In Guam, which once bustled with Koreans, Hotel Lotte's concerns are deepening. With a decline in Korean tourists, the duty-free division has decided to withdraw from the Guam International Airport duty-free shop it has operated for more than 10 years. On the ground, the hotel division with Lotte Hotel Guam is working hard to secure guests by broadening its customer base from families to young travelers such as friends and couples.
According to related industry sources on the 9th, Lotte Duty Free will operate the Guam International Airport duty-free shop through the end of this year and then withdraw. The existing concession ended in Jul., but at the airport's request to run the store until the next operator begins business, it has been continuing operations on a temporary basis. Lotte Duty Free did not participate in the bidding for the next concession, and Switzerland's Avolta (formerly Dufry) was selected as the new operator.
Lotte Duty Free entered the market by winning the Guam airport duty-free concession in 2013. After operating the store for more than 10 years, it decided to wind down the business due to sluggish sales and deteriorating profitability stemming from a decline in Korean tourists. The Guam airport location was known to have a high dependence on Koreans, who accounted for most of its sales.
Guam has long been a representative short-haul vacation spot for Koreans. Its short flight time of around four hours and its status as U.S. territory were seen as attractions. After gaining popularity as a honeymoon and filial piety destination, it established itself as a favorite resort for family travelers with young children.
But the number of Koreans visiting Guam has dropped noticeably in recent times. According to the Guam Visitors Bureau, from January to July this year, 133,879 Korean tourists visited Guam, down 30.8% from the same period a year earlier. In Jul., 15,707 people visited, less than half of the same month a year earlier. Compared with 67,866 in Jul. 2019, before COVID-19, the level is less than a quarter.
Analysts say a combination of factors such as a strong exchange rate and fewer flights played a role. The strong dollar has increased the burden of local stay costs such as lodging and food and beverage, and as demand fell, airlines also cut Guam routes. The time required to recover after tourism infrastructure was damaged by Super Typhoon Mawar in 2023 also slowed the rebound in visitors.
Another factor is the growing number of destinations that can replace Guam. As Southeast Asian resorts such as Da Nang, Nha Trang and Phu Quoc in Vietnam, and Cebu and Bohol in the Philippines grew rapidly, options for Korean travelers increased. A string of newly built luxury resorts featuring low prices, large pools and kids' facilities is also a strength.
For Hotel Lotte, which decided to exit the duty-free shop, concerns are growing about the hotel business it has run alongside in Guam. Since 2014, Hotel Lotte has operated Lotte Hotel Guam in Tumon Bay. There are currently no plans to withdraw. However, compared with the heyday when Korean tourists flocked there, the business environment is tough. The hotel has not disclosed occupancy rates, but it said the difference from the past is significant.
Lotte Hotel Guam is both retaining its existing family travelers and broadening its customer base. This summer, it increased the children's English experience program from four to five times a week and introduced a family travel package bundling a kids' indoor playground and cabanas.
It also launched products targeting young travelers such as friends and couples. Offerings include wine, macarons and cabana vouchers, as well as a package that allows a rental car for a day. This is an attempt to fill rooms by expanding demand, which had been concentrated on families with young children, to other age groups.
Facility investment is also a concern. While Guam is perceived to have relatively many older hotels and resorts, newly built luxury resorts are opening one after another in Southeast Asia and in places like Okinawa, Japan. To maintain competitiveness, facility renovations are needed, but it is not easy to decide on large-scale investments when tourism demand is subdued. Unlike the duty-free shop, attention is on whether the hotel, which continues operations, can draw new demand and maintain its competitiveness.