[Exclusive] Hotel Shilla Reenters China... First Flag of 'Shilla Stay' Raised

Silla Stay Entrusted Management in Yancheng, Jiangsu Province
Re-entry into Chinese Market After 3 Years of Withdrawal
MOU Signed Last June... Main Contract Expected
Third Overseas Base After Vietnam and the United States

Hotel Shilla is confirmed to be preparing for re-entry into the Chinese hotel market. The most likely plan is to operate Shilla Stay, a business hotel, on a consignment basis in Yancheng City, Jiangsu Province, eastern China, where over 1,000 Korean companies have entered. This marks a return to the Chinese market three years after withdrawal. It is expected to become the third overseas base for Shilla Stay, following Vietnam and the United States.

Silla Monogram Danang exterior view. [Photo by Hotel Shilla]

Shilla Stay to Open in Yancheng City, Jiangsu Province, China

According to comprehensive reporting on the 8th, Hotel Shilla signed a memorandum of understanding (MOU) in June to manage Shilla Stay, which will be built in Yancheng City, Jiangsu Province, China, on a consignment basis. It is reported that once the hotel is completed, a formal contract will be signed and full-scale operations will begin. The size of the hotel and the completion date have not been disclosed. Hotel Shilla stated, "As a hotel operator, we are receiving requests for consignment operations overseas," adding, "We are reviewing various proposals."

Previously, Hotel Shilla operated the Jinji Lake Hotel on a consignment basis in Jiangsu Province from 2006 but withdrew later. This hotel was Hotel Shilla's first global expansion case, initially planned for 20 years of consignment operation. However, due to redevelopment in the area, they withdrew in 2021.

Hotel Shilla's re-entry into China came after receiving another consignment management proposal in 2022. Targeting the demand for business hotels among Korean company employees in Yancheng City, Hotel Shilla decided to open Shilla Stay. Yancheng is an industrial city with a population of 8.1 million, home to over 1,000 Korean companies including SK and Kia.

The Shilla Stay to be established in Yancheng City will be the first Hotel Shilla brand introduced in the Chinese market. Hotel Shilla currently operates two brands, Shilla Hotel and Shilla Stay, whereas the previously operated Jinji Lake Hotel did not carry the 'Shilla' brand.

Following the opening of Shilla Monogram Da Nang in Vietnam, Hotel Shilla is preparing to open Shilla Stay in the San Jose area of Silicon Valley, USA. The San Jose opening was originally planned for 2021 but was postponed to next year due to the prolonged COVID-19 pandemic. Additionally, Hotel Shilla is pushing forward with the opening of Shilla Monogram Hanoi, a 4.5-star hotel, in Hanoi, Vietnam.

Duty-Free Store Performance Decline After THAAD Incident... Breakthrough in Overseas Markets

Hotel Shilla is accelerating its overseas expansion amid prolonged domestic stagnation and poor performance in the duty-free sector. In the second quarter of this year, Hotel Shilla recorded an operating profit of 27.628 billion KRW, a 58.9% decrease compared to the same period last year. The duty-free (TR) sector's operating profit (7 billion KRW) dropped by 83.8%, significantly impacting the overall results, while the hotel & leisure sector's operating profit also fell by 14.2%.

The duty-free market, which was hit hard by China's retaliation over the Terminal High Altitude Area Defense (THAAD) system, saw further deterioration due to the prolonged COVID-19 pandemic. After COVID-19 became endemic, the sustained strong dollar hindered the recovery of duty-free store performance. Furthermore, the prolonged domestic downturn caused by global economic sluggishness and high inflation has shrunk hotel sector profits, prompting the company to seek breakthroughs in overseas markets.

Exterior view of Lotte Hotel Moscow.
Photo by Asia Economy DB

The same applies to Lotte Hotel & Resorts. Lotte Hotel is currently pursuing plans to open a boutique brand 'L7' in Indiana, USA. In the second quarter of this year, Lotte Hotel recorded sales of 636.8 billion KRW, a 9.8% increase year-on-year due to domestic market recovery, but operating losses remained at 9.4 billion KRW, indicating it has yet to escape the deficit.

Lotte Hotel's L7 Indiana is the second L7 location in the United States after Chicago. Including these hotels, Lotte Hotel operates numerous hotels on a consignment basis in Myanmar, Russia, Vietnam, and other countries. Additionally, Lotte Hotel is implementing a multi-brand strategy in the global market with brands such as Signiel and Lotte City Hotel.