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CIR

Travel retail responds: South Korea’s summer is a lesson for us all

Renowned for its pop culture, fashion, food and medical tourism industry, South Korea has become one of the most popular destinations for Chinese tourists.

September 2015 | by Garry Stasiulevicuis, Managing Director

Last year, more than 6 million mainland Chinese tourists visited the country, with each traveller spending on average US$1,431 per person – that is nearly twice the amount other tourists spend.

The importance and relevance of the Chinese tourist to South Korean travel retail and the industry in general is undeniable; something that the China Airport Commercial & Retail Summit affirms as it enters its fifth year this September.

All the eggs in one basket

However, when investing heavily in one particular market, or market segment, there comes both a great opportunity and a considerable amount of risk.

As reported in the trade press, June 2015 was a disastrous month for Korean tourism after an outbreak of the Middle East Respiratory Syndrome (MERS) saw a -63% slump in Chinese visitors in just 2 months – the country’s most important shopping nationality.

The crisis could not have been predicted and Chinese tourists’ reactions, although understandable, were unprecedented. Such a significant drop in inbound PAX highlights the vulnerability of the market in relying on one particular traveller group.

Even though the health crisis is officially over, the impact on the travel retail industry is set to prevail until October 2015 – when Chinese tourists are eagerly anticipated to travel to South Korea once again for the Mid-Autumn Festival.

It would be easy to wait patiently for the tourism influx to go back to what it was, as it inevitably will; South Korea has a wealth of highly-prized tourist attractions and a world-class shopping infrastructure.

Instead, South Korean tourism officials and key travel retailers are investing in novel approaches to encourage their main demographic back in the short-term.

Lotte Duty Free – together with its sister companies, Lotte Hotel and Lotte World – has launched a major initiative to increase Chinese tourism to South Korea. The team held a press conference in Shanghai and also invited Chinese tourism entrepreneurs, press and power bloggers to Seoul and Jeju Island to experience the beauty of the country for themselves.

High-profile promotions (HPP) and event offerings have also been put on to help engage with the Chinese traveller and boost spend; including an outdoor K-pop concert and a new car giveaway.

This proposal seems to be working extremely well, as major Chinese group travel companies report that about 100,000 tourists from China will visit South Korea over a 150 day period.

What’s next?

Whilst the focus has been on these short-term wins, if the MERS outbreak has taught the industry anything it’s to ensure that longer-term strategies remain open and flexible.

For instance, reports suggests that South Korea is set to be overshadowed by nearby Japan – particularly as Chinese tourists dominated Japan’s visitor arrivals for the first time this summer (perhaps South Korea’s loss was Japan’s gain). This trend is also likely to continue for some while due to Japan’s reputation for good hospitality and, of course, the shopping; from luxury items to daily products, Japan is a must-see for the Chinese tourist.

The way South Korean travel retail has handled the MERS outbreak so far has been admirable – yet the industry needs to have better contingency plans in place, as this will not be the last time the market needs to react quickly to the known and the unknown.

 

Sources if unspecified: CiR database.

Image source: http://www.livetradingnews.com/