Yongpyong Resort, What Is Needed for Performance Recovery Is the 'Sales Business'

The domestic tourism industry, which had been contracted due to the spread of the novel coronavirus infection (COVID-19), is recently showing signs of recovery. With restrictions on international travel, people who cannot travel abroad are visiting domestic tourist destinations. Although it has not yet recovered to pre-COVID-19 levels, this is being seen as a signal that the worst period has passed. As the number of newlyweds going on honeymoons to Jeju Island and Namhae increases, some resorts and hotels have become so fully booked that it is difficult to make reservations even on weekdays. Expectations for improved performance of listed companies related to resorts, which had poor results in the first quarter, are also growing. Asia Economy reviews the potential for performance improvement and financial status of Ananti, Yongpyong Resort, and Lotte Tour Development, which is about to open a complex resort in Jeju Island.

[Asia Economy Reporter Yoo Hyun-seok] The second-half performance of HJ Magnolia Yongpyong Hotel & Resort (Yongpyong Resort), which had a sluggish first half due to the impact of COVID-19, is expected to improve. This is because the summer peak season is approaching and travelers who cannot go abroad are benefiting domestic travel. However, for a full-scale performance improvement, recovery of the sales business, which accounts for a large portion of total revenue, is necessary.

In the past, Yongpyong Resort's sales were concentrated in winter. Since skiing is a winter sport, sales were greatly affected by the season. However, after Yongpyong Resort established facilities such as water parks, it attracted visitors even in summer. The strategy of fully utilizing Daegwallyeong, where Yongpyong Resort is located, as one of the coolest areas in Korea worked well. As a result, the seasonal sales concentration was alleviated. In fact, sales in the first quarter of last year, which can be considered the winter peak season, were 33 billion KRW, and sales in the third quarter of last year, which can be classified as summer, reached 40.5 billion KRW.

Recently, Yongpyong Resort's performance has been declining. The special demand from events such as the '2018 Pyeongchang Winter Olympics' has disappeared, and the sales business, which accounted for a large portion of revenue, is also shrinking. On a consolidated basis, Yongpyong Resort's sales reached 209.8 billion KRW in 2017 but decreased to 129.4 billion KRW last year. Operating profit also turned into a loss during the same period, recording an operating loss of 4.1 billion KRW after earning 33.5 billion KRW. Additionally, condo sales, which accounted for 46.39% of total sales in 2017, decreased to 34.39% in 2018 and 9.35% in 2019. The operating business has maintained a level of about 110 billion KRW annually.

The first quarter of this year also recorded poor results. The first quarter posted sales of 34 billion KRW and an operating loss of 760 million KRW. Sales increased by 2.9% compared to the same period last year, but operating profit turned negative. The second quarter is also expected to record poor performance due to COVID-19 and other factors. However, from the third quarter, sales related to resort operations are expected to increase again as the summer peak season approaches and resort visitors increase. A company official said, "Weekend reservation rates are rising due to the KLPGA tournament and the start of the peak season," adding, "Although still negative compared to last year, we are gradually meeting the target the company expected."

However, for performance improvement, recovery of the sales business, which accounted for a large part of the business, is necessary. Yongpyong Resort began selling Apollis Condos in 2018. This is the third sales project after Birch Hill Terrace and Olympic Village (athlete village apartments). It is also the first premium condo sales project conducted after listing on the stock market. A company official explained, "Apollis Condo sales started in 2018, and full-scale promotion began last year; about 30% has been completed so far."