South Korea has emerged as one of the Asia Pacific region's strongest hotel markets over the past two years, driven by robust domestic and international demand, according to CBRE.
Data from STR shows that in Q1 2024, the Average Daily Rates (ADRs) in South Korea reached KRW 214,177, marking a 43% increase compared to Q1 2019. Additionally, Revenue Per Available Room (RevPAR) rose by 49% over the same period. While full-year occupancy levels are still on the path to recovery, Q1 2024 occupancy exceeded Q1 2019 levels by 2%.
Key Growth Drivers
South Korea's hotel sector is poised for sustained growth, supported by major cultural and medical tourism trends:
The Korean Wave (Hallyu): The Korea Tourism Organization reports that 37% of international visitors in 2023 cited the Hallyu phenomenon as a primary reason for their trip.
Medical Tourism: South Korea saw a record 616,000 medical tourists in 2023, further contributing to hotel demand.
Luxury and Upscale Segments Lead the Way
Luxury and upscale hotels are expected to drive market growth in key tourist hotspots, including:
Downtown Seoul
Haeundae in Busan
Jeju Island
With a limited supply pipeline projected over the next four years, CBRE anticipates continued performance improvements in these segments.
Investment Outlook
Despite strong operational performance, investment activity in the sector remains subdued. However, borrowing costs are projected to decline in the latter half of 2024 due to expected interest rate cuts in the U.S., which could stimulate acquisition activity.
Potential distressed opportunities may arise as Korean investors, heavily exposed to U.S. and European markets, face onshore liquidity challenges. Private and institutional investors are likely to drive acquisitions, focusing on value-add opportunities.
Emerging Co-Living Sector
The co-living sector is also gaining traction, with operators expected to expand their presence to address the shortage of living sector assets in South Korea.
With long-term drivers such as cultural tourism and medical travel, coupled with improving economic conditions, South Korea's hotel market is set to maintain its momentum as a top-performing market in the Asia Pacific region.