By Yi Whan-woo
Industry officials said on Friday that major foreign investment firms are seeking to acquire hotels in Korea as an increasing number of properties become available for sale amid the robust recovery of the travel market following the downturn caused by COVID-19.
Real estate firms, private equity funds and sovereign wealth funds across the world are interested in buying multiple hotels owned by domestic businesses such as KT, DL Group and Lotte Group, they said.
The companies are looking to sell their respective hotels, whose values have increased as more international tourists return to Korea after the COVID-19 pandemic. This rise in value provides an opportunity for sellers to raise liquidity and invest in new businesses.
KT, which has been expanding investments in artificial intelligence (AI), recently selected a consortium consisting of Samjong KPMG, Avison Young, Colliers Korea and Realty Planet as its sales advisers to sell its hotel properties.
The total value of hotels belonging to KT is over 2 trillion won ($1.37 billion), including five-star hotels such as Andaz Hotel and Sofitel Ambassador, both in southern Seoul, Novotel Ambassador Seoul in Dongdaemun District, and the Le Meridien & Moxy Myeongdong in central Seoul.
The hotels were built on the sites of KT’s former telephone offices and are managed by its real estate subsidiary, KT Estate.
The subsidiary now accounts for more than 10 percent of KT’s total operating profit, with the share of hotel revenue rising from 7.4 percent in 2019 to 34 percent by the end of the third quarter of 2024.
“The data suggests profitability of hotel business, which gives a reason for global investment companies to show their interest,” Kim Dong-young, chairman of the Global Real Estate Association of Seoul, said.
Regarding DL Group, Singapore’s sovereign wealth fund GIC, along with two U.S.-headquartered private equity firms — Kohlberg Kravis Roberts (KKR) and Blackstone — is eyeing the acquisition of the conglomerate-owned hotels.
The Korean side wants to sell Glad Yeouido, Glad Gangnam Coex Center, both in Seoul, and Maison Glad Jeju, in Korea’s southernmost resort island.
Operated by DL Group’s subsidiary, Glad Hotel & Resort, the three hotels are estimated to be worth between 600 billion won and 700 billion won combined.
Glad Yeouido and Gangnam COEX Center stand out for their prime locations in Seoul’s financial district of Yeouido and the commercial district of Gangnam. Meanwhile, Maison Glad Jeju, located near Jeju International Airport, has been strengthening its presence following renovations in the mid-2010s.
Lotte Group has also entered the rush to sell hotels amid rumors of a potential liquidity crisis.
While the company denied the rumor, it has been seeking to secure cash by unloading unprofitable businesses. The Group is considering selling its three- and four-star hotel brands, including L7 and City Hotel, with properties such as L7 Myeongdong, L7 Hongdae, and Lotte City Hotel Ulsan.
Industry officials explained that investment firms are likely to focus more on hotels than office buildings due to the oversupply of commercial office space.
For instance, Bental Green Oak, commonly known by its acronym BGO, was likely the only notable foreign investor to participate in a recent sales bid for the Seoul Finance Center (SFC).
Located in the bustling business district of Gwanghwamun, the SFC is estimated to be worth over 1 trillion won.
Although Blackstone and Keppel had considered acquiring the property, they ultimately withdrew from the bid at the last minute.
In contrast, data from commercial real estate service company Genstar Mate showed that the average room occupancy rate for hotels in Seoul reached 85.5 percent as of October 2024, the highest level in the past six years.
Meanwhile, industry officials noted that hotels in provincial areas may not be as profitable as those in Seoul and other major cities, given the country’s rapid population aging.
They should be “offered a package with the ones in large cities” for the sales to be successful, the officials said.
In a strategic move to secure liquidity for their new ventures, Korean Telecom (KT), Dongbu Life Insurance (DL), and Lotte Group have decided to unload their hotel properties. The decision comes as these companies look to diversify their portfolios and capitalize on emerging opportunities in the market.
KT, one of South Korea’s largest telecommunications companies, has announced plans to sell off several of their hotel properties in order to focus on expanding their digital services and technology offerings. This move will not only help KT streamline their operations but also provide them with the necessary funds to invest in innovative new projects.
Similarly, DL, a leading life insurance provider in Korea, is looking to divest their hotel assets to bolster their financial position and support their strategic growth initiatives. By offloading these properties, DL aims to strengthen their balance sheet and enhance their ability to pursue new opportunities in the insurance and financial services sectors.
Lotte Group, a diversified conglomerate with interests in hospitality, retail, and entertainment, is also joining the trend by selling off some of their hotel properties. This move is part of Lotte’s broader strategy to optimize their asset portfolio and focus on high-growth areas such as e-commerce, health and wellness, and sustainable living.
Overall, the decision to unload hotel properties reflects the evolving business landscape in South Korea, where companies are seeking to adapt to changing consumer trends and capitalize on emerging sectors. By securing liquidity through these sales, KT, DL, and Lotte are positioning themselves for future success and growth in the competitive market.
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KT, DL, Lotte, hotel properties, liquidity, new businesses, asset management, real estate, investment, financial strategy, business growth, asset sales, revenue generation, financial stability, portfolio diversification, market trends, industry news
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