April 18, 2024

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[THE INVESTOR] The tourism industry here is expected to continue to suffer from revenue plunges and a record-breaking trade deficit due to a lack of progress made between the leaders of South Korea and China over the THAAD dispute.

Between March and May, the number of Chinese tourists in Korea plunged to 841,952, down 57.7 percent from the last year‘s 1.98 million, according to the Korea Tourism Organization‘s data on July 9.

Of the total number of tourists that visited Korea in 2016, 46.8 percent or 8 million people were Chinese.

The already-dramatic downturn is expected to continue as Seoul and Beijing failed to come to an agreement on the US Terminal High Altitude Area Defense anti-missile system issue during the Group of 20 summit held in Berlin last week.

During the summit, China’s President Xi told both Korea and the US that China will not back down on the dispute over Korea hosting the US anti-missile system, alluding that China would not withdraw the alleged economic retaliations imposed on Korean firms until the issue is resolved.

President Moon Jae-in (left) attends a summit meeting with Chinese President Xi Jinping (right) in Berlin, Germany, on July 6. (Yonhap)

 

If the number of Chinese tourists decreases by half to reach 4 million this year, Chinese tourists’ spending in Korea is also estimated to plunge by almost 11 trillion won.

The average spending of a Chinese tourist was 2.74 million won in 2015, but this might too decline, industry sources anticipated.

On the back of continued decline of Chinese tourists in Korea, the sales of the duty-free industry saw the most dramatic financial loss.

Lotte Duty Free, Korea’s largest duty-free operator, expected its sales to decrease by 20 percent, a 350 billion won loss, compared with the same period last year.

The overall duty-free industry also expects its sales to decrease from 15 to 20 percent accounting for some 600 billion won.

Lotte Mart also had to shut down its 74 outlets of the total 99 outlets in China, due to the THAAD controversy. Of the 87 closed outlets, only 13 outlets were voluntarily closed by the company, while the rest were closed by Chinese authorities over safety violations.

Korea’s deficit in the tourism balance also expanded to hit a record high in May due mainly to a drop in incoming travelers, according to the Bank of Korea.

The tourism balance of payment, or net costs spent by Koreans on short-term overseas tours, reached $1.18 billion in May. The number of outbound tourists has also jumped 21 percent to 2 million in May from a year ago. The number of foreign visitors overall fell 34.5 percent to 978,000.



By Shim Woo-hyun/The Korea Herald (ws@heraldcorp.com)