Business Hotels 'Welcome' · Luxury Hotels 'Not So Sure'
As news of the return of Chinese group tourists (Youke) spreads, expectations for the effect on customer attraction vary by scale within the hotel industry. While 2-3 star tourist hotels, which directly benefit from the return of Youke, have already begun preparations to 'welcome Youke,' 4-5 star hotels classified as luxury hotels judge that the effect of this measure will be minimal and are showing a passive attitude toward various promotions and marketing preparations.
As China fully lifted the ban on group tours to Korea after 6 years and 5 months, raising expectations in the tourism industry, Chinese tourists arriving at Incheon Port International Passenger Terminal in Yeonsu-gu, Incheon, are moving on the morning of the 12th, when international passenger ferry service between Korea and China resumed. Photo by Yonhap News
On the 10th, the Chinese Ministry of Culture and Tourism announced the third list of 'countries allowing group travel,' including about 70 countries such as South Korea, the United States, and Japan, where group travel had been banned since COVID-19. It has been about six years and five months since group tourism by Chinese people to South Korea was allowed, following the imposition of the 'ban on travel' as a retaliatory measure after the deployment decision of the Terminal High Altitude Area Defense (THAAD) system by the US Forces Korea in March 2017.
Foreign tourists, including Chinese and Japanese, are strolling the streets of Myeongdong, Jung-gu, Seoul. [Photo by Kang Jin-hyung]
With the return of Youke, which once reached 8 million annually, the hotel industry is initially optimistic, but a subtle temperature difference is detected between 2-3 star business hotels that directly target Youke and 4-5 star luxury hotels that do not. Unlike business hotels, where visible indicators such as room occupancy rates are expected to rise immediately with the return of Youke, the ripple effect on luxury hotels is judged to be minimal.
Chinese group tourists entering with package products from inbound travel agencies (travel agencies attracting foreigners to domestic travel) rarely stay at luxury hotels with high average spending per customer due to pricing issues. Generally, in the hotel industry, it is widely analyzed that a 'domino effect' occurs where if the occupancy rate of 3-star hotels fills up, it moves to 4-star, and if 4-star hotels fill up, it moves to 5-star. However, currently, 4-5 star luxury hotels have almost recovered to pre-COVID-19 levels with over 80% of guests being foreigners, so industry insiders explain that the impact of this measure on these hotels is virtually minimal. If the inflow of Youke steadily continues over a long period, raising the overall average spending per customer at hotels, luxury hotels could also benefit, but for now, expectations for the direct ripple effect brought by the return of Youke are low.
On the other hand, 2-3 star business hotels, which directly benefit from the return of Youke, have already begun preparations to welcome large numbers of guests. Shilla Stay, the business hotel brand of Hotel Shilla, is known to have separately communicated internal response policies following the news of Youke's return on the 10th. The global business hotel chain Best Western has also seen a noticeable increase in meetings with inbound travel agencies centered on individual hotels since the news of Youke's return. Shilla Stay plans to capture Chinese group tourists by focusing on ▲launching products in cooperation with inbound travel agencies ▲introducing China-specific tourist products leveraging the advantages of its 14 locations ▲preparing Seoul tourism-linked products such as Seoul city tours and art museum exhibitions.
An industry official said, "It is undeniable that the news of Youke's return is a boon for the entire hotel industry, but the degree of ripple effect varies by scale. The biggest beneficiaries will likely be 3-star business hotels, and for 4-5 star luxury hotels, the effect gained from Youke's return is almost none." He added, "Unlike business hotels that have long prepared various promotions targeting Youke, there is little movement among luxury hotels to prepare special marketing or promotions."
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