CBRE Asia Pacific Hotels & Hospitality’s Market Update series explores key trends in the region across indicators such as tourism arrivals, hotels performance, supply and investment activity, as well as notable market developments that are relevant to the hotel sector.

In this issue, we focus on Korea.

Robust domestic and international demand have cemented Korea’s status as one of the top performing hotel markets in Asia Pacific over the past two years.

Average Daily Rates in Korea reached KRW 214,177 in Q1 2024, an increase of 43% over Q1 2019, with overall RevPAR 49% above the same period. While occupancy has yet to demonstrate a complete recovery over a full year, occupancy as of Q1 2024 was 2% above the same period of 2019.

Recent years’ strong hotel performance will be further boosted by several long-term growth drivers including the Korean Wave/Hallyu experience alongside a growing medical tourism industry. According to the Korea Tourism Organization, almost 37% of all travellers to Korea in 2023 stated that the Hallyu wave was a main driver behind them choosing to visit the country, while medical tourism arrivals reached an all-time high of 616,000 in 2023.

The luxury and upscale segments are expected to outperform once again over the next six to 12 months, led by assets located in key tourist destinations such as downtown Seoul, Haeundae in Busan, and Jeju Island. With the supply pipeline extremely limited over the next four years, CBRE expects hotel performance to continue to improve over the period.

Despite the significant improvement in hotel performance over the past 12 months, investment activity remains subdued. However, expectations are that borrowing costs will begin to decline in H2 2024 in tandem with interest rate cuts in the U.S., which should spur an increase in purchasing activity. Some distressed opportunities may arise through Korean capital potentially being overexposed in the U.S. and Europe, which may result in liquidity requirements onshore.

Both private and institutional investors will continue to drive acquisitions in 2024, with value-add opportunities being their primary focus. While still a nascent market, co-living operators will continue to add to their footprint by capitalising on the overall shortage of living sector assets.

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