Domestic Vacancies Filled by Foreigners, Hotels Take 'Flight' in Endemic Era

Surge in Foreign Tourists and Business Demand
More Than Filling the Domestic Staycation Gap
High Weekday Occupancy Rates and Room Rate Increase Effects

After the endemic phase, foreign tourists are filling the places left vacant by the decrease in domestic visitors to commercial hotels. Photo by Jo Yongjun jun21@

Major domestic hotels smiled as the endemic (periodic outbreak of infectious diseases) accelerated in the second quarter of this year. The surge in foreign tourists due to the global popularity of K-content, combined with foreign business demand, led to a flood of demand that more than filled the gap left by domestic hotel stayers who had traveled abroad. Hotel occupancy rates remained high not only on weekends but also on weekdays.

According to the hotel and financial investment industries on the 24th, Parnas Hotel's operating profit for the second quarter is estimated to be around 15 billion KRW, with sales around 100 billion KRW. This represents an increase of approximately 85% and 22%, respectively, compared to the operating profit of 8.1 billion KRW and sales of 81.8 billion KRW in the same period last year. Hotel occupancy rates were observed to be similar to the high levels seen in the first quarter, centered on hotels in key tourist and business hubs in Seoul. Compared to the same period last year, when the impact of COVID-19 was still present, occupancy rates improved by more than 20 percentage points. For the business hotel operated by Parnas Hotel, Nine Tree, weekday occupancy rates rose to nearly 90%. The proportion of foreign guests at Nine Tree Hotel significantly increased with the onset of the endemic, already recovering to pre-COVID-19 levels in the first quarter. Five-star hotels such as the Grand InterContinental Seoul Parnas also continued their recovery due to increased MICE (Meetings, Incentives, Conventions, and Exhibitions) demand. With room rates rising, sales expanded significantly.

With foreign demand returning due to the endemic, the contribution of the hotel division to GS Retail's performance this year is also expected to increase relatively. Nam Seong-hyun, a researcher at IBK Investment & Securities, explained, "This year, the hotel division's operating profit is expected to be 117 billion KRW, and sales 462.9 billion KRW, representing increases of 65.9% and 25.3% respectively compared to the previous year. This accounts for 38.2% of the company's total operating performance and 53.4% of the convenience store operating profit estimate."

After the endemic phase, foreign tourists are filling the spots left by the decrease in domestic visitors at commercial hotels. Photo by Jo Yongjun jun21@

Hotel Shilla is also expected to see sales increase by 3-13% year-on-year to between 160 billion and 176 billion KRW due to high occupancy rates and room rate effects. This was possible because the recovery speed of foreign demand outpaced the decline in domestic demand. The high occupancy rate of about 80% at Shilla Stay, a business hotel, and the expansion of business banquet demand at Seoul Shilla Hotel had a positive impact. However, operating profit is unlikely to see significant improvement due to the base effect from a one-time gain (about 12 billion KRW) reflected in the same period last year. Lotte Hotel also saw total sales increase by 27% and 24% at its Seoul and Jeju hotels, respectively. Lotte Hotel L7, located in urban tourist areas such as Myeongdong and Hongdae in Seoul, contributed to good performance through increased occupancy rates mainly from foreign guests.

The hotel industry expects sales momentum to continue in the second half of the year. As inbound demand continues to recover, room rates are also expected to rise due to reduced supply. However, since the endemic effect began to appear from the second half of last year, there is expected to be a base burden. During the peak summer vacation season, each hotel is actively promoting food and beverage (F&B) promotions not only to welcome foreigners but also for domestic guests planning short vacations. According to the Korea Tourism Organization, the number of foreign tourists visiting Korea in May was 867,130, an increase of 398.6% compared to 173,902 in the same period last year.

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