Hotels Receiving COVID Report Cards... Sighs Over First Quarter Earnings Turning to Deficit

GS Retail, SK Networks, and Others Face Continued Hotel Business Slump in First Half of Year

[Asia Economy Reporter Oh Ju-yeon] Domestic hotels, which had many vacant rooms due to the novel coronavirus infection (COVID-19), received a dismal report card in the first quarter. Despite the 'earnings surprise' of the parent companies operating the hotels, only the hotel business division posted losses. This trend is expected to continue into the second quarter, with the deficit streak likely to persist at least through the first half of this year.

According to the Financial Supervisory Service's electronic disclosure system on the 29th, GS Retail, which operates hotels such as the Grand InterContinental Seoul Parnas in Samseong-dong, Seoul, and the business brand Nine Tree, recorded an operating profit of 88.8 billion KRW on a consolidated basis in the first quarter, significantly exceeding market consensus. This was due to improved profitability in convenience stores and supermarkets, as well as profits from the real estate development business division. However, the hotel business division turned to an operating loss. Due to the impact of COVID-19, hotel occupancy rates fell, resulting in sales of 45.3 billion KRW, down 32.8% year-on-year, and operating profit swung from 14 billion KRW in the first quarter of last year to a loss of 700 million KRW.

The hotel business division's performance is expected to remain sluggish in the second quarter as well. Kiwoom Securities forecast that GS Retail's hotel division sales in the second quarter will decrease by 47.4% year-on-year to 40.3 billion KRW, with an operating loss of 3.2 billion KRW.

The situation is similar for SK Networks, which announced operating profits exceeding market consensus in the first quarter. SK Networks' hotel business, Walkerhill Hotel & Resort, closed its main building, the Grand Walkerhill, for a month starting in March due to COVID-19. As a result, first-quarter sales were 53.7 billion KRW, down 13.5% from 62.1 billion KRW in the first quarter of last year, and operating losses amounted to 14.2 billion KRW. In the first quarter of last year, it posted a profit of 700 million KRW. Walkerhill's operating losses are expected to continue for four consecutive quarters this year. Hana Financial Investment projected operating losses of 11.3 billion KRW for Walkerhill in the second quarter, with losses of 1.8 billion KRW and 1.3 billion KRW expected in the third and fourth quarters, respectively.

Hotel Shilla also posted a consolidated operating loss of 66.8 billion KRW in the first quarter, turning to a deficit compared to the same period last year, and is expected to record a loss of 67 billion KRW in the second quarter. Both the duty-free and hotel & leisure divisions performed worse than last year, with hotel & leisure sales declining by 20% year-on-year. Hotels in Seoul saw a 19% decrease, while Jeju experienced a sharp 30% drop, marking the largest decline.

This content was produced with the assistance of AI translation services.