Hotel Shilla reports travel retail revenue surge of +33% in third quarter

SOUTH KOREA. Hotel Shilla’s travel retail division recorded a +33% year-on-year increase in revenues in the third quarter of 2018, to KRW1,093.5 billion (US$960 million).

Operating profit in the division surged by +153% year-on-year, reaching KRW59.4 billion (US$52.1 million).

The company’s airport duty free business delivered a +48% revenue rise, while in downtown duty free the increase was +23%. The average tour agency commission rate in the downtown business was up slightly year-on-year, from 11.6% in the third quarter of 2017 to 12% in the same quarter this year.

Shilla has been buoyed by the sharp recovery in Chinese tourism to South Korea as the THAAD dispute has eased.

How Shilla’s travel retail division performed in the third quarter. Click on image to enlarge.

Sales have also benefited from the daigou (shuttle trader) phenomenon. This trade involves hundreds of thousands of Chinese shoppers purchasing Korean and international duty free goods for customers in Mainland China at well below prevailing Chinese domestic prices and then reselling them.

As reported, South Korean duty free sales hit an all-time high of US$12.9 billion between January and September 2018.

The latest Korea Tourism Organization (KTO) figures showed that Chinese visitor arrivals in South Korea rose +36.4% year-on-year in September, to 434,595, continuing the sustained recovery from the THAAD-hit 2017 numbers. However, there has been a -40.2% fall in Chinese tourists between September 2016 and September 2018.

In its 3Q outlook, Shilla said it was “expecting stable circumstances through incoming end of year demands and mitigation of competition”.

Hotel Shilla’s overall performance in the quarter in detail. Click on image to enlarge.
Click on image to enlarge.
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