According to CBRE, strong domestic and international demand have established Korea as one of the top-performing hotel markets in the Asia Pacific region over the past two years.
STR data indicates that the Average Daily Rates (ADRs) in Korea reached KRW 214,177 in Q1 2024, a 43% increase over Q1 2019, with overall RevPAR 49% higher than during the same period. Although full-year occupancy has yet to fully recover, Q1 2024 occupancy was 2% above that of Q1 2019.
The recent robust performance of the hotel sector is expected to be further bolstered by long-term growth drivers such as the Korean Wave (Hallyu) and a burgeoning medical tourism industry. According to the Korea Tourism Organization, nearly 37% of travelers to Korea in 2023 cited the Hallyu wave as a major factor in their decision to visit, and medical tourism arrivals reached a record high of 616,000 in 2023.
The luxury and upscale hotel segments are anticipated to lead the market over the next six to twelve months, particularly in key tourist locations like downtown Seoul, Haeundae in Busan, and Jeju Island. With a limited supply pipeline over the next four years, CBRE expects hotel performance to continue improving during this period.
Despite the significant improvement in hotel performance over the past year, investment activity remains muted. However, borrowing costs are expected to decline in the second half of 2024 alongside anticipated interest rate cuts in the U.S., which should stimulate increased purchasing activity. Potential distressed opportunities might arise due to Korean capital being overexposed in the U.S. and Europe, potentially leading to liquidity requirements onshore.
Both private and institutional investors are expected to drive acquisitions in 2024, with a focus on value-add opportunities. Although still an emerging market, co-living operators are likely to expand their presence by leveraging the overall shortage of living sector assets.
