[Click eStock] "Hotel Shilla, Focus on Rising Hotel Value"

On July 29, IBK Investment & Securities analyzed that the fundamentals of Hotel Shilla's hotel business division are strengthening, and further expansion of its pipeline is expected.

In the second quarter of this year, Hotel Shilla recorded consolidated sales of 1.0254 trillion won and an operating profit of 8.7 billion won. While sales increased by 2.3% compared to the same period last year, operating profit fell by 68.5%, falling short of market expectations. The reasons for the sluggish performance are identified as follows: a decline in margins due to increased discount rates at downtown duty-free shops; increased cost burden due to a decrease in the exchange rate; and higher costs from airport store rents and fixed expenses.

On the other hand, the hotel business division continued to show solid performance. In the second quarter, the hotel/leisure business division posted an operating profit of 20 billion won, which is a slight decrease compared to last year, but a significant increase from the first quarter.

Nam Sung-hyun, a researcher at IBK Investment & Securities, stated, "With the continued increase in foreign visitors to Korea and a structural shortage in supply, both ADR (Average Daily Rate) and OCC (Occupancy Rate) have maintained stable trends. In particular, the decline in visitors to the Jeju area also appears to be easing, which is a positive sign."

He added, "Hotel Shilla is continuing to expand its pipeline, with the opening of Gangneung Monogram and Xi'an Monogram in China scheduled for the end of this month, so related performance is expected to continue growing. Also, as the increase in accommodation facilities in Seogwipo, Jeju, is limited and the recovery in demand in the Jeju market is likely with the expected increase in foreign visitors to Korea, the performance of the Jeju hotel is also expected to stabilize."

He further stated, "In the mid- to long-term, the fundamentals of Hotel Shilla will be driven by the hotel business division."