By Kim Tae-jong
The antitrust regulator has launched an investigation into five five-star hotels in Seoul for allegedly conspiring to fix room rates amid a steady rise in foreign tourists here.
The five, all affiliated with conglomerates, are Lotte, Sheraton Grande Walkerhill, Shilla, Westin Chosun and the Plaza. A sixth rumored to be a target, the InterContinental Seoul, denied involvement.
International chains the Hilton and Hyatt are not part of the probe, but it is possible they will be looked into later.
According to hotel officials, the Fair Trade Commission (FTC) sent investigators to the five to request information, Wednesday.
“Two FTC officials visited our hotel and asked for information on room rates and prime costs,” an official from one of the five said. “That’s all that we can confirm at the moment.”
Other hotel officials also said investigators asked for prices of wedding-related services held at their establishments, which suggested that the FTC is also looking into price fixing of other services.
The FTC refused to comment, saying, “We are not allowed to make statements on cases we are investigating.”
The probe comes as luxury hotel chains have raised room rates by similar amounts in recent years amid a growing influx of foreign tourists, mainly from China and Japan. They have raised standard room rates to between 200,000 won and 250,000 won.
The average reservation rate at most top tier hotels stands at around 80 percent with foreign tourists accounting for over 60 percent, according to market insiders.
Because of the high occupancy rate, it has long been suspected that they have conspired to set prices at the same level, triggering the FTC to launch the investigation.
More recently, a shortage of hotel rooms has been acute. Currently, there are 140 hotels in Seoul, with a combined capacity of 24,000 rooms; but this is far less than required.
In 2011, there were a total of 9.79 million inbound tourists with Japanese visitors making up the largest portion at 3.29 million, followed by Chinese at 2.22 million.
The hotel chains dismissed allegations that they had fixed room rates.
“It’s true that it’s hard to get a room especially during peak season,” said a hotelier who declined to be named.
“But we don’t take advantage of it. Basically, room rates are decided on after considering various factors such as peak seasons, various group deals and packages. Group deals tend to be much cheaper than standard rates.”
Other top hotels have similarly increased room rates because the same factors affect their room rates too, he said.
Another official argued that it was unfair for the FTC to target only local hotels.
“It’s not right that only local hotels are being investigated probe,” he said on condition of anonymity. “Isn’t it like giving international chains a special favor?”
In related news, also looming in the FTC probe is the government’s effort to force chaebol to change business strategies, already manifest in its arm-twisting tactic to force them to withdraw from bakeries and business sectors that are deemed more fitting for small-time merchants.
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