[Click eStock] Increased Travel Demand to Jeju... Lotte Tour Achieves Break-Even Point in Q3

[Asia Economy Reporter Ji Yeon-jin] Hana Financial Investment forecasted on the 17th that Lotte Tour Development will grow to reach the quarterly break-even point (BEP) in the third quarter of this year, less than a year after the opening of Jeju Dream Tower, driven by travel demand to Jeju Island due to COVID-19.

Lee Ki-hoon, a researcher at Hana Financial Investment, stated, "(Lotte Tour Development) is an investment alternative that can fully benefit from the high demand for travel to Jeju Island and the momentum from the travel bubble and quarantine exemption." He added, "Since a complex resort's capacity depends on hotel rooms, high interest is required for Lotte Tour Development, which has 1,600 rooms."

Lotte Tour Development's sales in the first quarter of this year were 37.8 billion KRW, a 5% decrease compared to the previous year, and it recorded an operating loss of 37.8 billion KRW. Sales in the hotel sector were 11 billion KRW, with the occupancy rate (OCC) rising from 19% in January to 44% in March. Profitability in food and beverage (F&B) sales has been maintained at about 85% in line with room sales. The total number of rooms sold is estimated to have increased from about 23,000 in the first quarter to over 50,000 in the second quarter.

Especially during the peak season in July, reservations already exceeded the capacity of Tower 1 (750 rooms), leading to the start of opening Tower 2 (850 rooms). The expected room sales in the third quarter are projected to be at least 90,000 rooms, and hotel sales (rooms + F&B) are expected to reach up to 50 billion KRW. It is analyzed that even without the casino, the hotel alone can achieve a quarterly BEP (quarterly sales around 50 billion KRW). The increase in fixed costs (such as labor costs) is expected to be minimal even with the opening of Tower 2.

Last month, the number of visitors to Jeju Island reached 1.07 million (97%), and the cumulative number for April increased by 11% even without foreigners. The researcher said, "With travel demand concentrated due to COVID-19, it is a positive situation where awareness can be rapidly expanded in the early stages of opening," and added, "The casino is planned to open in June, starting operations targeting foreign residents living in Korea, and the management team from Macau will begin to fully demonstrate their capabilities during the travel bubble."