SOUTH KOREA. Travel retail industry sources have confirmed widespread media reports today that China is easing its ban on group tours to South Korea.

The move, seen as a critical kick-starting of Chinese tourism, follows the apparent resolution of a dispute between the two countries over South Korea’s deployment of US anti-missile system THAAD earlier this year.

As reported, that deployment prompted a furious backlash by the Chinese authorities and a collapse in tourism to South Korea. A ban on group tours in March led to a calamitous slump in Chinese visitors, beginning with a -40% year-on-year fall in arrivals in March. As the situation deteriorated, Chinese arrivals fell by -66.6%, -64.1%, -66.4%, -69.3%, -61.2% and -56.1% from April through September. For the first nine months of 2017, Chinese arrivals decreased by -49.6% to 3,192,248, a 32.1% share of total visitors compared with 46.8% for calendar 2016.

However, Chinese arrivals for October registered a -49.3% fall to 345,384, the best result since March.

Slump eases: The numbers still look grim but October’s figures from Korea Tourism Organization at least show an improvement in the Chinese inbound market compared with previous months.

Chinese group tourists are set to return to The Shilla Duty Free’s flagship store in Seoul

On October 31, however, the Seoul and Beijing authorities announced they were ending the dispute.

“This news might be the beginning of the end of a long tunnel to finish a turbulent situation” – The Shilla Duty Free

Reuters reported today that Chinese travel agencies have been permitted to “partly resume” sales of group tours to South Korea.  However, the report, citing tour agency officials, said that travel packages would exclude Lotte Group attractions – including its duty free stores.  Lotte has borne the brunt of the Chinese backlash, due to THAAD being sited on company land.

Reuters said that the China National Tourism Administration will, for now, only allow the resumption of over-the-counter (not online) sales of package tours from Beijing and Shandong to South Korea. The report attributed the news to Korea Tourism Organization Deputy Director Park Yong-hwan and executives at Chinese travel agencies.

Online sales of group tours, charter flights and cruise trips are still banned, Park told the agency, as well as Lotte-related packages.

The September visitor arrivals figures (above) and those from January-September (below) courtesy of Korea Tourism Organization underline the slump in Chinese tourism.

A Lotte Duty Free source said: We heard the news but for now the effect of the exclusion will be limited since the lifting is partial. We will have to carefully see how the situation develops.”

Lotte Duty Free has suffered most from the Chinese backlash due to the siting of THAAD on company land (Pictured: The new beauty department at Lotte Duty Free’s Myeong-dong store in Seoul)

A spokesperson for The Shilla Duty Free told The Moodie Davitt Report: “It obviously is a good signal for the South Korean duty free industry. Even though it’s not nationwide [in China], this news generates more optimism for South Korea’s travel-related industry in general.

“Still, we should wait for more noticeable signals, such as an actual increase in inbound Chinese pax heading to South Korea or extended flight schedules. However, this news might be the beginning of the end of a long tunnel to finish a turbulent situation. Shilla will be more than ready when the situation finally turns better or becomes normalised.”

As reported, The Shilla Duty Free responded quickly to the apparent resolution of the crisis via a marketing campaign featuring video of the company’s flagship Seoul flagship store shot by two Chinese Key Opinion Leaders (KOLs).

The retailer collaborated with the Alliance of Korea Chinese Tourist guides to invite the Chinese KOLs – Lenneyeon and Anyouyou – to shoot a video clip for the store (see below).

Vast influence: The video shot by Chinese Key Opinion Leaders Lenneyeon and Anyouyou is intended to revitalise The Shilla Duty Free’s appeal in China

The South Korean travel ban is expected to be lifted in other Chinese regions over time, Reuters said.

The news boosted key travel-related stock in South Korea today. As at 3.30p.m. Hotel Shilla (The Shilla Duty Free’s parent) shares were up +2.8%; cosmetics giant Amorepacific was ahead +0.34%; Asiana Airlines +3.12% and LG Household & Health Care +3.74%.