Jeju Island is experiencing a flood of listings for large, 5-star hotels. The demand for hotels in Jeju is predominantly driven by domestic tourism, with very little demand from international business travel, food and beverage (F&B), or events. Consequently, hotel revenues are closely tied to the overall economic climate, presenting significant risks and volatility for investors. While hotel revenues rebounded quickly after the COVID-19 pandemic, Jeju's tourism industry has faced a noticeable decline in visitors since late 2024 due to issues such as martial law and impeachment situations, and excessively high prices. However, transactions involving 5-star hotels tend to be influenced more by the individual property's characteristics than by macroeconomic factors, making the outcomes of these sales noteworthy.

D&D Investment (DDI) is moving forward with the sale of the Grand Chosun Jeju Hotel.

In July 2018, SK D&D acquired the former Kensington Hotel for KRW 115 billion with plans to remodel and increase its asset value. However, after the remodeling was completed in March 2021, the onset of the COVID-19 pandemic made it difficult to find a buyer, leading to its sale to 'DDI JJ 60 REITs,' established by D&D Investment (DDI), for KRW 240 billion. Chosun Hotel & Resort, an affiliate of the Shinsegae Group and the REIT's second-largest shareholder (26.2%), is responsible for the hotel's 20-year management contract. The REIT secured KRW 150 billion in mortgage loans at a 2.7% interest rate at the time of acquisition and is now pursuing a sale as the loan's maturity date approaches in March 2026.

DL Group's Maison Glad Hotel (513 rooms) is in negotiations with GIC, Singapore's sovereign wealth fund, and Gravity Asset Management, which has been selected as the preferred bidder. Blue Cove Asset Management plans to conduct an open bidding process in the first half of this year for the 5-star Parnas Hotel (307 rooms), with CBRE Korea acting as advisor.

Despite their differing motivations—restructuring for DL Group, loan maturity for D&D Investment (DDI), and profit-taking for Blue Cove—these properties are being listed for sale almost simultaneously.

Jeju Tourism Decline... Domestic Investors Lack Capacity, Attracting Interest Only from Some Foreign Investors

According to the Jeju Tourism Association, visitor numbers in January and February of this year totaled 1.81 million, a 12.3% decrease compared to the same period last year. While the number of foreign visitors (13% of total) increased by 11%, mainly driven by Chinese tourists benefiting from visa-free entry, the number of domestic tourists decreased by 15%. Notably, the affordability of travel to Japan is significantly diverting tourists who might otherwise have visited Jeju Island.

Currently, domestic institutional investors (LPs) remain hesitant to invest in retail assets due to their experience during the COVID-19 pandemic, leaving only foreign investors, including GIC, showing interest. In Korea, KB Asset Management is the only domestic player to have acquired the Four Points by Sheraton Seoul Station and is considering an investment in the Four Points by Sheraton Myeongdong.

A source from a foreign asset management firm commented, “Jeju Island hotels are too heavily reliant on tourism, making them severely susceptible to economic fluctuations. Seoul remains the top tourist destination and benefits from a balance with international business travel demand, which is why investors are concentrating on Seoul hotels, even at slightly higher prices.”

This article was published in Corebeat on April 3rd 2025.