"Far From Enough": K-Craze Draws Foreign Tourists, but Seoul Hotels Remain Short Until 2029 [Weekend Money]

Record-High Inbound Tourists
Seoul Hotels in Short Supply Until 2029
Active Hotel Transactions...Falling Vacancy Rates in Key Districts

With the number of tourists visiting Korea hitting an all-time high and the shortage of hotel supply in Seoul persisting, analysts say the hotel market is enjoying a boom.

Yonhap News Agency

Kim Taehoon, an analyst at Shinhan Investment & Securities, said in a recent report, "Compared to the growing number of tourists, hotels in Korea, especially in Seoul, are far from sufficient." The number of foreign tourists visiting Korea last year came to 18.94 million, up 15.7% from 16.37 million in 2024, marking the highest annual figure in the past 10 years. In contrast, the number of tourist hotel rooms in Seoul has been stagnant. From 2016 to 2019, the room count rose from 43,271 to 53,564, an average annual increase of 7.3%. However, after the COVID-19 pandemic, it increased by only 3.7%, from 54,190 to 56,206 through last year. Kim explained, "Although the volume of building permits has increased, given that it usually takes about five years for a hotel to go from building permit to completion, the current supply shortage is bound to continue until 2029."

Yonhap News Agency

"Korean hotel boom to continue for the time being, as seen in the Singapore case"

Comparing Singapore and Seoul, Kim projected that demand for Seoul hotels, especially luxury hotels, will be strong. Singapore and Seoul are similar in terms of area, demographic structure, and infrastructure level, and both see a high proportion of visitors from China and a rapid recovery in foreign tourist numbers after COVID-19. He analyzed, "If prices adjust to the level seen in Singapore, there is at least more than 30% upside from the current level."

Over the past 10 years, the Singapore hotel market has increased its room inventory mainly in the mid- to low-priced segment. However, due to chronic undersupply, it has maintained a high occupancy rate (OCC) in the 80% range even before COVID-19. After the pandemic, pent-up demand pushed the average daily rate (ADR) sharply higher, with the steepest increase seen in the luxury segment where supply was limited. The ADR for luxury hotels last year jumped 43.1% from 2019 in local currency terms, and 81.9% when converted into won. Kim added, "In light of Singapore’s example, there is ample room for further increases in ADR for five-star hotels in Korea going forward."

Hotel transactions also concentrated in Seoul...plenty of properties on the market

The value of hotels as commercial real estate is also rising. According to Ji Sejin, an analyst at KB Securities, of last year’s 2.9 trillion won in domestic hotel transactions, 2.2 trillion won worth involved assets located in Seoul. Ji said, "As with the rental market in major commercial districts in Seoul, the benefits of increasing foreign tourist arrivals are being concentrated in Seoul."

Institutional investors were particularly active. Institutional investors accounted for 47.3% of investments in the Seoul hotel investment market last year.

There is also ample supply of properties for sale. Recently, hotels owned by major domestic conglomerates such as KT&G, KT Group, and DL Group have been put on the market. In December last year, Heungkuk Asset Management acquired the Courtyard by Marriott Seoul Namdaemun Hotel previously owned by KT&G. Ji said, "Alongside asset securitization, they appear to be viewing this as an opportunity to sell at a fair price during a hotel boom." On top of this, global hotel chains are opening properties one after another, and the boom and maturation phase of the Seoul hotel market are expected to continue. Representative examples include luxury brands such as Rosewood (Yongsan, targeted for 2027), Mandarin Oriental (the development site in the northern station area of Seoul Station, targeted for 2030), and Janu (targeted for 2027).

Retail also concentrated in Seoul, vacancy rates stabilizing in major commercial districts

Major commercial districts in Seoul are also benefiting from the increase in tourists. According to the Korea Real Estate Board, in the fourth quarter of last year, the vacancy rate for medium to large-sized retail spaces near Gangnam-daero stood at 6.3%, nearly half the level of a year earlier. During the same period, the vacancy rate near Ttukseom was 3.6%, continuing to show a consistently low figure. With the recent increase in foreign tourists visiting Korea, vacancy rates in the Myeong-dong and Hapjeong-Hongdae commercial districts fell by 4.8 percentage points and 1.1 percentage points, respectively, from a year earlier. Ji said, "This year as well, we expect strong leasing demand, particularly from beauty and medical businesses targeting foreign tourists."