Helped by an increase in foreign tourists visiting Korea and a rebound in domestic and overseas travel demand, the hotel industry posted solid first-quarter results. As high occupancy continues at major hotels in Seoul and room rates (average daily rate·ADR) rise, profitability is improving.
According to the industry on the 28th, major hotel companies such as Parnass Hotel and Resort, Lotte Hotels and Resorts, and Lotte Tour Development set record first-quarter highs for revenue and operating profit this year. Analysts said the increase in foreign tourists and expanded demand for hotel staycations led to improved results.
Parnass Hotel and Resort, an affiliate responsible for GS Group's hotel business, posted first-quarter revenue of 128.6 billion won, up 39% from a year earlier, and operating profit of 24.4 billion won, up 53%. It was the highest first-quarter performance on record.
Stabilized operations at The Westin Josun Seoul Parnas, which opened in Sep. last year, drove the improvement, according to analysts. The Westin Josun Seoul Parnas logged first-quarter revenue and operating profit of 31.7 billion won and 200 million won, respectively, turning an operating profit in just two quarters since opening.
Lotte Hotels and Resorts recorded first-quarter revenue of 348.4 billion won and operating profit of 25.7 billion won. Revenue rose 14.2% from a year earlier, and operating profit swung to a profit. Both revenue and operating profit were the highest for a first quarter.
Lotte Hotels said increased foreign tourists and a recovery in global travel demand led to improved results in its hotel and duty-free businesses. In fact, foreign guests in the first quarter rose about 14.1% from a year earlier, and room revenue increased 10.2%.
Lotte Tour Development achieved new record first-quarter results as its casino and hotel businesses grew together. First-quarter revenue was 156.2 billion won, up 28.1% year over year, marking the first time quarterly revenue exceeded 150 billion won. Operating profit rose 121% to 28.8 billion won. Analysts cited a combination of factors including increased visitors to the Jeju Dream Tower casino, expanded foreign VIP demand, and higher hotel occupancy.
With a steady rise in foreign tourist inflows recently, competition to book rooms at major Seoul hotels is intensifying. In particular, hotels in key commercial areas such as Myeong-dong, Gangnam, and Yeouido are maintaining high occupancy rates (OCC), while room rates are also trending up. Some hotels have set record-high peak-season rates on weekends and holidays.
Weekend room rates at major five-star hotels sold on global online travel agencies (OTAs) such as Hotels.com have surged to around 1 million won. Four Seasons, Josun Palace Seoul Gangnam, and THE SHILLA Seoul are around 1.1 million won, while Signiel Seoul is around 1 million won. Fairmont Ambassador and Park Hyatt Seoul are priced in the 900,000-won range.
Josun Hotels and Resorts also benefited from an increase in foreign tourists. First-quarter revenue was 168.5 billion won, up 2.4% from the same period last year, and operating profit was 3.9 billion won, up 116.7%. As foreign tourists increased, occupancy rose and average check per guest improved.
Rising domestic travel demand, including for hotel staycations, also appears to be supporting the hotel industry's improved results. With airfares jumping due to the Middle East war, more consumers are turning to domestic trips instead of overseas travel, and lodging demand is growing alongside a string of large events such as concerts and sports competitions.
Given that the hotel high season typically kicks off in the second quarter, some expect the pace of improvement to widen further. The third quarter, which packs the summer vacation period, school summer break, and the Chuseok holiday, is considered the biggest season of the year for the hotel and travel industries.