"No Vacancies"... Hotels Soared in the Third Quarter as Well

Long Holiday Domestic Vacant Spots Filled by Foreigners
"Art Fair Benefits... Seoul Hotel Sales Growth"

Despite the downturn in the distribution industry, major domestic hotels are expected to continue their strong performance into the third quarter. The vacancies left by domestic travelers during the holiday season and long weekends were filled by foreign tourists, resulting in almost no vacancies on both weekends and weekdays.

According to the hotel and financial investment industries on the 30th, Parnas Hotel's operating profit for the third quarter is estimated at around 25 billion KRW, with sales revenue around 126 billion KRW. The operating profit represents a 13% increase from the previous quarter (22 billion KRW), which saw a significant rise due to the endemic phase of the pandemic, and about a 10% growth compared to the same period last year (23 billion KRW). Reflecting the effect of increased room rates, sales revenue is also expected to have achieved double-digit growth exceeding 20%.

Although there was analysis suggesting a performance base burden in the second half of this year following the explosive demand from domestic customers since the second half of last year, the hotel industry is optimistic, forecasting record-breaking quarterly results this year. Looking at the core indicator of hotel performance, the occupancy rate, most hotels maintained over 90%. Generally, an occupancy rate of 90% is considered full capacity, and major hotels in Seoul’s key tourist areas as well as business hotels continued their streak of full occupancy.

Foreign tourists fully filled the spots left by domestic travelers who went abroad during the long holidays such as Chuseok. Major hotels in Seoul focus on MICE (Meetings, Incentives, Conventions, and Exhibitions) as their core business. In early September, the world’s second-largest art fair, ‘Frieze Seoul,’ and Korea’s largest art fair, ‘Kiaf Seoul,’ were held consecutively, directly benefiting the hotels. During the Chuseok holiday period, demand from overseas tourists increased, with Seoul Parnas Hotel’s occupancy rate rising to as high as 98%. According to the Korea Tourism Organization, the number of foreign tourists visiting Korea in August was 1,089,113, a 150.8% increase compared to January this year (434,429).

Jeju hotels also benefited from foreign tourists. In Jeju, where direct flights from China and other countries have not resumed, the market is heavily dependent on domestic demand. As domestic travelers’ overseas travel demand increased, visits to Jeju relatively decreased, causing some revenue impact. For example, Hotel Shilla’s recent earnings report showed a 9% growth in Seoul hotels but a 9% decline in Jeju hotels. Nevertheless, the hotel industry is focusing on the rise in foreign tourist occupancy rates. A hotel industry official said, “While foreign occupancy rates at Jeju hotels used to be around 10%, they have recently risen to the 20% range. Although domestic occupancy rates have fallen, the usage rate of food and beverage outlets is on the rise.”

The hotel industry expects the upward trend in performance to continue into the fourth quarter. Flight routes have not yet resumed to pre-COVID-19 levels, and with global interest in K-content, demand to visit Korea is expected to grow. Sanghoon Cho, a researcher at Shinhan Investment Corp., explained, “Hotels will maintain their earnings growth trend as occupancy rates continue to rise.”

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