APPD Market Report Article

Seoul

November 29, 2022

Mike Batchelor, CEO - Hotels & Hospitality Group, Asia Pacific

81.9%

KRW 155,896

RevPAR
Rising

Domestic staycations remain a key driver

  • As at YTD August 2022, South Korea recorded a 130.7% y-o-y growth with 1,385,103 international visitor arrivals. Easing of travel restrictions has spurred the recovery of the tourism sector and welcomed visitors from more diverse markets, thus lowering South Korea’s reliance on mainland Chinese visitors.
  • Severe global inflation and growing geopolitical uncertainty are likely to curb both cross-border and domestic travel demand. Regardless, the hotel sector is anticipated to finish 2022 with a strong performance, as luxury hotels and resorts benefit from pent-up demand for leisure travel and strong staycation demand.

Limited supply growth in Seoul, but growing pipeline elsewhere

  • Hotel pipeline remains limited in Seoul, with openings in 2022 limited to Voco Gangnam and Hotel Naru MGallery. DoubleTree Pangyo, Le Meridien and Moxy Seoul Myeongdong are scheduled to open before end-2022. A majority of hotels that are opening are franchised and managed by international operators as the market grows more receptive to new brands.
  • The majority of new hotels in the pipeline are concentrated in satellite cities of Seoul and regional markets. A significant amount of new supply is scheduled to enter major leisure destinations along the East Sea, such as Busan and Jeju.

Acceleration of RevPAR recovery

  • Revenue per available room (RevPAR) of Midscale and Economy hotels in Seoul recovered to KRW 76,101 as at YTD September 2022, a 94.0% y-o-y increase and a 386.8% increase from the first half of 2022. In addition, the RevPAR of Luxury and Upper Upscale hotels has increased to KRW 155,896, recovering to 93.9% compared to 2019 levels.
  • Both Midscale and Luxury hotels in Seoul have improved y-o-y, recovering almost to pre-pandemic levels. Occupancy rates of the Midscale & Economy segment and Luxury & Upper Upscale segment have increased by 19.8 and 25.5 percentage points, respectively. Average daily rate (ADR) has also recovered to KRW 76,101 and KRW 291,481, with growths of 20.4% and 14.6%, respectively, compared to 2021.

Outlook: Optimistic recovery during uncertain times

  • While hotel transaction volumes have outpaced JLL projections with the country’s record-breaking deals, the pace of transactions is likely to slow down for the rest of 2022 and 2023. Increasing development costs, decreasing home prices and rising interest rates will likely make redevelopment strategies less viable, and thus domestic investors are anticipated to hold back and monitor the market.
  • Despite geopolitical conflicts and the global economic slowdown, Korea’s lodging sector still shows strong signs of recovery, fuelled by increased interest in Hallyu culture. The reduced activity from domestic investors, deteriorating financial market, and favourable currency exchange rates should present unique opportunities for international investors to explore value-add opportunities.

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

Talk to us 
about real estate markets.