This article was displayed on April 22, 2025, at 3:38 p.m. on the ChosunBiz MoneyMove site.
Domestic hotels that were overlooked during the COVID-19 pandemic are regaining attention as investment opportunities. The number of foreign tourists visiting Korea has recovered to pre-COVID levels, but the total number of hotel rooms has significantly decreased, improving profitability.
According to the investment banking (IB) sector on the 22nd, the real estate management company Blue Cove Asset Management has been actively expanding its hotel portfolio since the second half of last year. Blue Cove is in the final stages of negotiations regarding the acquisition of the New Oriental Hotel in Myeongdong, Seoul. It is reported that of the total transaction amount of approximately 22 billion won, 6 billion won will be raised through equity, while the remaining 16 billion won will be financed through borrowing.
Blue Cove is an asset management company founded by CEO Kim Seung-beom, who previously worked at IGIS Asset Management, in 2019. The assets under management (AUM) amount to approximately 2.1 trillion won, and after investing in the Grand Hyatt Seoul in June 2023, it has experience in exiting (recouping funds). Recently, Blue Cove has been actively investing in hotels; in March, it was selected as the preferred negotiator for the acquisition of the Shilla Stay Dongtan in Hwaseong, Gyeonggi Province. Last November, it jointly acquired the SM Group's Gangnam office building in Yeoksam-dong, Gangnam District, Seoul, with Blackstone and plans to convert it into a hotel.
Blue Cove is not the only one turning its attention to undervalued quality hotel assets. The foreign investment giant Government of Singapore Investment Corporation (GIC) is in negotiations to acquire three Glad Hotels located in Yeouido, Gangnam, and Jeju while selling office buildings such as The Exchange Seoul. The total transaction price is expected to exceed 600 billion won. Multiple foreign asset management companies, including KKR (Kohlberg Kravis Roberts), have submitted bids for these hotels.
There have been instances of canceling plans to convert hotels into office spaces amid the COVID-19 pandemic. The Tmark Grand Hotel in Jung-gu, Seoul, purchased for around 210 billion won by Hana Alternative Investment in 2016 has turned into a headache as the pandemic set in. It struggled to operate in Myeongdong, where tourists had vanished, faced difficulties in financing, and ultimately closed in 2022, causing the fund to reach expiration of benefits (EOD).
In early 2024, Gravity Asset Management partnered with U.S.-based alternative investment firm Angelo Gordon to acquire hotels. Initially, they intended to redevelop the property into office spaces, but in September of the same year, they reopened it as a four-star hotel named Boco Seoul Myeongdong. The Prima Hotel Jongno in Jongno-gu, Seoul, which was initially planned for office development, is now operating as a hotel since last year.
Industry insiders analyzed that the domestic hotel market shows signs of recovery, becoming more active in transactions. According to JLL (Jones Lang LaSalle) Korea's report on the '2025 Outlook for the Korean Hotel Investment Market,' hotel transactions are expected to reach approximately 2.2 trillion won this year, fueled by excellent operating performance and expectations of interest rate cuts. There are also forecasts that foreign capital will continue to flow into assets that offer value-add (investments that enhance property value through remodeling or expansion).
The factors that enable this are the increasing number of tourists and the insufficient number of rooms to accommodate them. The number of tourists visiting Korea in 2024 is expected to reach 16.3 million, recovering to 93.5% of pre-COVID levels. It is projected that the number of foreign visitors in 2025 will approach 17.5 million. However, approximately 4,000 hotel rooms, predominantly four to five-star accommodations, that disappeared from Seoul during the pandemic have not yet fully recovered. Consequently, the average revenue per available room (RevPAR) of luxury hotels in Seoul is expected to increase by 62% compared to 2019 in 2024, with a projected growth of 5-10% in 2025.
An industry source noted, 'During COVID-19, hotels that were too expensive to sell are now negotiating at higher prices compared to 1-2 years ago,' adding, 'Especially, investors, both domestic and foreign, are showing interest in hotels as assets targeting operating revenue rather than redevelopment opportunities, particularly in areas like Myeongdong where accommodations are limited.'