Hotel Lotte Co., South Korea’s leading hospitality, leisure and travel retail giant, has resumed its global expansion drive after its hotel and resort business enjoyed record-high earnings last year thanks to the thriving global hotel industry in the endemic era.
According to the hotel industry on Monday, Hotel Lotte’s hotel and resort unit Lotte Hotels & Resorts is set to open new hotels at home and aboard, including its premium boutique hotel chain L7 in Seoul.
It is also in talks with the owners of two hotel properties in South Jeolla Province to manage and operate them as its hotel brands.
Lotte Hotels & Resorts owns several hotel brands, upper upscale hotel brand Signiel, luxury hotel operator Lotte Hotels, boutique hotel brand L7 Hotels, business hotel operator Lotte City Hotels and Lotte Resorts. It also operates a VL senior home brand.
In overseas markets, the Korean hotel operator focuses on Vietnam after L7 West Lake Hanoi by Lotte became a popular hotel destination in the country instantly after its opening last year. Lotte is considering opening L7 hotels in other cities in the Southeast Asian country, such as Ho Chi Minh and Da Nang.
In the US, it reopened the Kimpton Hotel Monaco Chicago as L7 Chicago By Lotte last month. Korea’s largest hotel group completed the purchase of the 191-room Chicago property for $36 million in 2022.
It also plans to open a new L7 hotel in Busan, the largest port city and second largest city in Korea.
GAINING MOMENTUM
Lotte Hotels & Resorts is accelerating the expansion of its hotel operations across the world after it was forced to slow down its ambitious global drive by Beijing-Seoul diplomatic rows over the deployment of a US anti-ballistic missile defense system in Korea in 2016 and the COVID-19 outbreaks.
In 2014, the company vowed to become Asia’s No. 1 hotel brand with a plan to operate 40 hotels at home and abroad by 2019 and 200 by 2030.
However, the end of the pandemic has paved the way for Lotte’s resumption of such delayed grand plans.
In 2023, Hotel Lotte raked in 468.8 billion won ($343.5 million) in operating profit from hotel operations only on the highest-ever hotel business revenue of 1.3 trillion won thanks to the thriving global travel industry. The results were better than the pre-pandemic levels recorded in 2019.
While its mainstay travel retail business has been grappling with falling sales due to a fall in Chinese visitors to Korea, its hotel business has become more important in its overall business.
Sales of Lotte Hotels & Resorts accounted for 27.17% of Hotel Lotte’s total revenues in 2023 versus 12.2% in 2019. Over the same period, Lotte Duty Free’s share dropped to 64.8% from 82.5%.
EXPANSION THROUGH ASSET-LIGHT STRATEGY
As the hotel business has gained growth momentum, Lotte is expected to push for global expansion to sustain growth.
“Expansion is nearly the only way that can guarantee the company’s growth,” Kim Tae-hong, chief executive officer of Lotte Hotels & Resorts, said at a ceremony to commemorate the company’s 51st anniversary early this month.
He emphasized the importance of an asset-light business model in accelerating the company’s growth and vowed to expand its business through hotel management consignment agreements, instead of purchasing or leasing properties.
An asset-light business model is a business approach focusing on minimizing the ownership and investment in physical assets so companies can be more flexible, agile and scalable in business operations based on market demands.
Lotte will adopt an asset-light strategy to improve the awareness of the Hotel Lotte brand across the world with minimized initial investment, said an official from the hotel.
Write to Sun A Lee at [email protected]
Sookyung Seo edited this article.
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