By Joo Young-min
Korea has long been plagued with a lack of quality, affordably priced hotel rooms, particularly outside Seoul. In response to growing tourism demand, the Korea Tourism Organization (KTO) has launched “Benikea,” standing for “Best Night in Korea.” This new association of hotels brings quality accommodation with franchise-level consistency to budget conscious travelers.
Acutely aware of the mounting number of tourists and the shortage of hotel rooms, the KTO and Ministry of Culture, Sports and Tourism conducted a hotel feasibility study in 2005 to improve the accommodation infrastructure.
The following year, KTO initiated a pilot project with the Industry-University Cooperation Foundation of Hanyang University.
The project established a foundation for the mid-tier hotel business in May 2009 and four months later, Benikea, the first mid-tier Korean hotel brand, was launched with a multi-language online reservation system.
The KTO does not operate the hotels per se. Rather, it provides support services and consulting to help hotels achieve and maintain its standards of excellence.
Getting under the Benikea umbrella is difficult. Even a high-class hotel has to go through a rigorous checklist to be included. The attitude of hotel managers, conditions of rooms, service quality and a host of other factors are evaluated.
A hotel that completely meets all the standards becomes a full member, a Benikea chain hotel. It receives the entire package of the KTO’s support services and may also use Benikea in its official name, a marketing plus as brand recognition of Benikea is climbing steadily among travelers.
When Benikea was launched, there were six Benikea chain hotels and 33 associates. By May 2012, 49 out of the nation’s 680 hotels were under the Benikea umbrella, including 20 with member status. In January 2010, brand recognition was 4.7 percent and in December 2011 it had reached 17.3 percent, putting it 13th among the 21 hotel groups in Korea.
Hotels under the Benikea umbrella are found in all parts of Korea, including Gyeonggi Province, Gangwon Province, Incheon, Daegu, Jeju, and Seoul, making themselves easily accessible to tourists. Two-thirds of the hotels are outside of Seoul, which helps promote tourism in those areas.
In addition, reservation and sales performance via the Benikea website have grown steadily. The website is in Korean, English, Chinese and Japanese and each Benikea hotel only dedicates a portion of its rooms to the Benikea reservation system. In 2011, about 12,000 rooms were booked at Benikea hotels. Aggregated sales between 2009 and 2011 were 920 million won, of which 540 million won was in 2011.
A hotel in the Benikea chain receives a broad range of support to boost revenue. The services include market analysis and marketing strategies to bolster competitiveness; loans from the government’s tourism promotion fund; supplies at lower prices through bulk buying by Benikea hotels; and money to make signboards.
To improve brand value and increase reservations, television subtitles, radio broadcasting, outdoor advertising, online banners and search advertising are used in the domestic market while travel magazines, online banners and search advertising are aimed at foreign travelers.
To encourage reservations on the Benikea website, Benikea frequently offers special online deals to Korean and foreign individuals. In addition, it has provided familiarization (FAM) tours to foreign journalists and employees of travel agencies and used exhibitions at home and abroad as a chance to inform customers of Benikea.
Systematic training of all employees regardless of rank is also conducted twice a year and optional courses are also available. The training is customized for each Benikea member and associate hotel.
Hotel evaluation was conducted based on disguised visits in which inspectors check-in as guests; customer feedback; the percentage of rooms allotted to the Benikea online reservation system and training participation. On the latter, a hotel gets extra credit for participation in optional training.
Benikea developed a brand standard for facilities and management of chain hotels in September 2011. The facility standard defines the best floor layouts for optimum service and efficiency, based on how employees and guests move around in parts of hotels. Management standards encompass organization operations, room management, housekeeping, restaurant and coffee shop management, general management and sales marketing.
In April 2012, the first Benikea hotel that became subject to its brand standard opened in Yeosu, South Jeolla Province. In June 2012, groundbreaking for a new type of Benikea hotel was planned in Haeundae, Busan. Benikea Hotel Busan, or Marianne Hotel, will be completely constructed in December 2013.
Benikea provides lessons to Korean hotels on how to respond to global chains that dominate Korea’s mid-tier hotel segment. While it is difficult for individual hotels to thoroughly manage all areas of guest services, Benikea has shown that joining an alliance of local cohorts is a potential solution.
In an environment where there is no large conglomerate specializing in the hotel business, Benikea has been managed with state budgets of 2 billion won a year. However, it cannot depend on state budgets forever.
The initial plan was to bind operating hotels under the Benikea brand and raise competitiveness by providing standardized services and reservation systems and then collecting various tariffs, including an affiliation fee, which would be half the standard rate of foreign hotels.
Benikea has yet to establish a revenue structure, because it decided not to collect affiliation fees when the business was transferred to the KTO in 2009.
For successful privatization in 2013, Benikea should establish a business model and secure sustainability as early as possible. It should seek ways to provide the benefits of affiliation to affiliated hotels. In that sense, Benikea’s initiation to develop products in link with Benikea and nearby tourist attractions partnering with five major inbound travel agencies — Korean Tour, Lotte Tour, Global Tour, Hannara Travel and Hanjin Travel — in April 2012 is very encouraging.
The writer is a research fellow at Samsung Economic Research Institute (SERI) with expertise in tourism economics and policy and regional development. SERI provided this article to Business Focus.