[Why&Next] Lotte Duty Free’s Restructuring Pays Off... Hotel Lotte Captivates Investors

Hotel Lotte Successfully Issues 200 Billion Won in Corporate Bonds
Surge in Foreign Visitors Drives Lotte Hotel’s Exceptional Performance
Restructuring Efforts, Including Workforce Reduction at Lotte Duty Free, Yield Results

Hotel Lotte has successfully raised 200 billion won in the public bond market this year. The company’s duty-free division, Lotte Duty Free, has undergone large-scale restructuring over the past several years, including significant workforce reductions. Meanwhile, the hotel division has seen a surge in foreign guests visiting Korea, driven by the global popularity of K-culture, leading to a marked improvement in profitability and attracting investors.

According to the Financial Supervisory Service’s electronic disclosure system on February 2, Hotel Lotte announced the issuance of corporate bonds worth 200 billion won on January 28. Initially, Hotel Lotte aimed to raise 100 billion won through the public offering of corporate bonds, but the order volume reached 585 billion won-about six times the target-prompting the company to increase the issuance to 200 billion won.

Hotel Lotte Turns a Profit with 160 Billion Won in Q3 Operating Income Last Year... Expectations for Further Improvement

This strong demand is attributed to the “beginning-of-year effect,” as institutional investors typically make large investments early in the year, as well as growing expectations for Hotel Lotte’s improved performance. In the past, Hotel Lotte’s results suffered due to the underperformance of its duty-free division, which accounts for more than half of its revenue. However, the company achieved a sharp turnaround in the third quarter. After recording an operating loss of 45.6 billion won in 2024, Hotel Lotte posted an operating profit of 161.3 billion won in the third quarter of last year, successfully returning to profitability.

The net loss also shrank dramatically. From a net loss of 1.0574 trillion won at the end of 2024, the figure dropped to 36.9 billion won in the third quarter of 2025. At the end of 2024, Hotel Lotte recorded asset impairment losses of 397.2 billion won for tangible assets and 366.6 billion won for right-of-use assets, resulting in a net loss in the trillion-won range. This was due to the company not recognizing the asset value of stores that continued to incur losses.

In fact, sales in the Hotel Lotte duty-free division fell from 5 trillion won in 2022 to the 3 trillion won range from the following year. This decline was attributed to the withdrawal from Incheon Airport and the continued slump in the duty-free market. Lotte Duty Free sought to recover sales by focusing on downtown duty-free shops and targeting Chinese “Daigou” traders, but the growing burden of commissions paid to Daigou led to an operating loss of 143.1 billion won in 2024, further eroding profitability.

Cutting Ties with Daigou and Undergoing Drastic Restructuring

Yonhap News Agency

In 2024, Lotte Duty Free carried out a voluntary retirement program and, starting last year, cut ties with Daigou traders as part of a sweeping restructuring effort. Through the voluntary retirement program, the company offered compensation equivalent to 32 months of base salary, a reemployment support payment of 20 million won, and up to 30 million won in educational support per child. As a result, the workforce in Hotel Lotte’s duty-free division decreased from 923 employees in 2023 to 769 in 2024, and further to 752 as of the third quarter of 2025.

Compared to the hotel and world divisions, the duty-free division had higher average salaries and longer average years of service, resulting in a heavier labor cost burden. As of the third quarter of last year, the average annual salary for male employees in the duty-free division was 80 million won, significantly higher than the hotel division (55 million won) and the world division (44 million won). The average years of service for female employees in the duty-free division was 17 years, also higher than the hotel division (9 years) and the world division (15 years).

Thanks to these efforts, Hotel Lotte’s selling and administrative expenses have also decreased significantly. From 3.4666 trillion won in 2022, these expenses dropped to 1.5859 trillion won in 2023, 1.8272 trillion won in 2024, and reached 1.2015 trillion won in the third quarter of last year.

Increase in Foreign Tourists to Korea... Hotel Room Sales Experience a Quantum Jump

The hotel division has been the main driver of Hotel Lotte’s recent performance. As of the third quarter of last year, Lotte Hotel’s sales exceeded 1 trillion won, with the revenue share rising from 15% in 2020 to 32% in the third quarter of last year. The surge in foreign tourists visiting Korea, fueled by the global spread of “K-culture,” has led to a boom in the hotel market.

In fact, Lotte Hotel’s room sales shrank to 187.1 billion won in 2020 due to the COVID-19 pandemic, but rebounded to 273.2 billion won the following year, then soared to 501.4 billion won in 2022, 646.8 billion won in 2023, and 800.1 billion won in 2024. As of the third quarter of last year, room sales had already reached 600 billion won, suggesting that full-year sales for last year could approach 1 trillion won when including the peak fourth quarter. This rapid sales growth has sharply boosted the profitability of Lotte Hotel, with cumulative operating profit for the first three quarters of last year reaching 76.2 billion won-more than double the 29.1 billion won posted in the same period a year earlier.

The world division, which operates the Lotte World theme park, is Hotel Lotte’s stable cash cow. After recovering from sales of around 120 billion won in 2020 to 300 billion won in 2022, the world division has maintained sales of around 380 billion won annually since 2023, following the transition to the COVID-19 endemic phase. Cumulative sales through the third quarter of last year increased by 3% year-on-year to 293.3 billion won, while operating profit during the same period surged by 10 billion won (30%) to 45 billion won.

Recapturing Incheon Airport Duty-Free... Will Lotte Group Pursue Its Long-Awaited IPO?

Yonhap News Agency

This year, Lotte Duty Free will return to Incheon International Airport’s duty-free market for the first time in three years. Last month, Lotte Duty Free participated in the bidding for the Incheon Airport duty-free concession, which saw the withdrawal of Shilla Duty Free and Shinsegae Duty Free, and was selected as the DF1 (cosmetics, perfume, liquor, tobacco) operator. Previously, Lotte Duty Free lost its bid for a new operator at Incheon Airport in March 2023 and withdrew after 22 years. In the latest bidding, Lotte Duty Free offered a minimum rent of 5,345 won per departing passenger (including VAT), which is 6% higher than the minimum rent of 5,031 won set by Incheon International Airport Corporation.

With Lotte Duty Free’s return to Incheon Airport, the company is expected to reclaim its position as the top player in the duty-free market this year. As of the third quarter of last year, Hotel Shilla’s duty-free division posted sales of 2.5 trillion won, about 500 billion won more than Lotte Duty Free’s 2 trillion won in the same period. Considering that the DF1 area generated sales in the low 400 billion won range when operated by Hotel Shilla, a reshuffling of domestic duty-free operators’ rankings appears inevitable. However, profitability may be somewhat constrained. Due to the symbolic status of Incheon Airport as Korea’s “gateway,” the domestic duty-free market has been highly competitive, and high rent costs have long weighed on profitability.

Hotel Lotte may also attempt to relaunch its initial public offering (IPO), leveraging the recent boom in the hotel industry and growth in duty-free sales. The stock market is currently strong, with the KOSPI index soaring, and the Fair Trade Commission has blocked Hotel Lotte’s sale of its stake in Lotte Rental, making it harder for Lotte Group to secure liquidity at the group level.

While Hotel Lotte’s debt burden is not as high as some other group affiliates, it has provided financial support to subsidiaries such as Lotte Biologics and Lotte Construction. As a result, concerns about Hotel Lotte’s financial burden persist in the market.

Meanwhile, Hotel Lotte’s credit rating stands at AA-.

This content was produced with the assistance of AI translation services.