Korea set for record-high inbound tourism in 2026

• As of May 2026 YTD, inbound visitor arrivals to Korea reached approximately 8.72 million, up 21% Y-o-Y and marking the highest level ever recorded for the same period. By the third week of June 2026, cumulative arrivals had already surpassed 10 million.
• Visitation from Mainland China experienced strong growth, supported by visa-free policies for group tourists and geopolitical tensions between China and Japan. Visitation from Taiwan (+33.0% Y-o-Y), the Americas (+12.3% Y-o-Y) and Europe (~1.19 million visitors) also recorded strong growth, highlighting a broader tourism demand base.

Limited new hotel supply in Seoul and increasing interest in conversions

• Actual hotel supply additions in Seoul remain limited in 2026 due to structural constraints, including scarce development sites in central districts, rising construction costs and elevated financing expenses.
• As new ground-up developments face structural limitations, faster market-entry strategies are gaining traction amid rapid tourism growth. Rebranding and conversion of vacant-possession assets, such as U5, continue to expand across the market.

Strong growth momentum in the hotel transaction market

• Korea’s hotel transaction market maintained strong momentum, with H1 transaction volume reaching approximately USD 750 million (KRW 1.1 trillion). The market was mainly driven by domestic investors.
• Hotel assets for sale in core tourism districts, including L7 Hongdae and voco Myeongdong, remain limited. As a result, investor interest is expanding to non-traditional hotel markets, such as Seonyu Union Hotel.

Outlook: KRW depreciation supports tourism growth, while higher interest rates weigh on investment market activity

• The weak Korean won is expected to support inbound tourism demand and visitor spending, particularly among high-spending FIT travellers from Europe and the Americas. Meanwhile, following the Bank of Korea’s rate hike from 2.50% to 2.75%, higher financing and construction costs are expected to limit future hotel supply.
• The market is expected to enter a phase of simultaneous demand expansion and supply constraints. While this may favour sellers, buyers are likely to face stronger competition for limited trophy assets in core districts amid higher financing costs and limited deal availability, driving further pricing premiums.