Tourism recovers rapidly in 2023

• As of YTD November 2023, South Korea has already welcomed over 9,995,000 international arrivals, doubling the total number recorded for the entire year of 2022. The return of group tours from Mainland China has played a role in driving the increase in visitor numbers, but Seoul also benefits from more diversified visitors from Southeast Asia, the Americas and Europe.
• We observed two trends in Korean domestic demand. Firstly, demand for hotels in Seoul remained strong, as exhibited by strong average daily rate (ADR) growth in Seoul’s luxury sector. Secondly, demand for regional markets has slowed as Koreans are travelling abroad. Overall, the outlook for domestic demand as the main driver of the recovery is uncertain due to factors such as severe inflation.

Postponed openings catches up, but pipeline is limited

• During the year, a total of 2,000 rooms opened in and near Seoul, including notable additions such as the 602-room DoubleTree by Hilton Pangyo, the 160-room Nine Tree Premier ROKAUS Hotel Seoul Yongsan, and the 1,058-room Inspire Entertainment Resort & Casino. However, supply growth seems limited in 2024, with less than 500 rooms planned to be opened.
• Alongside traditional hotels, the co-living market has emerged and gained interest in South Korea. The opening of NouDit Hongdae, a 276-room co-living space, in August indicated growing demand for communal living options in Seoul. As the population densifies and the number of one-person households increases, the co-living sector has shown potential for future development. 

RevPAR recovery continues; strong recovery in occupancy

• The luxury hotel market in Seoul has exceeded expectations with consistent growth in revenue per available room (RevPAR). In 2023, RevPAR of Seoul’s Luxury & Upper Upscale segment reached an all-time high with a 38.4% y-o-y increase to KRW 248,129. This growth has been supported by an elevated ADR and occupancy levels of KRW 352,048 and 70.5%, respectively.
• The Midscale & Economy segment has also shown strong growth, increasing 82.3% y-o-y to reach KRW 79,685, and recovering to almost pre-pandemic levels. The occupancy rate has increased by 15.9 percentage points, and ADR has recovered to KRW 105,078, with a growth of 44.2% compared to 2022.

Outlook: Seoul is poised for further growth

• Seoul is poised to sustain its growth trajectory in the short term, fuelled by continued demand growth and limited future supply. The outlook for medium- to long-term growth is more reserved, due to escalating global uncertainty. Seoul still presents a unique opportunity for investors to capitalise on its growing popularity as a global destination.
• In 2023, the hotel market in South Korea experienced strong investment momentum, highlighted by significant transactions like Nine Tree Premiere Myeongdong II, Nine Tree Dongdaemun and Aventree Insadong. These deals showcased the continued interest of strategic investors, both domestic and international. We anticipate interest in the Korean market to continue in 2024.