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Lotte Hotel Yangon South Korea’s POSCO International Corp. and Hotel Lotte Co. have been suffering from sluggish earnings of their five-star hotel in Yangon, Myanmar, blamed on COVID-19 and a military coup.POSCO International, a sister trading company of the world’s sixth-largest steelmaker POSCO, and Hotel Lotte, retail conglomerate Lotte Group’s luxury hotel operator, jointly opened Lotte Hotel Yangon in 2017.POSCO International and Hotel Lotte hold 75% and 25% stakes, respectively, in POSCO International Global Development Pte. (PIGD), which owns management rights of the luxury hotel located near the iconic Shwedagon Pagoda and the deep blue waters of Inya Lake in Myanmar’s largest city.PIGD has been in the red for the last three years, reporting a net loss of $19.2 million in 2021 with sales of $23.9 million on a consolidated basis, according to a South Korean financial regulator.The number of foreign tourists shrank to about 900,000 in 2020, slightly more than a fifth of 4.4 million in 2019 before the outbreak of COVID-19. The number was estimated to decline further last year when the military seized control of the country. Weaker tourism hurt the hotel’s sales while operating costs and interest expenses ballooned, increasing its net loss.The sustained loss deteriorated PIGD’s financial structure with its debt ratio reaching 1,150% last year. POSCO International and Hotel Lotte guaranteed $150 million and $50 million in debt to the hotel, respectively. Without a turnaround, both companies will have to assume the guaranteed debt.END OF THE TUNNEL?Lotte Hotel Yangon, however, showed a glimmer of hope as it reported its first operating profit of $2.5 million last year.Its sales are expected to rise, increasing its operating profit and helping to log a net profit, as the ruling military junta has allowed the entry of foreign tourists since May 15. The country had banned international flights except one for international workers to curb COVID-19 since March 2020.POSCO International is predicted to play a role in the turnaround of the hotel based on its business experience in the Southeast Asian country with a gas exploration project. Daewoo International, the former entity of POSCO International, secured the exploration rights to gas fields off Myanmar in 2000.“The hotel’s earnings will significantly improve as tourists increase and it is located in Yangon, the country’s economic hub,” said a POSCO International source.By Ik-Hwan Kimlovepen@hankyung.comJongwoo Cheon edited this article.
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