A luxury 49-story hotel is set to rise on the site of the former Prima Hotel in Cheongdam-dong, Gangnam-gu, following approval from the Seoul Urban and Architecture Commission. The site was initially slated for apartment buildings and mixed-use residential units. In 2022, a real estate developer acquired the property for about 400 billion won ($280 million), with plans to construct upscale residential facilities after the hotel ran into financial trouble during the COVID-19 pandemic. However, the project faced potential collapse due to rising interest rates and complications with project financing loans. The development regained momentum in May last year when Shinsegae Property acquired a 50 percent stake and joined the project, shifting the focus to a high-end hotel. The company determined that a luxury hospitality project would be more commercially viable than residential development. “A growing number of foreign tourists have been returning to South Korea since the pandemic, but there are no ultra-luxury hotels to accommodate them in the Gangnam area,” a Shinsegae Property official said.
With the resurgence of international visitors—fueled by the global popularity of Korean dramas and cuisine—hotel development is once again gaining traction in Seoul. The tourism industry expects around 18 million foreign visitors to arrive in South Korea this year, surpassing the all-time high of 17.5 million in 2019. Despite the rebound in demand, the number of hotel rooms remains below pre-pandemic levels, prompting expectations of improved hotel performance amid rising room rates and limited supply.
The favorable market conditions have prompted a reversal in several development plans that had previously aimed to convert hotel properties into other uses. Projects once intended for residential or office development are now reverting to hotel use.
Late last year, U.S.-based private equity firm Blackstone purchased the SM Group’s Gangnam headquarters in Yeoksam-dong for approximately 120 billion won ($84 million) and plans to convert the building into a hotel. “We plan to introduce a groundbreaking hotel through a partnership with a global hotel chain,” a Blackstone representative said. Similarly, in September, U.S. investment firm Angelo Gordon acquired the Tmark Grand Hotel Myeongdong—previously slated for office conversion—and reopened it as Voco Seoul Myeongdong, a brand under the global hospitality group InterContinental Hotels Group (IHG). The former Prima Hotel Jongno was also sold to an asset management firm that initially planned to redevelop the site as an office complex. That plan was abandoned, and the property is now operating successfully as a hotel. Another stalled project—the Paradise Group’s hotel development in Jangchung-dong, Jung-gu—had remained inactive for years due to weakened commercial viability during the pandemic. The project has since resumed following the signing of a construction contract with DL E&C.
Global real estate firm Jones Lang LaSalle (JLL) noted that “backed by solid tourism demand, limited new supply, strong performance, and rising foreign investment, the hotel market is expected to make a full recovery this year,” adding that “many investors are now reassessing the potential of converting office buildings and retail properties into hotels.”
The sharp increase in tourism has been a key driver of demand. According to the Korea Tourism Organization, the number of inbound tourists through February reached 2.26 million, up 18 percent from 1.91 million during the same period last year. That figure represents 98 percent of the 2.31 million visitors recorded during the same period in 2019, just before the pandemic.
However, the recovery in hotel room supply has lagged. According to JLL, approximately 4,000 rooms in four- and five-star hotels disappeared in Seoul during the pandemic. In 2024, only about 1,100 new rooms were added, and fewer than 1,000 are expected this year.
“With no major hotel openings scheduled until after 2027, demand will likely outpace supply for the next two to three years, leading to continued growth in hotel performance,” JLL projected. Last year, the average room rate rose by more than 40 percent compared to pre-pandemic levels.
