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Lotte, Samsung lock horns in race to lure Chinese tourists

With the influx of Chinese tourists and their spending at duty-free stores snowballing, Lotte Group and Samsung Group have locked horns in the services and retail industries, striving to win the favor of Chinese consumers.

Their affiliates -- Hotel Shilla, with Samsung Group, and Hotel Lotte as well as Lotte Duty Free -- have been placed at the forefront to win the hearts of Chinese tourists, who have been known to spend an average of $2,094 during their stay, according to data from the Korea Tourism Organization.

Lotte Group chairman Shin Dong-bin has taken the initiative.

He sent his right-hand man Hwang Kak-kyu earlier this month to Shanghai to meet with high-ranking officials of Jin Jiang International Group, the largest comprehensive tourism company in the region, and ask for the Chinese company’s support in sending more tourists to Korea.

Soon after Hwang, Hotel Lotte CEO Song Yong-duk, Lotte Duty Free CEO Lee Hong-kyun and Lotte World Adventure CEO Park Dong-ki visited Shanghai to promote Korean tourism.

“The Chinese Thanksgiving Holiday that falls on Sept. 26-27, and another national holiday season Oct. 1-7 will be the golden time for all the tourism industry. It is no wonder that even CEOs are running all over to win more tourists,” an industry watcher said.

Hotel Shilla president Lee Boo-jin, who overlooks Samsung’s hospitality and tourism units, took a more systematic approach.

She showed up at the “Samsung Tourism Business Brand Convention” and urged more Chinese people to spend their holidays in Korea in front of 600 Chinese travel agents, journalists and bloggers. She was accompanied by Samsung C&T and Hotel Shilla managers, alongside K-pop group SHINee and actor Lee Jong-suk.

The eldest daughter of Samsung chairman Lee Kun-hee on Sept. 9 met with James Jianzhang Liang, founder of CTrip, China’s largest online travel agency, and signed a memorandum of understanding to reinforce their partnership in Korean tourism.

The reason behind the enthusiasm is simple: They really need to make money. Lotte JTB, the tourist agency under Lotte Group, has continually reported losses since it was established in 2007. The joint venture between Lotte and Japanese tourism agency JTB reported 1.8 billion won ($1.53 million) in the red, making little improvement from its 2.7 billion won in losses in 2013. Hotel Lotte reported 31.5 billion won in the red, while Lotte World reported 28 billion won in losses.

Hotel Shilla’s hotel operation department also reported 19.3 billion won in losses. Adding to sister company Samsung C&T’s leisure businesses’ 30.8 billion won in losses, the situation has become grave. 

And to them, Chinese tourists are the golden egg.

According to the South Korean Embassy in China, the number of Chinese nationals who visited South Korea stood at 6,335,000 in 2014, up 46 percent from a year before.

Thanks to their shopping sprees, Lotte Duty Free posted 4.2 trillion won in sales last year, while Hotel Shilla’s duty-free sector marked 2.6 trillion won during the same period.

Lotte Group said it will host the duty-free stores on three top floors of the 123-story Lotte World Tower that is scheduled to be completed no sooner than late next year. The company is still in the uncomfortable position of having to get their duty-free license renewed in October, but industry watchers say that utilizing the lucrative venue -- Lotte World Tower is the tallest skyscraper in the country -- reflects Lotte’s zeal to win over Chinese tourists, who may be drawn to such a landmark.

Because Shilla will open another urban duty-free store in central Seoul, the competition will be fiercer, industry watchers say. 

However, the two leaders share something beyond their competitiveness. 

According to Rep. Yun Ho-jung, the two companies have offered 1.2 trillion won in rebates to tourism agencies and agents to draw Chinese vacationers.

“This is clearly an unfair practice since the two absolute powers are giving away money and the rather minor companies who cannot afford those rebates will lose their market appeal dramatically,” Yun said.

By Bae Ji-sook (baejisook@heraldcorp.com)
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