South Korea has long been regarded as one of the top tourist destinations in Asia, Seoul ranked fourth in international overnight arrivals amongst the top 20 Asia Pacific destinations, closely trailing Bangkok, Singapore and Tokyo but surpassing major metropolitan cities such as Hong Kong and Shanghai.1
Seoul also recorded the highest year-onyear (Y-O-Y) growth of 32.7% in 2016 in terms of international overnight arrivals.
Looking ahead, continued investment into the tourism sector and excellent growth in new and established source markets are predicted to drive strong gains in the South Korean hotel market, translating to strong trading performance and a subsequent increase in investment volumes.
These trends are expected to create investment opportunities for domestic and foreign investors alike.
Overview of Visitation to South Korea
Over the past decade, the South Korean government implemented a number of deliberate initiatives to capitalize on the country’s international appeal. The most successful of these policies has been the easing of visa requirements on key source markets, allowing foreigners - in particular those from China and Southeast Asia - to obtain entry visas more easily.
Other initiatives include implementation of investment incentives, promotion of Korean pop culture, and facilitation of MICE (Meetings, Incentives, Conferences and Events) and gaming industry growth. The country also hosted a number of international events including the 2012 Nuclear Security Summit, 2014 Incheon Asian Games and, most recently, the 2018 Pyeongchang Winter Olympic Games, which showcased the destination and affirmed South Korea’s status as a global tourism hub.
These marketing initiatives resulted in visitor arrivals more than doubling from 6 million in 2006 to 17 million in 2016, a compound annual growth rate of nearly 11%. This was primarily a result of growth in visitor arrivals from China, which increased nearly ten-fold from 900,000 in 2006 to over 8 million by 2016.
The resiliency of South Korea’s tourism industry was tested in 2015 when visitor arrivals declined nearly 7% as a result of negative perceptions related to documented cases of Middle East Respiratory Syndrome (MERS). Despite the decline, international visitation quickly recovered and in 2016, South Korea recorded the highest number of international arrivals of over 17 million.
As South Korea’s largest city and one of the largest metropolitan areas in the world, Seoul is the preferred port of entry for most visitors, accounting for 60% to 70% of all arrivals.
In 2017, visitation from China began to decline as a result of geopolitical tensions, relating to the placement of a Terminal High Altitude Area Defense (THAAD) system. It was reported that in March 2017, China instituted a ban on mainland tour packages to South Korea, which culminated in a 48% decline in visitor arrivals from China.
Although declines were significant, South Korea once again demonstrated its resilience by offsetting the decline in visitation from China with growth in visitation from secondary source markets. The net result was a 23% decline in total visitation and a 4% Y-O-Y decline in tourism & travel contribution to GDP in 2017; the first major decline in almost a decade.
The decline in visitor arrivals from China continued into 2018 with arrivals in January and February declining by approximately 44% against the same period in 2017. However, beginning in March 2018 visitor arrival trends from China returned to growth. This growth has accelerated in the months since, pointing to the beginnings of a strong recovery in travel from China.
For the period from April to June 2018, visitor arrivals from China increased by 52% from the same time last year; provided current trends continue, visitation from China is expected to continue to recover at a similar pace through the end of the year.
1 - MasterCard’s 2017 Asia Pacific Destinations Index
Download the full report here (PDF).
