the Asia Pacific region, especially in Macau and Singapore (Malek and Kim ).…”

“…Scholars have found antecedents of variables associated with casinos revenues. Suh and Kim () have shown that visitors to casinos are influenced by major macroeconomic variables (e.g. exchange rates, oil prices, stock prices, interest rates, money supply, and exports).…”

“…This study involved the investigation of the economic impacts of the South Korean casino industry, which provides two types of gambling establishments: domestic and foreigner only. The South Korean casino industry has been on the rise (Suh and Kim ) with posted revenues in the gaming sector of US$1.215 billion from more than three million gamblers (Korea Casino Association ). By extension, South Korea's casino developments have become highly profitable for the national economy.…”