SOUTH KOREA. Hotel Shilla’s travel retail division posted a +30% surge in revenues for the first quarter of 2018, to KRW1,013.7 billion (US$950 million), while operating profit in the division surged by +182% year-on-year, hitting KRW47.6 billion (US$44.5 million).
The company’s airport duty free business delivered a +41% revenue rise, while in downtown duty free the increase was +22%. The average tour agency commission rate in the downtown business dipped to 11.9% in the quarter, having hit a recent high of 16.3% in the same period last year.
As reported, the business was hit last year by the collapse in Chinese tourism (from mid-March) due to the THAAD dispute with China, as well as by soaring tour group agency commission rates.
Sales at Shilla and other duty free companies 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 earlier today, South Korean duty free sales to foreigners surged +90.2% year-on-year in March, to US$1.26 billion, driven mainly by daigou. The figures come against the backdrop of the first growth in Chinese tourism in 13 months.
Commenting on the outlook for Q2 2018, Shilla said it would “focus on maintaining profitability in downtown stores and stabilising the newly obtained airport concessions (Hong Kong, Incheon Terminal 2, Jeju) at the early stage.”
Note: Look out for Martin Moodie’s major report from Seoul on the Korean duty free market, out in The Moodie Davitt Report Interactive and Print Editions early May.
