Travel demand continues to show robust recovery

• Amid the influx from main source markets such as Japan and Taiwan, South Korea’s tourism industry continued to recover. As of YTD May 2023, international arrivals increased almost 500% y-o-y with 3.5 million visitors. While the number of visitors during 1H23 already exceeds total visitors during all of 2022, visitation numbers still remain at approximately 50% of 2019 levels.
• A full recovery is anticipated when visitation from Mainland China fully recovers, as visitation from China remains at 16% of pre-COVID-19 levels. We anticipate the demand from China to recover quickly, as monthly visitation has exceeded 100,000 per month since April 2023.

Supply growth thriving with growing appetite in co-living sector

• In 1H23, 1,058 rooms entered the market, including the 602-room Double Tree by Hilton Pangyo Hotel & Residences and the 160-room Nine Tree Premier ROKAUS Hotel Seoul Yongsan. While there are no other luxury hotels planned to open in Seoul by the end of 2023, large-scale mixed-use developments containing hotels are anticipated to be competed in 2030.
• While the co-living market is still nascent in South Korea, interest in the sector is emerging as the population densifies and the number of single-person households increase. Later in 2023, the 276-room NouDit Hongdae is expected to open, alongside an international co-living brand seeking to enter the market.

RevPAR recovery supported by an uplift in occupancy

• Seoul Luxury & Upper Upscale segment revenue per available room (RevPAR) was again at an all-time high, marking an increase of 68% y-o-y to KRW 217,454 as of YTD June 2023. Comparably, with the return of international businesses, the Midscale & Economy segment also showed strong growth of 126% y-o-y to KRW 67,792, recovering to almost reach pre-pandemic levels.
• With the resumption of international visitation and group tours, the Midscale & Economy segment is also exhibiting strong recovery, as evidenced by the 55% growth in ADR to KRW 94,231, and 22.6 ppts recovery to 71.9% occupancy as of YTD June 2023.

Outlook: Strategic investors are capturing the opportunity to expand

• Several large hotels, such as the 1,100-room Inspire Entertainment Resort, are scheduled to open by the end of 2023. Due to rising land prices, increasing construction costs, rising interest rates and geopolitical uncertainty, supply of luxury hotels in Seoul is limited, and the pipeline is mostly concentrated in satellite cities.
• Strong investment momentum resurfaces, supported by enhanced trading performance and positive expectations for the post-pandemic tourism market. From large-scale hotels to mid/economy-scale hotels, transaction activity is anticipated to accelerate over the next 12 months, mainly driven by strategic investors expanding their market presence in South Korea.