[Platform Abuse] 'Yanolja's Excessive Commission... Swallowing 30% of Room Rates

Planning - Abuse of Power by Platforms in the COVID Era (Part 1)
Accommodation Industry Dying in the COVID Era
Platform Fees Averaging Over 30%
Platform Fee Controversy Spreading Across Industries

Yanolja Headquarters, Gangnam-gu, Seoul

[Asia Economy Reporters Minyoung Cha and Junhyung Lee] "Out of the 100,000 KRW lodging fee, 30,000 KRW is nothing but a toll." Mr. Ho-young Choi (pseudonym), in his 50s, who has been running a motel in Gyeonggi Province for 15 years, sighed as he expressed his frustration. His monthly sales amount to 20 million KRW, but an average of 30% flows directly to the platform under the names of advertising fees and brokerage commissions.

The dual nature of platform businesses, the growth drivers of the 4th Industrial Revolution era, is emerging. This is due to various fees reaching as high as 20-30%. From lodging to delivery, taxis, and fashion, including Yanolja, the number one lodging app in Korea currently under investigation by the Fair Trade Commission, some even complain that "it was better before platforms existed."

According to the Korea Federation of Small and Medium Business and related industries on the 11th, Yanolja's brokerage commission is 9.9% per reservation, and it charges an average monthly advertising fee of 343,000 KRW. The advertising fee, which is a seat fee for exposure at the top of the application, can be up to 3 million KRW depending on the company. The final fee, combining brokerage commissions and advertising fees that come like fixed costs, amounts to 20-30% of total sales. Additionally, there is a one-time registration fee of 82,000 KRW in the first month. This is why it is said that about 30,000 KRW out of the 100,000 KRW lodging fee paid by consumers is a toll.

Even considering just the brokerage commission, it is higher than Baedal Minjok, which was embroiled in a fee controversy last year. Considering that the check card fee rate for sales under 300 million KRW is 0.5%, there are criticisms that this is excessive. Especially as the tourism industry was hit hard by COVID-19 and small business owners' livelihoods are threatened, criticism that only the platforms are profiting is inevitable. Unfair practices such as forcing minimum price conditions, which were controversial along with fees, have only recently been corrected.

Namsoo Cha, Head of Policy and Public Relations at the Korea Federation of Small and Medium Business, pointed out, "Assuming a room with a normal price of 50,000 KRW is sold, considering various variables, if the lodging business owner finally earns 100,000 KRW, 30,000 to 40,000 KRW goes to Yanolja." He added, "Although they provide only simple brokerage services without any product planning (MD), they charge high fees and impose advertising costs of hundreds of thousands of KRW on small business owners." Yanolja, which has achieved more than tenfold sales growth over the past five years, is now accused of abusing its dominant market position to squeeze the lodging industry.

The controversy over excessive platform fees is spreading across industries such as delivery, taxis, and fashion. The average commission for online fashion platforms like Musinsa reaches 26.7%. Some platforms, including Yanolja, suspected of unfair practices, are also undergoing investigations by the Fair Trade Commission.

However, Yanolja stated, "Compared to the average in the platform market, the brokerage commission is not high. Since card fees are included, they should be excluded." The company explained, "We did not charge fees to nearby lodging businesses during the Pohang and Gyeongbuk earthquakes three years ago, and we did not receive supplementary budgets for travel and tourism last year." They claim that fees are used for platform operating costs, 24-hour customer support, and marketing, and that the company's profit margin is only about 1%.