Q3 2024 Performance of South Korea's Hospitality Industry: Strong Growth in Resorts and Pensions, Weak Performance in Hotels
 

Yanolja Research (Director Jang Soo-cheong) released its “Q3 2024 Domestic Hospitality Industry Report” on October 31, analyzing the market trends for domestic hotels, motels, pensions, and shared accommodations during Q3 2024 (July–September). The report combines data from the Yanolja platform, AirDNA, and proprietary surveys to present changes in performance across the hospitality industry during the summer vacation season.

According to the analysis, the summer vacation boom led to an increase in the Average Daily Rate (ADR) for accommodation types like resorts and pensions compared to Q2 2024. Specifically, ADR for pensions and resorts, popular choices for summer travel, rose by 27% and 19%, respectively, while Revenue per Available Room (RevPAR) increased by 55% and 14%.

In contrast, the hotel sector showed only marginal growth, with RevPAR increasing by just 1% for 1- and 2-star hotels and 2% for 4-star hotels. Meanwhile, RevPAR for 3-star and 5-star hotels declined by 6% and 7%, respectively, indicating that hotels did not fully benefit from the summer vacation season boom.

Changes in ADR/OCC/RevPAR from Q2 to Q3 2024 by Accommodation Type

Performance Compared to the Same Period in 2023

Compared to Q3 2023, overall performance in Q3 2024 declined significantly. Most hotels, except for 3- and 4-star hotels in the Jeolla region and 4-star hotels in Busan and Jeju, experienced a year-on-year drop in performance. The overall ADR for hotels saw little improvement, while Occupancy Rates (OCC) dropped sharply: 3-star and 5-star hotels recorded -10% and -13%, respectively, while 4-star hotels saw a relatively smaller decline of -6%.

Consequently, RevPAR for 3-star and 5-star hotels decreased by -13% and -12%, respectively, while 4-star hotels experienced a decline of -5%. In contrast, the pension sector showed solid performance, with both ADR and OCC increasing, resulting in a 3% year-on-year rise in RevPAR. Motels maintained similar performance levels compared to the previous year, while the shared accommodation sector experienced a RevPAR decline of -8% due to the continued increase in supply.

Suckwon Hong, Senior Researcher at Yanolja Research, explained, "The Q3 results reflect the impact of a sluggish domestic economy and high inflation, which reduced demand for domestic travel during the summer. Additionally, the significant increase in demand for international travel during the peak summer season likely influenced the results."

Changes in ADR/OCC/RevPAR from Q3 2023 to Q3 2024 by Accommodation Type

Outlook for Q4

The report also presented the Q4 "Hospitality Industry Outlook Index," which forecasts mixed performance for hotels and motels. The hotel sector anticipates a decline in ADR and OCC following the end of the summer vacation season, while motels are expected to maintain relatively stable performance.

According to Yanolja Research’s Q4 Outlook Index, the ADR index for hotels was 95.56, and the OCC index was 93.55, both below the benchmark of 100, indicating expected declines. In contrast, the indices for motels were 100.70 and 100.47, reflecting their relative immunity to seasonal fluctuations. The "Hospitality Industry Outlook Index" by Yanolja Research uses a benchmark of 100, where values above 100 indicate improvement and values below 100 indicate decline.

Correlation Between Weather and Accommodation Bookings

The report also analyzed the impact of weather, including record-breaking heatwaves and heavy rainfall, on accommodation bookings. This summer saw over 30 days of extreme heat, the second-highest on record, with monthly average temperatures from June to September exceeding those of the previous year.

The prolonged summer and scorching weather positively influenced accommodations in major vacation destinations like Busan and Gangwon. In Seoul, hotel bookings increased with rising daily maximum temperatures, while motel bookings showed a declining trend. Senior Researcher Deachul Seo at Yanolja Research attributed this to the demand for "hotel vacations" (ho-cations), where consumers seek short getaways in urban hotels to escape the heat.

In Busan and Gangwon, rising maximum daily temperatures contributed to increased bookings across hotels, motels, and pensions. Popular destinations such as Haeundae and Gwangalli beaches, as well as coastal areas in Gangwon, attracted more travelers, boosting summer performance. The report detailed the effects of heatwaves and rainfall variations on regional accommodation performance, highlighting the influence of summer weather on the hospitality industry.

Weather Effects on Accommodation Bookings by Sector (Hotels/Motels/Pensions)