[At the Brink Hotel] Number of Hotels in Seoul Doubled... But Chinese Tourists Remain 'Dark'

Number of Hotels in Seoul Doubled Since 2012
Main Target Chinese Tourists Remain Flat
Last Year Barely Recovered to 6 Million
Direct Hit from COVID-19 Feels Like a Cold Shower

[Asia Economy Reporter Cha Min-young] Amid the massive damage to the national tourism industry caused by the novel coronavirus infection (COVID-19), it has been revealed that hotels concentrated mainly in Seoul have suffered significant losses. Although the era of "20 million foreign tourists" was anticipated, the number of hotels has more than doubled compared to 2012, while the main target, Chinese tourists, has remained stagnant.

According to the industry on the 4th, a representative of a 3-star business hotel in Gangnam-gu, Seoul, explained, "Since the outbreak of COVID-19, the reservation rate has dropped by 70% compared to usual, and after checking passports, we politely refuse entry to customers with Chinese nationality or those who have visited China," adding, "Once a confirmed case visits, it affects us, so this is an unavoidable measure." In fact, The Riverside Hotel in Seocho-gu closed from the 2nd to the 5th of this month after a confirmed COVID-19 case visited and is scheduled to reopen on the 6th. It is currently banning all entry and stays by domestic and foreign visitors who have been to China within the past two weeks. Shilla Stay Haeundae also closed for three days from the 28th of last month and resumed operations on the 2nd.

Luxury hotels are also facing issues. Paradise Hotel Busan is closing its restaurant and the key Executive Lounge for the entire month of March and partially reducing operations in other restaurants. Paradise City has decided to temporarily shorten the operating hours of boutiques (shops) and restaurants in March. Lotte Hotels have seen cancellations of about 50,000 rooms across all 30 affiliated hotels, and around 160 MICE (Meetings, Incentives, Conferences, and Exhibitions) conferences have been canceled. Following Lotte Group's policy, employees who wish to take unpaid leave are being permitted. Some branches of Kensington Hotel & Resort, operated by E-Land Park, have temporarily reduced operations for up to 13 days.

The overcrowding of hotels in Seoul is considered a factor that has intensified the industry's shock. Compared to the sharp increase in the number of Seoul tourism hotels targeting mainly Chinese tourists over the past five years, the number of Chinese tourists has actually decreased. According to Seoul's tourism accommodation registration status, as of September 2019, there were 450 hotels in Seoul with a total of 58,676 rooms. This is an increase of more than 11,000 rooms (11,329 rooms) compared to September 2018 (431 hotels, 57,347 rooms). Compared to 2012, the number of hotels and rooms has increased about threefold and twofold, respectively. On the other hand, the number of Chinese tourists in Korea decreased from 6.13 million in 2014 to 4.17 million in 2017, then slightly recovered to 4.79 million in 2018 and 6.02 million in 2019, barely regaining the 6 million mark. Over the five-year period from 2014 to 2019, this represents a -1.7% decline.

Moreover, with the addition of the COVID-19 issue, the avoidance of Korea has become more pronounced. According to the Ministry of Justice, the number of foreign arrivals was 6,920 as of March 1, a quarter of the 38,059 arrivals on February 1, one month before COVID-19. The decline in inbound travel demand to Korea is expected to deepen further. According to a recent report by Hana Financial Management Research Institute, as the spread of COVID-19 continues, the likelihood of a decrease in foreign tourists entering Korea, despite the improving perception of Korea through K-content and other factors, has significantly increased.

The problem of hotel oversupply has been continuously raised. The hotel industry points to the "Special Act for the Expansion of Tourism Accommodation Facilities," which was temporarily enforced from 2012 to 2016, as the main cause. A 2015 report by Woori Bank's Real Estate Research Office titled "Seoul Hotel Market Trends and Supply-Demand Outlook" also analyzed that the supply-demand balance had tipped into oversupply, with demand at 31,900 rooms and supply reaching 32,300 rooms that year.

Professor Han Jin-soo of Kyung Hee University's College of Hotel and Tourism Management stated, "To overcome situations like the COVID-19 crisis, a long-term strategic shift is necessary," and added, "For example, a conceptual approach to the hotel industry as a whole, such as shared accommodation, should be considered as part of management strategy." This includes recent key topics in the Fourth Industrial Revolution, such as "joint production of big data in the hotel industry." He emphasized, "We need to consider smart tourism strategies centered on demand that reflect the characteristics of tourists entering Korea," and added, "To gain price competitiveness in hotels, qualitative growth focused on content rather than quantity and expansion based on domestic and international cultural diversity are necessary."