Raise the attractiveness of domestic tourism first

Those involved in the tourism business must seriously reflect on their complaints about lower competitiveness than in foreign countries.

Korea’s travel trade balance in the first quarter showed the largest deficit of $3.24 billion since the third quarter of 2019. The red ink increased fast as Koreans started to travel overseas after foreign countries opened their doors to foreign tourists after the Covid-19 pandemic. The tourism balance, in particular, sharply leaned toward deficit from $1.76 billion in the final quarter of last year to $2.59 billion in the first quarter this year, up 47 percent.

Most of the losses in the travel balance come from the worsened tourism balance. In the first quarter alone, 4.98 million Koreans toured foreign countries — a whopping 1,100 percent increase over the same period last year. Foreign tourists also increased by more than five times in the first quarter of last year, but the increase was smaller than the increase in Korean tourists to other countries. That can be partly attributed to China’s ban on group tourism to Korea. As many as 900,000 foreigners, which account for 55 percent of the number in April 2019, toured to Korea last month, but Chinese tourists were only 24 percent of their number four years ago.

Tourism is more important as it not only represents the basic strength of the Korean economy but also affects the current account balance more than before. Korea has shown a chronic deficit in the services balance, which includes the travel balance. But the country could manage to maintain trade surplus thanks to the surplus in the goods balance. But the goods balance has worsened after exports decreased sharply. As a result, the current account balance showed $29.8 billion in deficit last year, as well as in the first quarter this year.

In macroeconomic perspectives, controlling the deficit in the services balance is more important than before. In a recent report, the Hyundai Research Institute pointed out the need to revitalize our tourism industry to improve the deficit in the travel balance, the largest factor in worsening the services balance.

The government is struggling to turn the tide, starting with handing out discount coupons to lodging facilities in the country next month. It can help boost domestic tourism, but can hardly change the trend. A fundamental solution is needed to increase attraction among domestic tourists.

Koreans and foreigners alike complain about overly expensive prices in the streets of Myeong-dong, not to mention in Jeju. Those involved in the tourism business must seriously reflect on their complaints about lower competitiveness than in foreign countries. Promoting tourism based on patriotism is simply not sustainable.