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Conglomerates enter business hotel fray

Hotel business booming with over 10 million inbound tourists

Dec. 11, 2012 - 20:01 By Korea Herald
As the number of foreign tourists visiting Korea this year surpassed 10 million, the hotel business has become a rising star in the slumping economy.

Seoul has 26,000 hotel rooms, fewer than 100 other cities around the world, such as Bangkok with 94,000.

Many Chinese tourists who were unable to find hotel rooms in downtown Seoul during peak seasons had to stay in hotels far away from the city center, including in the surrounding Gyeonggi Province.

Eager to grab a bigger slice of the burgeoning demand, major hotel chains are rushing to build new business hotels, especially around Seoul’s Myeong-dong, Cheonggye Stream and Seoul Station.

Their choice is business or boutique hotels with rooms under 200,000 won per night: Like Koreans traveling to Hong Kong or Tokyo, many Japanese and Chinese tourists, who account for 60 percent of all foreign tourists here, look for no-frills accommodation within their budget and tastes.

Seoul’s central Jung-gu district now has 30 business hotels with about 7,600 guest rooms. 
Hotel Skypark in Myeong-dong, a popular tourist spot in Seoul (Park Hae-mook/The Korea Herald)

The Jung-gu district office has so far approved plans to build another 20 hotels. The envisioned hotels will provide more than 3,000 guest rooms, which will be enough to meet expected demand. Some hotel chains including Skypark have already opened four new hotels in Myeong-dong where Japanese and Chinese tourists like to stay.

Drawing the most attention are business hotels built by major conglomerates.

Parnas Hotel ― 70 percent owned by GS Engineering and Construction, and the rest by the Korea International Trade Association ― opened its first business hotel Nine Tree Myeong-dong in the central shopping district early this month.

Parnas, which runs the five-star Grand InterContinental Seoul Parnas and InterContinental Seoul COEX in the southeastern district of Samseong-dong, is bullish about its business hotel business.

“Nine Tree Myeong-dong is the flagship hotel of our Nine Tree brand. We plan to build more Nine Tree hotels, although we cannot speak about how many or where yet,” said Kim Tae-yeon, a spokesperson of Parnas.

Nine Tree was named as such to emphasize its nine distinguished services including experience of Korean traditional seasonal customs, language services, articles for children and services for female guests.

“All our staff members are fluent in Japanese, and many can speak Chinese,” Kim said.

“We can say that more than 90 percent of our guests will be foreign tourists, mostly Japanese.”

The 15-story hotel has a restaurant, Coffee Bean and lounge where guests can mingle, in addition to 144 guestrooms. All rooms on deluxe floors are equipped with foot massagers, skin massage packs and traditional tea sets.

Lotte and Shilla, which run the two best resorts on Jeju Island side by side, have both chosen business hotels as their new growth engine.

Lotte Hotel, which has enjoyed good sales at Lotte City Hotel Mapo and Lotte City Hotel Gimpo Airport, is building two more hotels in downtown Seoul.

The 22-story Lotte City Hotel Janggyo, slated to open in October 2015, will be built across the street from the Industrial Bank of Korea headquarters on Euljiro 2-ga, near Cheonggye Stream. The 19-story Lotte City Hotel Myeong-dong is scheduled to open in December 2015.

“City Hotel Janggyo will be a business hotel with 435 guestrooms, and City Hotel Myeong-dong will be a boutique hotel with 272 guestrooms targeting female tourists,” said Lotte Hotel spokesperson Lee Chan-yang.

Lotte plans to open more City Hotels in Jeju, Daejeon, Ulsan and Seoul’s Guro in 2014.

Overseas, it seeks to open Lotte Hotels in Hanoi in 2014 and Shenyang in 2017, in addition to the existing Lotte Hotel Moscow in Russia and Lotte City Hotel Kinshicho in Japan.

In Mapo, Lotte will soon face competition from rival Shilla, which runs the nation’s top hotels in Seoul and Jeju.

Shilla, a member of Samsung Group, plans to open a 23-story business hotel less than 50 meters away from Lotte City Hotel Mapo in the second half of 2015. The hotel with over 300 guestrooms will be built by Samsung C&T and run by Hotel Shilla.

For this, Hotel Shilla recently signed a 15-year lease contract starting 2015 with Samsung C&T.

“We plan to open five business hotels within Seoul under the new brand ‘Shilla Stay’ including the one in Mapo,” said Hotel Shilla spokesman Seo Il-ho.

Westin Chosun Hotel, a member of Shinsegae Group, is also set to open a business hotel near Seoul Station in 2014. The builder, Ssangyong Engineering and Construction, is in talks to sell the building to Macquarie Asset Management, which will commission Westin Chosun as the hotel operator under a 20-year lease contract.

A smaller conglomerate Ajou Group plans to build a 22-story business hotel named Hotel Seokyo near Hongdae in Seokyo-dong, western Seoul. It will be the second hotel for Ajou, which bought the Hyatt Regency Jeju on the resort island in 2000.

Hanjin Group has long been eyeing the hotel business.

Korean Air ― a key member of Hanjin Group ― secured a site for a seven-star hanok-style hotel overlooking Gyeongbok Palace, but it could not start construction due to a law that bans hotels within 200 meters of schools. There are three girls’ middle and high schools nearby. The government, however, unveiled a bill that gives the green light to hotels near schools as long as they don’t have casinos or bars.

SK Networks, which runs Sheraton Grand Walkerhill and W Seoul Walkerhill, plans to build business hotels on unprofitable SK gas station sites.

Aekyung Group is taking steps to build Novotel Ambassador Suwon, which will open in 2014 and be run by Accor Ambassador Korea. Aekyung also seeks to build a business hotel at a site under development in the Hongdae area.

When it comes to hotels, most major conglomerates have a foot in the door, although Korea is yet to produce an internationally recognized hotel brand.

Hyundai Group acquired the six-star Banyan Tree Club and Spa Seoul in June. Hyundai Motor Group runs Haevichi Hotel in Jeju, while Hyundai Heavy Industries runs Hyundai Hotels in Gyeongju, Ulsan, Mokpo, Gangneung and Vladivostok.

By Kim So-hyun (sophie@heraldcorp.com)