Until COVID-19 stopped everything, it was easy to find articles about growing foreign visitors in Korea along with the Korean Wave. But now they are gone and we can only see some articles about lodging businesses in crisis due to COVID-19. Here come in a question though. How many lodging properties are there in Korea, how much have they earned in the boom, and how hard are they now that the market has disappeared?
First, the number may vary depending on how you define a lodging property. Under the Building Code of Korea, lodging properties are divided into three types: general and living accommodation, tourist accommodation, and multi-living facilities (floor area of 500 square meters or more). A lodging business means a business running these lodging properties. Lodging properties are commonly subject to the Public Sanitation Act. In addition, the Tourism Promotion Act is applied to tourist accommodations and the Multi-use Facilities Act is applied to multi-living facilities. As there are differences in the relevant regulations, they are all supervised by different authorities and their statistics are managed separately by each authority. The Ministry of Interior and Safety is in charge of general and living accommodations and multi-living facilities, while the Ministry of Culture, Sports and Tourism is in charge of tourism accommodations.
There are certain types of properties not clear where to belong. If you operate a guest house, pension, dormitory, youth training center, youth hostel, camping site, you may or may not be defined as a lodging business. Technically, they are not lodging properties as defined in the Building Code. A guest houses and pension are classified as a single-family house, a dormitory is classified as a multi-family house, and a youth training center, a youth hostel and a camping site are classified as a training facility. In particular, a youth hostel can be more confusing because they have a similar name to a hostel, one of the categories in the hotel.
Second, the number may vary due to differences in the scope of management and the aggregation criteria of statistics, subject to the supervising authority. For example, regarding the number of hotel businesses as of 2019, the National Business Survey says 746; the Ministry of Culture, Sports and Tourism says 1,983; and the local governments say 3,091. In the case of the timeshare businesses, the National Business Survey says 300; the Ministry of Culture, Sports and Tourism says 235; and the local governments say 146. The number of motels/inn businesses are said to be 23,074 by the National Business Survey and 19,841 by the local governments. For the others, the National Business Survey says 16,392, and the local governments say 6,600. The biggest factor seems to be how to count the number of businesses if a company operates multiple properties.
First of all, according to the 2015 Economic Census data, lodging businesses in Korea generated a total of KRW 1.5 trillion in revenues, of which KRW 1.5 trillion was left as profit. It was noted that 53,162 lodging properties participated in the survey, meaning that each property generated KRW 220 million in revenues and KRW 30 million in profit. It is not clear exactly how 53,162 properties were counted, but it is similar to 53,198 properties in local government statistics which includes properties out of business. Meanwhile, according to the Bank of Korea’s Enterprise Management Analysis data for the same year, incorporated lodging businesses generated a total of KRW 6.3 trillion in revenues and recorded an operating loss of KRW 24 billion. We don’t know how many incorporated lodging businesses were included here.
Meanwhile, according to the Korea Hotel Association’s data on the operating statistics of hotel businesses, hotels in Korea sold 60% of the total 19 million rooms available in 2015, generating KRW 1.4 trillion in room revenues and KRW 1.3 trillion in other revenues. The statistics do not specify how many hotels participated in the survey, but you can infer from the separate source of data. According to the list of registered tourist accommodations, a total of 1,279 hotels supplied 117,626 rooms during this period. In other words, it is estimated that there were approximately 43 million rooms available, and the sample size in the operating statistics of hotel businesses represent 45% of the total supply. The operating statistics of hotel businesses are no longer available down to an individual property level any more due to the strengthening of privacy laws.
This includes youth training centers and youth hostels, some of guest houses and pensions, and excludes dormitories and camping sites. Of these, 69% of the accommodations represented by motels and inns. On the other hand, hotels, which provides a better visibility over the operating statistics, account for only 7% of all lodging properties. In other words, the visibility of the lodging market in Korea is limited to 7%. This is a problem because administrative policies or business decisions related to the lodging industry are made based on such limited visibility.
Hotelysis provides a comprehensive visibility over the lodging market in Korea with all the details about 23,273 lodging properties including general and living accommodations, tourist accommodations, and other accommodations as of 2019. This includes detailed data on facility information, demand, price, revenue, expense, working capital, financial position and asset value, which are provided for the period from 2005 to 2019 in the same format. Hotelysis’ AI algorithms have collected fragmented and scattered data from various sources, connected them and filled the blanks. Also, all the datasets went through multiple validation tests as compared to actuals, and are included in the database only when they passed the tests. (Database update 2021.08.12.)
Information barriers are increasing among operators, owners, financial institutions, and advisors, who are supporting the segmented value chain of lodging industry. And it’s now coming back as a boomerang, threatening the ecosystem of the lodging industry, blocking the interaction between lodging and capital markets, meaning the flow of market liquidities. Hotelysis will continue to work on breaking down the barriers to help the lodging industry regain stability of the value chain.