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This is a love hotel — and it’s big business

Updated : November 05, 2019 01:27 PM IST

Would you stay in a love hotel?
Love hotel, would you stay?
Oh no, no, no!

Depends on how much?

So big, in fact, that here in South Korea, it has just born the country’s latest $1 billion start-up – online budget hotel bookings platform Yanolja, which means “hey, let’s play” in Korean.

It is South Korea’s eighth unicorn, and has made a superstar of its once impoverished founder.

South Korea's relationship with the amorous accommodation hasn’t always been one of affection. Understanding its new allure requires going back to its sordid roots.

Love Hotels are a type of short-term, pay-per-hour accommodation. They originate in Japan, where for centuries they’ve been providing couples a discreet place for intimacy.

But in the late 1960s, the underground industry gained prominence with the launch of the first eponymous “Love Hotel" in Osaka.

Adorned with a rotating, neon sign and offering guests hourly rates for a quote “rest,” the accommodation tapped into society’s growing sexual liberalisation, and paved the way for a new wave of pay-per-hour love hotels — each more exotic and erotic than the last.

The industry’s rise coincided with a widespread tightening of prostitution laws in Asia. The trend didn't go unnoticed, and quickly spawned negative associations of love hotels as breeding grounds for illicit activities and extramarital affairs. 

But that didn’t stop their international expansion.  Today, few countries have been left untouched by the craze.  The hotels’ ubiquity even scored them an iconic emoji in 2015.

Back here in South Korea, love hotels rose to prominence in the late 1980s with the Seoul Olympic Games. Their seedy associations have long been a source of embarrassment.  But in 2005, one man sought to change that.

For Yanolja founder Su-Jin Lee, love hotels had always been a source of sanctuary.  Orphaned at a young age, Lee started as a janitor at a love hotel when he was 23. It offered a place to stay and a steady wage.  So when an anti-prostitution law passed in 2004 threatened to kill the industry, he saw an opportunity.

The discreet accommodations traditionally relied on walk-in customers. So Lee started by creating an online advertising platform to attract new guests.

But it was with the launch of love hotel bookings site Yanolja in 2007 that the business really began to take off.

Yanolja, especially Su-Jin Lee, they are thinking what are the pain points nobody understands or nobody finds out?

Lee also offered renovation services under the Yanolja franchise, which helped love hotels clean up their acts and target new customer bases.

Chief among those were two major segments: Young couples and budget travelers seeking short-term accommodation.

In South Korea, it’s typical for young people to live with their parents until marriage.

With rising living costs and a slumping marriage rate, that phenomenon has been exacerbated.  Estimates suggest 57 percent of young South Koreans live at home well into adulthood, making love hotels an appealing escape for couples wanting to get away from the prying eyes of parents.

Meanwhile, growing travel appetites have increased demand for new types of accommodation. In South Korea, online travel sales have nearly doubled in the past five years and the country now represents one of Asia’s largest tourism markets.

Travel industry is really growing fast in South Korea. It’s because South Koreans consumers’ attitudes have been significantly changing, as millennials put their priority on their working-life balance. In addition, the government limited the maximum working hours to 52 hours per week from last year. This kind of government activity also encourages travel industries.

Those trends led Yanolja to expand into its own line regular hotels and guest houses as well. It has recorded an annual growth rate of more than 70 percent over the past five years.

The platform, which makes its money off of commission, has 32 million downloads and 3 million monthly active users. It now hosts more than 20,000 partner accommodations across South Korea. That’s almost half of the country’s some 46,000 registered inns and guesthouses, whose annual revenues exceed $3.6 billion.

The hotel is one of the items, but we are pursuing to realize a total package for the users. So Yanolja is providing restaurant and activity, leisure tickets, transportation, and the others.

That expansion has proven appealing for investors, too. In June 2019, a $180 million funding round pushed Yanolja to a valuation of more than $1 billion, making it the latest travel-tech unicorn to follow in the footsteps of Airbnb, OYO and Klook.

I think the reason why we can be a unicorn is because Yanolja is number one hotel in Korea. But it’s just the beginning, I think. So we are trying to be a number one globally.

Now Yanolja wants to tap into more growing markets.  The business has ventured into leisure bookings and now offers its renovation services to other commercial properties, ranging from bookstores to healthcare centers.It has also developed its own hotel management software to sell to partners and fuel its wider growth plans across Asia Pacific.
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