Why new hotel development will be subdued in Seoul in the near term

There were no new hotel completions in Q1.

There were no openings of new internationally-graded hotels in Q1 according to JLL, with the future pipeline also remaining constrained. The opening of Tribute Portfolio Guro, which was scheduled for winter 2023, was postponed to the second half of 2024. 

Key anticipated openings are restricted to the 83-key Maison Delano (2026) and Rosewood (late 2027), indicating a trend towards luxury in the supply pipeline.

Here’s more from JLL:

The lack of project financing for several condominium hotels and timeshare products in popular leisure destinations along the East Sea, Busan and Jeju has made international brands more cautious about participating in strata-share-type developments in South Korea. With the challenging financial market, the development of new hotels will likely remain subdued in the near term.

Trading performance fully recovers to pre-pandemic levels

Benefitting from the return of Chinese visitors, the Midscale & Economy segment in Seoul experienced a remarkable recovery in Q1, with revenue per available room (RevPAR) surging to KRW 74,739. This represented a substantial 39.5% q-o-q increase compared to the same period last year and surpasses the 2019 levels by 15.0%.

The Luxury hotel segment has already exceeded pre-COVID-19 figures; however, the operating figures continue to rise even now, achieving new highs every quarter, with RevPAR reaching an impressive KRW 209,317, surpassing the 2019 levels by a substantial 53.7%.

Outlook: Strong fundamentals rekindle investments

With the full recovery of international visitation amid the return of Chinese visitors, both Luxury and Midscale segments are set to fully recover to pre-pandemic levels by the end of 2024. While the short-term trajectory will remain robust with record-breaking KPIs, we anticipate the growth to be stabilised in the medium term due to escalating global uncertainty.

Although there have been some notable transactions with the sale of 344-key Shilla Stay Gwanghwamun and 576-key TMark Grand Hotel Myeongdong, the hotel investment sentiment in the local market remains subdued due to the tight lending environment. In the short term, the hotel transaction market will be led by strategic international investors looking for value-added opportunities.

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