Hotel Shilla Reports Operating Loss of 17 Billion KRW in Q3... Turns to Deficit

Operating Loss of 17 Billion KRW, Turning to Deficit Compared to Last Year

Hotel Shilla recorded an operating loss in the third quarter, turning to a deficit. This marked an earnings shock as it fell significantly short of the estimates expected by the securities industry for profit growth.

According to the Financial Supervisory Service's electronic disclosure system on the 1st, Hotel Shilla posted an operating loss of 17 billion KRW in the third quarter of this year, turning to a deficit compared to the operating profit of 7.7 billion KRW in the same period last year. Sales increased by 0.4% to 1.0162 trillion KRW, while the net loss widened to 23.4 billion KRW compared to a loss of 3.3 billion KRW last year.

According to estimates from the securities industry, sales and operating profit were 964.5 billion KRW and 27.2 billion KRW, respectively. While sales exceeded expectations, operating costs increased, preventing profits from rising to the anticipated level.

Hotel Shilla's business is divided into hotel and duty-free sectors, with the slow recovery in the duty-free market affecting performance. The duty-free sector recorded sales of 844.8 billion KRW and an operating loss of 38.7 billion KRW, which is a larger loss compared to the operating loss of 16.3 billion KRW last year. The opening of new business locations within Incheon Airport this year and increased overseas travel in the third quarter led to higher marketing expenses, which is expected to have negatively impacted profits.

A Hotel Shilla representative explained, "The duty-free industry is experiencing significant difficulties due to unpredictable changes in the market environment," adding, "Domestic consumers are affected by the high exchange rate, and foreign consumers face reduced purchasing power due to the downturn in the Chinese economy."

The hotel sector recorded sales of 171.4 billion KRW and operating profit of 21.7 billion KRW. Sales increased by about 3% compared to the same period last year, while operating profit decreased by 9.6%. Although sales in the stay and leisure sectors increased, the decline in sales at Jeju hotels is analyzed to have affected profits. A company official stated, "The hotel sector continued to operate profitably," and added, "We will strengthen product competitiveness to meet year-end demand and maintain a positive performance trend."