South Korea’s luxury hotels bask in return of tourists post-pandemic

South Korea’s luxury hotels are enjoying the return of tourists following years of COVID-19 restrictions, which significantly hurt their sales revenue and earnings.

According to industry data on Tuesday, Lotte Hotels & Resorts, the country’s largest hotel chain operator, posted record sales of 1.2 trillion won ($898 million) in 2023, up 20% from the previous year.

Its operating profit is estimated to have risen over sixfold to 40 billion won from 6.5 billion won in 2022.

Lotte had been in the red for seven straight years from 2015.

To stay in business, the company cut executives’ salaries and put employees on mandatory leave until 2022 when business conditions started to improve with the end of the pandemic.

Josun Hotels & Resorts, owned by Korea’s retail giant Shinsegae Inc., saw its 2023 operating profit double to 40.3 billion won from the previous year’s 22.2 billion won.

Sales rose 16% to 556.2 billion won.

Hotel Shilla Co., affiliated with Samsung Group, posted record sales of 634.7 billion won with an operating profit of 68.7 billion won last year. Its operating profit margin rose to 10% for the first time.

Hotel Shilla’s 2023 operating profit was higher than the 22 billion won posted by its duty-free shop operations, deemed its cash cow.

Walkerhill Hotels and Resorts, run by SK Networks Co., posted a record operating profit of 13.6 billion won in 2023.

Hotel Paradise, which has one of Korea’s largest casinos, saw its 2023 hotels and resorts business sales rise to an all-time high of 235.1 billion won.

OCCUPANCY RATES SURGE

The average room occupancy rate of hotels in Seoul and the metropolitan area has also risen from the 30% range in 2020 to 60% in 2022. It now remains around 80%.

The hotel industry drastically cut jobs during the pandemic and is now suffering from a labor shortage.

To ease the problem, the government said in December it would allow hotels and resorts to hire foreign workers from 2023.

The average daily room rate, or ADR, has also risen significantly.

In 2020, the ADR was 110,000 won in Seoul. The rate rose to 180,000 won last year. For five-star luxury hotels, the ADR hovers around 330,000 won.

Industry officials said the hikes in room rates were led by top-notch hotels such as Lotte’s Signiel Seoul, Shinsegae’s Josun Palace, and international luxury brands, including Four Seasons Hotels and Resorts and Fairmont Hotels and Resorts.

“The hotel industry boom will likely continue for a while as the number of incoming travelers, including those from China, is increasing,” said a hotel industry official.

Write to Jae-Kwang Ahn at ahnjk@hankyung.com

In-Soo Nam edited this article.