APPD Market Report Article

Seoul

May 26, 2024

Nihat Ercan, CEO - Hotels & Hospitality Group, Asia Pacific

12.9%

KRW 209,317

RevPAR
Rising

The return of Chinese visitors drives strong tourism growth

  • According to the Korean Tourism Organization, international visitors registered 1.9 million arrivals as of YTD February 2024, which marked a 109.2% y-o-y growth. The top five source markets were China (33%), Japan (17%), Taiwan (10%), the United States (7%) and Hong Kong (3%). Taiwan and the USA have already surpassed pre-COVID-19 levels, indicating a growing interest from diverse source markets.
  • China rebounded as the top source market for the first time since 2019, reaching 73.7% of pre-pandemic levels. International visitation has recovered to 82.0% of pre-pandemic levels and is expected to fully recover by the end of 2024.

Supply growth remains muted, with no new completions in Q1 2024

  • There were no openings of new internationally-graded hotels in Q1, with the future pipeline also remaining constrained. The opening of Tribute Portfolio Guro, which was scheduled for winter 2023, was postponed to the second half of 2024. Key anticipated openings are restricted to the 83-key Maison Delano (2026) and Rosewood (late 2027), indicating a trend towards luxury in the supply pipeline.
  • The lack of project financing for several condominium hotels and timeshare products in popular leisure destinations along the East Sea, Busan and Jeju has made international brands more cautious about participating in strata-share-type developments in South Korea. With the challenging financial market, the development of new hotels will likely remain subdued in the near term.

Trading performance fully recovers to pre-pandemic levels

  • Benefitting from the return of Chinese visitors, the Midscale & Economy segment in Seoul experienced a remarkable recovery in Q1, with revenue per available room (RevPAR) surging to KRW 74,739. This represented a substantial 39.5% q-o-q increase compared to the same period last year and surpasses the 2019 levels by 15.0%.
  • The Luxury hotel segment has already exceeded pre-COVID-19 figures; however, the operating figures continue to rise even now, achieving new highs every quarter, with RevPAR reaching an impressive KRW 209,317, surpassing the 2019 levels by a substantial 53.7%.

Outlook: Strong fundamentals rekindle investments

  • With the full recovery of international visitation amid the return of Chinese visitors, both Luxury and Midscale segments are set to fully recover to pre-pandemic levels by the end of 2024. While the short-term trajectory will remain robust with record-breaking KPIs, we anticipate the growth to be stabilised in the medium term due to escalating global uncertainty.
  • Although there have been some notable transactions with the sale of 344-key Shilla Stay Gwanghwamun and 576-key TMark Grand Hotel Myeongdong, the hotel investment sentiment in the local market remains subdued due to the tight lending environment. In the short term, the hotel transaction market will be led by strategic international investors looking for value-added opportunities.

Note: Seoul Hotels refers to Seoul's luxury and upper upscale hotel market.

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