[Click eStock] "Hotel Shilla Sees Rapid Inbound Recovery... Neutral Investment Opinion"

On June 16, Korea Investment & Securities maintained a neutral investment opinion on Hotel Shilla, stating, "While doubts about the company's long-term growth potential still remain, inbound (domestic tourism inflow) is increasing more rapidly than the market expected."

On this day, Kim Myungjoo, a researcher at Korea Investment & Securities, said, "There are short-term favorable factors in the duty-free industry that deserve attention, and there is still room for further stock price increases."

In April, inbound visitors increased by 16.7% year-on-year and by 5.7% compared to the previous month. The recovery rate compared to April 2019 reached 104.4%, showing a faster-than-expected increase. Since the base effect from last year is low, there is a high possibility that inbound tourism will continue to increase steadily for the remainder of this year. In the third quarter, a visa-free policy for Chinese group tourists will also be implemented. Kim stated, "Although changes in consumption patterns mean that travelers visit pre-departure duty-free stores less than in the past, the ongoing recovery in inbound tourism is clearly positive for Hotel Shilla's duty-free and hotel businesses."

The recovery of the duty-free industry from May to early June was somewhat sluggish. Excluding Lotte Duty Free, which announced the suspension of large-scale Daigong (Chinese bulk buyers) transactions, the major domestic duty-free stores saw slightly weaker sales last month compared to the previous month. Kim noted, "Fortunately, commission rates differ by company, but on average, they have remained at levels similar to April. The possibility of implementing a visa-free policy for Chinese group tourists in the third quarter is high, and related expectations help offset disappointment over the industry's slow recovery. For Hotel Shilla, additional airport rental fee discounts at overseas airports could be applied as early as the second or third quarter."

Additionally, Kim added, "Recently, due to a shortage of hotel rooms, the average daily rate at major hotels in Seoul has been rising rapidly. As of the first quarter, excluding the Jeju hotel, Hotel Shilla's average daily rate also either remained similar to last year or increased slightly depending on the location. If inbound tourism continues to grow steadily for the remainder of this year as it did in April, the value of Hotel Shilla's hotel business could also come into greater focus."