20 Million Foreign Tourists Flock In, but "There's Nowhere to Stay"... Seoul Hotel Scores KRW 140 Billion Jackpot [Real Estate A to Z]

CBRE Korea Seoul Hotel Strategy Report
"Demand Expected to Outpace Supply Through the Late 2020s"

Seoul hotels have emerged as a major real estate investment destination amid a rise in tourist numbers and a shortage of room supply, according to an analysis. With hotel acquisition prices and interest expenses also rising, the analysis says investors need strategies to increase returns by upgrading existing hotel facilities, changing brands, and adjusting operating models.

On November 10, CBRE Korea, a commercial real estate services firm, published the analysis in its recent report, “Seoul Hotel Market Value and Value-Add Strategies.” The report forecast that hotel room supply in Seoul would grow by only 7% through 2032, leaving demand ahead of supply until the latter half of the 2020s.

Myeongdong Street in Jung-gu, Seoul. Photo by Cho Yongjun

The number of foreign tourists visiting Korea rose from 17.5 million in 2019 to 18.94 million in 2025, while visitor numbers from January through September this year were up 21.5% from the same period a year earlier. By contrast, the annual average growth rate in Seoul hotel room supply, which held at 8.5% from 2010 to 2019, fell to 0.1% from 2019 to 2025. Of the 3,900 new rooms scheduled to open by 2032, 44% will be in upper-tier hotels concentrated in Gangnam and Yongsan, so the supply of mid-range hotels favored by ordinary tourists is expected to remain limited for the time being.

CBRE said it would be difficult to increase room numbers in the short term because building new hotels takes time and construction costs are high. Although the Seoul Metropolitan Government has eased regulations, including floor-area-ratio limits, to allow larger hotels to be built on the same site, actual room supply is unlikely to materialize before 2029, given the time required for permits and construction.

Hotel profitability has improved as the influx of foreign tourists has coincided with slow room supply growth. Seoul hotels recorded an average occupancy rate of 76% last year, up 4 percentage points from 72% in 2019. With occupancy rates nearing their upper limit, the hotel industry has been raising room rates to secure revenue. Sale prices have also climbed: the median transaction price per room for Seoul hotels sold for operating purposes doubled from KRW 250 million in 2022-2023 to KRW 500 million in 2024-2026.

Net Supply of Hotel Rooms and Hotel Stock in Seoul. CBRE Korea

Unlike in the past, when hotels were bought, demolished, and redeveloped for other uses, investors have recently been increasing asset value by retaining existing buildings and changing their brands, the report said. Voco Seoul Myeongdong is a case in point. The hotel was sold for KRW 228.2 billion a year and a half after closing. An investor acquired it, introduced a global brand, and upgraded its facilities before selling it for KRW 368.6 billion this June. In just over two years after its acquisition, the price per room rose from KRW 400 million to KRW 640 million.

Under hotel management contracts, third-party operators receive 5-7% of total revenue, while franchise fees range from 3% to 5%. Investors should also prepare for the possibility of higher financing costs, as the benchmark interest rate is forecast to reach an annual average of 3.5% in 2027.

Choi Sunghyun, senior vice president and head of capital markets at CBRE Korea, said, “Seoul hotels have now become investment assets evaluated alongside major sectors such as offices and logistics. With occupancy rates near their upper limit and lending rates rising, future returns will need to come from the assets themselves, making brand changes and the choice of operating model important.”

This content was produced with the assistance of AI translation services.