The hotel industry is increasingly entering the senior living services market. With over 10 million people aged 65 and older, which accounts for more than 20% of the total population, it appears to be a strategic move to secure future revenue in response to the entry into a hyper-aged society.
◇ Hotel Shilla enters senior living services market
According to the Financial Supervisory Service's electronic disclosure system on the 23rd, Hotel Shilla plans to hold a regular shareholders' meeting on the 20th of next month to add the operation and management of elderly living and leisure welfare services, integrated leisure businesses, and the sale and management of condominiums to its business objectives. A representative from Hotel Shilla noted, "The proactive expansion of the business objectives in the articles of incorporation is to secure various business opportunities in the future."
Hotel Lotte, which previously ventured into urban senior residence businesses, will operate the senior residence 'V.L. Rauer,' which will open in the Osiria tourism complex in Busan's Gijang-gun in the first half of this year. The site will comprise 60,031 square meters, featuring 574 high-end residences, a traditional medicine hospital, a medical center, and commercial facilities.
V.L. targets vibrant seniors aged 60 and older, providing tailored services comparable to those of a five-star hotel. A 24-hour concierge will assist residents, and a 'housekeeping' service will offer cleaning and laundry twice a week. Customized healthcare linked to medical institutions as well as health meals prepared by hotel chefs will also be offered.
◇ Hotel Lotte to open 'V.L. Le West' in Magok, Seoul in the second half of the year
Hotel Lotte is also preparing to open 'V.L. Le West' in Magok, Seoul, in the second half of this year. The company plans to apply its strategy of asset lightweighting, which it has adopted in the hotel market, to diversify its operations within V.L. A representative from Hotel Lotte stated, "In response to the explosion of the elderly population, we will offer senior services equipped with hotel-style operation services" and added, "Rather than directly investing assets, we will enhance management efficiency through a consignment operation method to lead the market."
The five-star Maple Field hotel is preparing a senior town named 'The Headen' in Gangseo-gu, Seoul. The Savoy Hotel in Masan is also being redeveloped into a silver town. The project is being undertaken by First Global, which has partnered with Wyndham, a global hotel and resort company operating Ramada Hotels in Korea, to complete the senior residence by 2027. Additionally, Daemyung S'ono Group has established a task force for the senior business, and Shinsegae Chosun Hotel & Resort is also reviewing related projects.
The reason the hotel industry is showing interest in senior living services is that changes in the population structure are expected to drive growth in related businesses. According to the Statistics Korea, the population aged 65 and older, which was about 16% in 2020, is projected to exceed 40% by 2050. This indicates that the age group with the purchasing power and consumption potential is continually increasing. The Korea International Trade Association forecasts that the domestic silver industry market size will grow from 72 trillion won in 2020 to 168 trillion won by 2030.
Na Seung-do, a researcher at SK Securities, stated, "The trend indicates an increase in active seniors among the 50-60 age group, which accounts for 30% of the total population, who are actively investing and consuming for their happiness after retirement" and predicted, "Products and services aimed at a consumer segment that embraces aging naturally and healthily will gain attention."
In fact, senior residences have been receiving positive responses. In the case of senior residences in downtown Seoul, the deposit reaches 1 billion won, and the monthly rent amounts to 5 million won, yet the re-contract rate is reported to exceed 90%. The V.L. Rauer, which is set to open this year, also received considerable interest, evidenced by a pre-registration competition rate reaching 25 to 1 in 2022.
While urban residences entail high entry and management expenses, they are considered more reasonable than nursing facilities as they allow easy access to various medical and convenience facilities while reducing household burdens. Accordingly, it is reported that not only the wealthy but also middle-class seniors are showing interest in moving in.
◇ The hotel industry views duty-free business downturn as an opportunity
Many in the industry believe that hotels with advanced guest service know-how acquired through years of hotel operations hold an advantage in the senior residence market. One hotel industry representative stated, "Just as the community facilities in newly built apartments influence the value of the apartments, guest reception and care services have emerged as competitive factors for senior residences" and added, "Senior services are rising as a new revenue source for the hotel industry."
Some analyses suggest that the downturn in existing hotel businesses has also contributed to the entry into new business ventures. For both Hotel Lotte and Hotel Shilla, which operate duty-free businesses alongside their hotel businesses, duty-free sales accounted for 80% of total revenue, but following the COVID-19 pandemic, the delayed recovery of the duty-free business has created an urgent need to discover new revenue sources.
Hotel Shilla saw its revenue increase by about 11% last year compared to the previous year; however, due to the downturn in its duty-free business, it reported an operating loss of 5.1 billion won, marking a transition to a deficit. Similarly, Hotel Lotte's operating profit decreased by 64% year-on-year in the third quarter of last year. While profits in the hotel sector increased, the duty-free shop reported an operating loss of 46 billion won, leading to reduced profits.