Hotel Lotte resumes global push with management deals

Hotel Lotte Co., South Korea’s leading hospitality, leisure and travel retail giant, has resumed its global expansion push after its hotel and resort business enjoyed record-high earnings last year thanks to the thriving global hotel industry in the endemic era.

According to hotel industry sources on Monday, Hotel Lotte’s hotel and resort unit Lotte Hotels & Resorts is set to open new hotels at home and abroad, including its premium boutique hotel chain L7 in Seoul.

It is also in talks with the owners of two hotel properties in South Jeolla Province to manage and operate them under its hotel brands.

Lotte Hotels & Resorts owns several hotel brands, including upscale hotel brand Signiel, luxury hotel operator Lotte Hotels, boutique hotel brand L7 Hotels and business hotel brand Lotte City Hotels and Lotte Resorts. It also operates a VL senior home brand.

Overseas, the Korean hotel operator has focused on Vietnam after L7 West Lake Hanoi by Lotte instantly became a popular hotel destination there after opening last year. Lotte is now considering opening L7 hotels in other cities in Vietnam such as Ho Chi Minh and Da Nang.

In the US, it reopened the Kimpton Hotel Monaco Chicago as L7 Chicago By Lotte last month. Korea’s largest hotel group purchased the 191-room Chicago property for $36 million in 2022.

It plans to open a new L7 hotel in the port city of Busan, Korea's second largest city.

GAINING MOMENTUM

Lotte Hotels & Resorts is now accelerating the global expansion of its hotel operations after being forced to slow its ambitious drive by Beijing-Seoul diplomatic rows over the deployment of a US anti-ballistic missile defense system in Korea in 2016 and the COVID-19 outbreaks.

In 2014, the company vowed to become Asia’s No. 1 hotel brand, with a plan to operate 40 hotels at home and abroad by 2019 and 200 by 2030.

The end of the pandemic has paved the way for Lotte’s resumption of its delayed grand plans.

In 2023, Hotel Lotte raked in 468.8 billion won ($343.5 million) in operating profit from hotel operations alone on its record-high hotel business revenue of 1.3 trillion won, thanks to the thriving global travel industry. The results surpassed even pre-pandemic levels recorded in 2019.

While its mainstay travel retail business has been grappling with falling sales due to a drop in Chinese visitors to Korea, its hotel business has become more important to its business success.

Sales at Lotte Hotels & Resorts accounted for 27.17% of Hotel Lotte’s total revenues in 2023 versus 12.2% in 2019. Over the same period, Lotte Duty Free’s share dropped to 64.8% from 82.5%.  

EXPANSION THROUGH ASSET-LIGHT STRATEGY

With the hotel business gaining momentum, Lotte is expected to push for global expansion to sustain growth.

“Expansion is virtually the only way to guarantee the company’s growth,” Kim Tae-hong, CEO of Lotte Hotels & Resorts, said at a ceremony earlier this month to commemorate the company’s 51st anniversary.

He underscored the importance of an asset-light business model to accelerating the company's growth and vowed to expand its business through hotel management consignment agreements instead of purchasing or leasing properties.

An asset-light business model is an approach that focuses on minimizing ownership and investment in physical assets so that companies can be more flexible, nimble and scalable in business operations based on market demands.

Lotte will adopt an asset-light strategy to improve awareness of the Hotel Lotte brand around the world with minimized initial investment, said a hotel official.

Write to Sun A Lee at suna@hankyung.com
Sookyung Seo edited this article.