Korea's top hotel chains bet big on upscale retirement homes

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Major hotel chains in Korea are entering the senior residence market, targeting healthier and wealthier older adults, as the country becomes the world’s fastest-aging nation — marked by rising life expectancy and a sharp decline in birthrates.

These high-end senior residences offer luxury services typically found in upscale hotels — such as five-star concierge services, housekeeping, meals, health care and cultural and leisure programs — designed to meet the needs of older adults who stay active in their communities and continue to enjoy consumption and leisure pursuits after retirement.

Lotte Hotel launched its senior residence brand, Vitality and Liberty (VL), in 2022 and is currently developing properties in Seoul and Busan.

Drawing on the five-star hotel’s 50 years of experience, the residence offers 24-hour response services, cleaning and room management and driver-accompanied car rentals.

Additionally, 24-hour customized health care services are available through partnerships with Lotte Healthcare and the Bobath Memorial Hospital, part of the Lotte Medical Foundation in Seongnam, Gyeonggi Province.

The properties have become popular among affluent older adults. VL Le West, set to open this October in Seoul’s Gangseo District, sold out all its contracts before its launch.

A rendering image of Lotte Hotel's senior residence VL Le West / Courtesy of Lotte Hotel

Hotel Shilla, operated by Lee Boo-jin, daughter of the late former Samsung Group Chairman Lee Kun-hee, is also developing a senior residence project.

At its general shareholders’ meeting last month, Hotel Shilla approved adding “comprehensive recreation business,” “condominium sales and operation business,” and “senior housing business” to its articles of association — a move viewed as preparation for attracting affluent senior customers.

Shinsegae Group’s Chosun Hotel and Resort is also preparing to enter the senior residence market.

After announcing senior residence business as a key future focus during its 10th anniversary ceremony in 2023, the company established a senior residence service planning division last year. More recently, Shinsegae Property, the group’s real estate development subsidiary, formed a task force to handle the project.

Parnas Hotel, an affiliate of GS Group, said in its March business report that it aims to expand into the premium concierge lounge and senior residence markets as part of its growth strategy alongside new consigned management properties.

Daemyung Sono Group, Korea’s largest resort company and recent acquirer of domestic budget carrier T’way Air, has also ventured into the senior housing market.

The company, which has been running a task force focused on businesses serving the elderly, is developing a luxury senior community called “Sono Wave” in Gangnam, with plans to later expand into travel, health care and funeral services.

This trend reflects Korea’s rapidly changing demographic.

A rendering image of Lotte Hotel's senior residence VL Le West / Courtesy of Lotte Hotel

According to a report released last month by the Korea Rural Economic Research Institute, the elderly will make up more than 75 percent of the population in 22 regions across Korea by 2030. In other words, at least seven out of every 10 residents in those areas will be seniors.

The country’s elderly population surged from 7.2 percent in 2000 to 15.7 percent in 2020. Korea has officially become a super-aged society as over 20 percent of its population turned over 65 in December last year, and Statistics Korea estimates the figure will further increase to 40.1 percent by 2050.

These older adults have “witnessed the country’s rapid economic development and grown more culturally open with a strong inclination towards consumption,” according to Kim Mun-sun, a senior researcher at the Korea International Trade Association. “This contrasts with earlier seniors who primarily planned their postretirement lives around support from their children.”

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According to KB Financial Group’s “2023 KB Golden Life Report,” many seniors prefer to remain in their current neighborhoods and stay connected to their communities. However, after learning about senior housing options, 60.7 percent of respondents said they would consider moving to a senior community.

“Although there is a great desire to grow older in areas where they are familiar, if the supply of facilities and services suitable for many elderly people’s situation expands and their understanding increases, more people will become more willing to live in a senior residence,” the report said.

This trend is also emerging as the hotel industry's traditional revenue driver — duty-free sales — faces a downturn, driven by a decline in large purchases by Chinese shoppers and a global economic slowdown.

According to industry data, domestic duty-free store sales in January totaled 954.4 billion won — a 40 percent drop compared to the same month last year.

For The Shilla Seoul hotel, which relies on duty-free sales for around 70 percent of its revenues, the impact is significant. The hotel generated 3.94 trillion won ($3.79 billion) in sales last year, marking a 10.6 percent increase from 2023, but still posted operating losses exceeding 5.2 billion won.

Customers stand in front of the entrance to a duty-free shop in Seoul's iconic Myeong-dong shopping district, March 23, 2024. Yonhap

Lotte Hotel also posted an operating loss of 45.6 billion won as of the end of last year due to sluggish sales at Lotte Duty Free.

The senior housing industry, meanwhile, is considered a blue ocean.

According to a report by the Korea Health Industry Development Institute and Samil PwC Business Research, Korea’s silver industry market is projected to grow in size from 72 trillion won in 2020 to 168 trillion won by 2030.

Although the domestic senior residential industry is still in its early stages, it holds significant growth potential, as current housing supply for that age group meets less than 3 percent of the elderly population, the report stated.

The report also highlighted opportunities for hotel chains to expand by developing residential complexes that integrate department stores, large supermarkets and convenience stores.

“Seniors with spending power prefer well-equipped residential environments with health care and infrastructure, regardless of cost," an industry official noted. "Luxury hotels, known for their premium services, are especially motivated to make luxury senior housing their next major projects.”