+ A

Many more hotels, but not enough guests

Feb 20,2018
The night view of central Seoul where a large number of hotels have been built in the past five years. However, foreign tourists staying at hotels have actually shrunk 23 percent in the first two months of this year compared to last year. [BYUN SUN-GOO]
Hotel rooms are sitting empty in Seoul, crushing hopes that the Lunar New Year holidays and the Winter Olympics would be a double boon for the Korean hotel industry.

In a survey of 15 five-star hotels in Seoul, the JoongAng Ilbo found there was no boon this February. Five of the surveyed hotels reported no difference in occupancy rates compared to the same month last year, while four reported a three to five percent increase. Three reported a five to 10 percent increase and two hotels replied they had a 20 percent decrease.

“The occupancy rates of five-star hotels in Seoul will stabilize at around 70 percent this February,” projected Kim Dae-yong from the Korea Hotel Association. “If this is the case with five-star hotels, three- and four-star hotels as well as hotels outside of Seoul are probably doing much worse.”

Though the occupancy rates of Seoul’s hotels recorded an annual average of 75 percent in 2016, this number probably fell to the mid-60s in 2017 with the choking off of Chinese tourists by Beijing to protest a U.S. missile shield in Korea.

But this year, even as the Lunar New Year overlapped with the Olympics, the number of tourists seeking hotels increased only slightly compared to last year at the peak of Chinese retribution for the Thaad (Terminal High Altitude Defense) system deployment.

Hotel rooms are going empty because their supply exceeds their demand. According to the Korea Hotel Association, the number of hotel rooms in Seoul by the end of last year reached 53,454, twice the number available in 2011, the year before lawmakers passed special legislation that allowed hotels and other lodging facilities to expand aggressively.

Seoul was considered to have a severe hotel shortage at the time.

In the last five years, the popular shopping district Myeongdong in central Seoul has seen 40 or so new hotels erected.

Seoul’s hotel construction boom began in 2012 under former president Lee Myung-bak and was also pushed by the Park Geun-hye administration on grounds that the lodging venues were not equipped to meet the growing influx of foreign tourists, particularly Chinese tourists.

The government under Park revised the tourism promotion act to allow hotels to be constructed 75 meters away from schools, a dramatic change from an earlier 200-meter limit.

At the time, the Tourism Ministry applauded the revision, crediting it for attracting 800 billion won ($749.28 million) in investments and creating 16,500 new jobs.

The Tourism Ministry was persuaded to expand hotels after observing thriving tourist levels in 2015. Though fewer Japanese made their way to Korea after diplomatic relations between the two turned sour, Chinese tourists were more than making up for the loss, numbering over 4.7 million that year.

In October 2016, when the Chinese government was already displaying signs of restricting tourism to Korea, the Tourism Ministry expanded the number of hotels, determined to create 90,000 additional hotel rooms in Seoul by 2020, a year it forecasted that 23.2 million foreigners would visit Korea.

In 2017, the number of foreign tourists reached a meager 13.33 million and demand failed to meet hotel supply by a huge margin. The Thaad retaliation caused the number of Chinese travelers to fall by 4.17 million, or 48 percent, last year compared to 2016, and tourist levels from Southeast Asia were stagnant.

The Chinese tourists who did come, however, ignored the new hotels and gravitated towards cheaper rooms. “The so-called youke slept at motels that cost 30,000 to 40,000 won per night,” explained one hotel manager. (Youke is Chinese for tourist.) “Because Chinese tourist groups have small profit margins, the agencies had to accommodate them at those rates.”

Last November, New Huacheng, the country’s largest tourist agency targeting Chinese travelers, had to put its Geum Ryung Tourist Hotel in Jeju Island up for auction. Small and large hotels alike were either facing occupancy rates below 50 percent, or going bankrupt.

Cheaper alternatives to hotels surged in the last couple of years. According to the Ministry of Health and Welfare, small and medium-sized accommodation facilities including guesthouses, Airbnb rentals and homestays have dramatically increased. Studios near Hongdae station and Yeonnam-dong are also being transformed into guesthouses.

“Foreigners in their twenties and thirties prefer guesthouses since five to eight people can share a room for just 70,000 to 120,000 won,” said one guesthouse owner.

KIM YOUNG-JU AND KANG NA-HYUN [kim.eunjin1@joongang.co.kr]