SOUTH KOREA. Chinese arrivals, critical to the duty free market, rose by 35.2% year-on-year in May to 500,413 – the first time in 27 months that arrivals have risen above the 500,000 mark. Arrivals were spurred by extended travel during the Labor Day holiday in early May.
Chinese monthly visitor numbers to South Korea deteriorated after the Korean deployment of the US anti-missile system THAAD after peaking in July 2016 at 917,519.
While the Chinese government never officially banned travel to South Korea, the group tour business was effectively eliminated from March 2017.
As relations between the two countries have improved, so visitor numbers have picked up steadily. Chinese arrivals to South Korea grew by 30% year-on-year from January to May of 2019 to 2,327,479 as recovery towards pre-THAAD inbound levels continued.
Total arrivals into South Korea grew 32% in May with major source markets growing across the board. Japanese visitor numbers grew by 26%, boosted by many travelers in their 20s who are interested in Korean pop culture (Japan growth by age group: 0~20 – 50.6%, 21~30- 46.2%, 31~40-23.5%, 41~50-16%, 51~60-15.2%, +61-18.3%). Taiwan and the US, other important source markets for Korea, were up 15.3% and 13.3%, respectively.
Outbound travel by Korean nationals remains sluggish and grew just 3% year-on-year in May.
The following factors have dampened the desire for outbound travel:
- Outlook on the economy worsening (Korea Institute for Industrial Economic and Trade recently downgraded 2019 GDP forecast from 2.6% to 2.4%),
- Recent sharp drop in the Korean Won (-9% YoY, -5% compared to 1Q19 average)
- Weak consumer sentiment (May -0.4% YoY). Outbound travel shows some correlation to consumer sentiment and although we’ve passed the 2H18 trough, economic conditions must improve for both consumer sentiment and outbound travel to improve.
