The hotel industry is currently experiencing a 'full house phenomenon' due to the recent increase in tourists visiting Korea. The popularity of Korean Wave content and various international events have led to an increase in foreign visitors to Korea. However, concerns about infrastructure supply shortages have emerged due to staff departures and business closures during the COVID-19 pandemic.
According to the Korea Tourism Organization on the 5th, the number of foreign tourists visiting Korea in the first quarter of this year was 3.87 million, a 13.7% increase compared to the same period last year. By the end of April, the cumulative number of foreign tourists visiting Korea exceeded 5.5 million, surpassing the previous record high of 2019. This was aided by 1.71 million foreign tourists visiting Korea in April alone. In the first four months of 2019, there were a total of 5.477312 million foreign tourists visiting Korea. As a result, there are expectations that the total number of foreign tourists this year could surpass the 17.5 million visitors of 2019 and approach 20 million.
Industry insiders attribute the increase in tourists visiting Korea to multiple factors, including ▲the global popularity of Korean Wave content like K-pop and K-dramas, ▲the surge in suppressed overseas travel demand following the pandemic, and ▲government policies such as visa relaxations. In particular, demand for shopping, beauty, and medical tourism has also risen, in addition to the desire to directly experience Korean Wave content, due to the recent depreciation of the Korean won (increased exchange rates).
The hotel industry continues its streak of full occupancy. The Four Seasons Hotel in Jongno-gu, Seoul, recently recorded an occupancy rate of about 90%. The Shilla Hotel in Jung-gu, Seoul, has also reported an occupancy rate of over 90%. According to ChosunHotel & Resort, the average room occupancy rate of five major hotels in Seoul, including Chosun Palace and Westin Chosun Seoul, has increased from approximately 84% last year to 86% this year.
Grand Hyatt Jeju, operated by Lotte Tour Development, saw its May visitor numbers surpass the peak season record set in August of last year. The room occupancy rate also reached 87.6%, breaking its previous record of 86% set in April. Considering that hotels typically reserve some rooms for extraordinary situations, this implies that the majority of rooms are essentially full.
However, some point out that despite the rapid increase in tourist numbers, there is a lack of supply infrastructure. This is attributed to the lingering effects of business closures and staff departures during the pandemic. According to the Statistics Korea, the number of hotel rooms in Seoul at the end of last year was 60,708, a 1.2% decrease compared to the end of 2021 (61,483). Considering that the number of foreign tourists visiting Korea surged from about 970,000 to around 16 million during the same period, there is a shortage of accommodation facilities.
However, due to the tightening of the project financing (PF) market and the rise in construction costs, new hotel developments have effectively come to a standstill. The Seoul city government has set a goal of attracting 30 million foreign tourists by 2026, but there are growing calls for a mid- to long-term response plan to manage the increasing accommodation demand. The lack of lodging and rising labor costs could lead to an increase in hotel prices, so there is an urgent need for infrastructure improvements to support an expansion in tourist inflow.
Concerns have been raised that if the supply shortage continues long-term, the increase in tourist demand could backfire. Rapid increases in accommodation prices, booking difficulties, and shortages of budget lodging could pose obstacles to attracting individual and group tourists. In particular, the exemption of visas for Chinese group tourists starting in the third quarter of this year may further exacerbate the supply shortage.
An industry representative noted, "There is a need for policy support to induce the supply of budget-friendly 3- to 4-star hotels where group or individual tourists can comfortably stay," and added, "If the surging demand is not supported, the opportunities that have come to the Korean tourism industry could turn into a crisis."