Seoul’s hotel supply pipeline concentrated in provincial markets

Around 3,000 new hotel keys are expected to be added this year.

For the remainder of 2023, JLL revealed in a report that approximately 3,000 additional keys will be added to Seoul’s hotel pipeline, including Inspire Entertainment Resort Incheon, DoubleTree Pangyo, Cassia Sokcho and Village de Ananti Busan. 

It is worth noting that the new supply is mostly concentrated in provincial markets.

Here’s more from JLL:

Hotel development projects face challenges in securing financing loans as well as rising construction costs, which may result in project delays or halts. This is particularly so for condominium hotels and timeshare products that have become popular in major leisure destinations along the East Sea, such as Busan and Jeju.

Fuelled by international visitation, recovery is accelerating

Amid the rebound in tourism, RevPAR of the Midscale & Economy segment in Seoul recovered to KRW 53,547 in 1Q23, a 100.1% y-o-y increase from 1Q22. The Luxury & Upper and Upscale segment saw even stronger recovery, with RevPAR increasing to KRW 182,184, surpassing the 2019 level by 33.8%.

As international visitation and group tours return, we anticipate the recovery in the Midscale & Economy segment to accelerate, and the recovery in the Luxury & Upper and Upscale segment to slow down. The ADR of the Luxury & Upper and Upscale segment has recovered by only 13.2% y-o-y as of 1Q23, but the Midscale & Economy segment has recovered by 39.6% during the same period.

Outlook: Deal volume may decline despite strong investment appetite

South Korea, especially Seoul and Jeju, is poised to be the largest beneficiary of pent-up leisure and business demand from the reopening of Chinese borders. However, global recessionary fears and heightened geopolitical tensions are expected to continue to be the main factor weighing down the recovery to 2019 levels.

The hotel market is expected to remain resilient, backed by the return of international visitors. However, challenges such as the high cost of debt are predicted to limit transaction activity. We anticipate a number of value-add opportunities to attract international investors seeking value-add or opportunistic investments, but the larger core assets held by conglomerates will likely weather the storm.

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