Lee Boo-jin’s dream of a’global hotel chain’… Construction delayed and business resumption uncertain

Input 2021.02.04 12:00

Shilla Monogram Danang business discontinued… US delays construction schedule
Announced in 2019, the goal of “leaping into a global hotel chain”
Long-term growth engine’overseas business’ is also at risk in the first ever deficit due to Corona 19

Rob Report, an American luxury magazine, selected’Silla Monogram Danang’ in’Best New Family Oriented Resort of the Year’ last month. This place Hotel Shilla (008770)It is an Upper Upscale (next-ranked luxury) hotel that opened last year in Danang, Vietnam. As it was the first overseas expansion, it was a great achievement to celebrate, but the company decided to simply notify the social network service (SNS).

The Shilla Monogram Danang has been closed for six months. At the end of June last year, despite the coronavirus infection (Corona 19), customers were once received, but the number of confirmed cases in Da Nang increased rapidly and closed again after a month. Even after half a year, the reopening schedule has not been confirmed. To customers who ask about the reopening schedule, the hotel informs them that “the local situation is constantly changing,” and “the date will be set by the end of this month.”

Hotel Shilla had an expectation that it would be able to resume business in the second half of this year, until the Shilla Monogram Danang closed last year. The reservation window was also closed until the first half of the year. This is because Vietnam, with a population of 95 million, is a model country for quarantine with fewer than 2,000 confirmed cases of corona. However, the situation has changed 180 degrees since last month. As community infections continue to spread, health authorities have issued orders to close schools in 26 provinces and cities nationwide, raising the level of social distancing.

President Lee Boo-jin set a goal to make Hotel Shilla a’global hotel chain’, which was focused on domestic business. Hotel Shilla had no opportunity to advance overseas after consigning a hotel in Suzhou, China in 2006. Since then, it has announced that it will actively promote overseas expansion with the Shilla Monogram and Shilla Stay brand in 2019. Starting with the Shilla Monogram Danang in 2020, it was planned to open a premium business hotel’Shilla Stay’ in San Jose, Silicon Valley, USA this year.

However, the already opened Shilla Monogram Danang is uncertain when the discontinued business will resume, and the construction schedule for Shilla Stay San Jose in the US, which is pursuing hotel construction by purchasing a site, has been delayed. The excavation work (digging the ground before the foundation work) is now underway on the site in the Albiso district of Silicon Valley, which the company purchased two years ago. An official of the company said, “Completion will be possible at the end of 2022,” and “We are coordinating the opening schedule with the site.” The official opening is expected to be possible only in 2023.

Some analysts say that earnings recovery will be slower than expected as Hotel Shilla’s overseas business, which it intends to use as a long-term growth engine, is put on hold. Hotel Shilla posted an annual operating deficit for the first time ever due to sluggish duty-free shops and hotels last year. In response to concerns over sluggish earnings, Korea Credit Rating lowered the Hotel Shilla credit rating from AA to AA- in December last year. The Korean company evaluation lowered the rating outlook in July last year from’negative review’ to’negative’.

Cho Won-woo, a member of the evaluation expert of Korea Enterprise Evaluation, said, “The important thing is how much the hotel and duty-free business will improve this year. Considering the vaccine supply schedule, it will continue to be difficult until the first half of this year.” In case (performance improves) we can review our direction.”