Founder of South Korea’s top love hotel app aims to make business family-friendly

by

Bloomberg

Lee Su-jin used to work at a love hotel in South Korea, changing sheets and cleaning up after couples who had paid for a few hours of privacy. Sixteen years on, he is using the knowledge he gained to transform the industry.

Lee is founder of Yanolja, which makes South Korea’s most popular app for booking rooms at short-stay lodgings, which South Koreans call motels. He is trying to persuade owners to stop focusing on sex and alter their facilities to appeal more to business travelers, families and tourists.

“If all the motels relied on love, they’d starve to death,” 39-year-old Lee said in his office in Seoul’s ritzy Gangnam neighborhood.

Lee said the Winter Olympics next February in Pyeongchang will be an opportunity for the company to convince love hotels to become more tourist-friendly.

His success may be watched closely in Japan, where the government is encouraging more than 10,000 love hotels to convert into lodgings for visitors to the 2020 Summer Games in Tokyo.

Yanolja, whose name means “hey, let’s play” in Korean, has 17,000 hotels as partners and employs 350 staffers, half of them focused on research and development, including software and design. It is valued at as much as 600 billion won ($547 million) and this year drew 60 billion won in investment from Chin Dae-je, a former CEO of Samsung Electronics Co. and minister of technology. The Yanolja app posted revenue of 68 billion won last year and is seeking an initial public share sale as early as 2020.

The company makes money by taking a cut of booking fees and through advertising, as well as motels paying to be given prominent spots in the app. The commission can range from zero for motels in remote areas to 10 percent in upmarket areas. The company also receives royalties from operators who adopt the Yanolja brand, as well as revenue from consulting and sales of hotel supplies.

“Yanolja has unlocked an industry with a sleazy image to the broader public and now threatens to cannibalize existing hotels,” said Byun Jung-woo, who teaches hotel and tourism businesses at Kyung Hee University in Seoul. “Hotels know they won’t survive by competing with apps that provide more attractive booking platforms, so more and more of them rely on Yanolja.”

Lee’s story is one of a determination to escape poverty. The early loss of both his parents meant he spent much of his childhood being shifted from one relative to another. To end his nomadic lifestyle, he decided to take a job at a love hotel when he was 23, because it provided accommodation close to the city center and a steady wage.

“Day in and day out, I felt wretched but hung on,” Lee said. “It feels like a dream now.”

With the money earned as a janitor, he invested in stocks and started a salad business. It failed and he returned to the hotels.

So he decided to use his knowledge of the industry to bounce back. He had built a 10,000-strong internet community, from suppliers of towels and toilet paper to the hotel owners. In 2005 he turned the connections into a website that eventually allowed people to preview and book rooms.

Lee persuaded operators to allow him to show pictures of the actual rooms — something that was rare in an industry founded on secrecy. The images were an instant hit. In 2011 his company launched the smartphone application; it now has 8 million subscribers.

Lee also allowed customers to share online their opinions of the rooms, an innovation that has sometimes been double-edged. South Korea’s Fair Trade Commission fined Yanolja and its two competitors in April for hiding some negative posts.

Lee’s main local rival app for love hotel bookings is Withinnovation. As he moves more into the mainstream hotel market, he is also coming up against big global platforms like Agoda. Competition is intense, with apps developing features such as virtual previews and artificial intelligence software that gauges consumer preferences.

Most of Yanolja’s business still comes from young couples. Many are either unemployed or just starting work and tend to take a room about one to three times a month. Often, they only rent the room for a few hours.

Love hotel owners are often reluctant to abandon a business model that has worked for decades. Only in 2015 did the country decriminalize adultery.

Lee has run ads designed to appeal to young South Koreans who are tired of being told they have to work hard all the time, including one featuring the South Korean rapper Loco, whose smiling face asks viewers: “Is life long? Hey, let’s play.”

He also runs a training program on how owners can prevent unscrupulous clients from installing hidden cameras in the rooms.

To help drive change, Yanolja has started operating some of its own hotels, remodeling them to be more modern and cleaner. Below Lee’s office the company runs what it calls a “laboratory” to show rooms equipped with trendy furniture and the latest internet technologies.

The rise of apps and innovations like Airbnb have pushed traditional hotel chains to adapt. In South Korea, larger hospitality companies have moved aggressively into related businesses such as restaurants and conventions. A drop in visitors from China due to political tensions also assisted booking apps as hotels turned to them to try to reduce vacancy rates, said Byun at Kyung Hee University.