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| Courtyard by Marriott Seoul Namdaemun operated by KT&G / Courtesy of KT&G |
By Jun Ji-hye
KT&G is pushing to generate new revenue from its real estate business in a bid to find a breakthrough in sluggish cigarette sales and escalating competition with overseas e-cigarette makers including JUUL Labs, officials said Friday.
The Korean cigarette company said it has nurtured its real estate business based on financial resources accumulated through the tobacco business and developable lands it possesses.
The firm's new businesses include real estate sales and leasing as well as the hotel business.
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| KT&G CEO Baek Bok-in |
Operating profit in the real estate segment during the first quarter of the year was tallied at 27.7 billion won, rising five-fold from the previous year.
The firm made inroads into the hotel business in 2013 in an effort to diversify its business portfolio, signing a consignment operating deal with global hotel chain Marriott.
The cigarette company opened Courtyard by Marriott Seoul Namdaemun in May 2016 and has attracted foreign travelers and visitors on business trips.
For the real estate leasing business, the firm is currently developing a 268,077-square-meter factory site in Suwon, Gyeonggi Province, to construct an apartment complex and park. The number of households of the apartment complex will be 3,000.
KT&G has already completed development of its old factory site in Daegu, and built a 1,005- household apartment complex and a shopping center there.
"KT&G will enhance the real estate lease business by developing lands we possess and purchasing profitable buildings," a KT&G official said. "We are aiming to strengthen competitiveness in development, operation and investment to solidify our business structure and generate revenue consistently."
The cigarette company's move to nurture the real estate business comes at a time when the tobacco market has been stagnant amid the government's push for a non-smoking policy in addition to a population decrease.
Amid a fall in cigarette sales, the firm's operating profit has decreased from 1.3 trillion won in 2016 to 1.2 trillion won in 2017 and to 1 trillion won in 2018.
The firm has also faced growing competition with foreign e-cigarette makers such as Philip Morris and JUUL Labs.
On Wednesday, JUUL Labs, the best-selling e-cigarette maker in the United States, announced its entry into the Korean market.
