Lotte, Hotel Shilla expand foothold abroad to overcome pandemic

By Yi Whan-woo

Lotte Hotels & Resorts and Hotel Shilla are trying to expand their footholds abroad in what are seen as their bids to overcome business risks stemming from a decline in the number of international visitors to Korea due to the COVID-19 pandemic.

Lotte Hotels & Resorts, Korea's top hotel chain operating under the wing of Lotte Group, has its eyes on the United States where it falls behind other international hospitality brands, but possesses growth potential at the same time.

Hotel Shilla is targeting the duty free market on China's tourist island of Hainan that has emerged as a paradise for Chinese shoppers after being designated as a tax-free zone.

“We consider the U.S. as a symbolic place for the hospitality sector with global brands being present in its major cities,” Joey Min, director of the PR & Communication Team at Lotte Hotels & Resorts, said, Wednesday. “The competition is as fierce as a battleground and being successful in the U.S. means we can raise our brand awareness worldwide.”

Lotte Hotel & Resorts opened its 12th and latest hotel abroad in Seattle, U.S., in September 2020. Korea Times file

Lotte opened its third and latest U.S. hotel in Seattle in September 2020, following ones in New York City and the U.S. island territory of Guam.

The U.S. hotels are among Lotte's 12 overseas operations, including ones in Japan, Myanmar, Russia, Uzbekistan and Vietnam. They make up the 32 hotels operated by Lotte, including 20 in Korea.

Min noted that the U.S. expansion is only the beginning, citing Lotte Hotels & Resorts Americas CEO Jim Petrus who said in a media interview, July 23, that the hotel chain “aims to add more than 20 hotels in the next five years.”

The U.S. business is part of a future strategy to lend Lotte's brand name to Southeast Asian hotels under consignment operations. Such practices are commonly seen with Marriott, Hyatt and other global brands.

In a separate media interview last year, Lotte Group Chairman Shin Dong-bin pledged to shift away from a domestic market-oriented business and go abroad.

Shin said he will “capitalize on M&As as a tool” to double the number of hotel rooms globally to 30,000 within the next five years.

Asked whether the expansion of the hotel business is linked to a possible new attempt for an initial public offering (IPO), Min said it is “very unlikely.”

Lotte Hotels & Resorts dropped its plan for what could have been a $4.5 billion IPO in 2016 when Shin faced bribery, embezzlement and other corruption charges linked to then-President Park Geun-hye. Shin was given a suspended jail term in 2019.

Hotel Shilla's duty free business arm, The Shilla Duty Free, announced that it signed a memorandum of understanding (MOU) with Hainan Tourism Investment Duty Free Co. (HTDF), July 21, to enhance business cooperation.

The MOU is expected to help Hotel Shilla enter the Chinese market beginning with Hainan by setting up a joint venture.

“The MOU is meaningful considering we have advanced into the Chinese market that has been growing despite the COVID-19 pandemic,” Hotel Shilla said in a press release. “We will try to come up with a wide range of strategies to overcome the difficulties faced by the duty free sector.”

Outside Korea, The Shilla Duty Free runs stores in Asia's three major airports in Singapore, Hong Kong and Macau.

Dubbed the “Hawaii” of China, Hainan has increasingly been a key global duty free market in the pandemic era. This is because Chinese tourists, who are known to be big spenders, flocked to the island and went on a shopping spree after being discouraged from traveling outside the country.

Hainan's sales during the Lunar New Year holiday in 2021 totaled more than $231 billion, approximately double the size from the same holiday period two years ago before the world was stricken by COVID-19.

A subsidiary of Hainan Tourism Investment Development Co, HTDF, runs a duty free store in downtown Hainan.

The 95,000-squre-meter store sells 45 types of products from 500 international brands.

HTDF also runs a shopping mall that has dining and entertainment facilities.