Price matters when it comes to tourism

It is necessary to devise countermeasures after thinking about how to lower the consumer prices through deregulation and institutional improvement.

Kim Chang-gyu

The author is the economic news editor at the JoongAng Ilbo. 666,000 vs. 2.583 million. The former is the number of Japanese tourists who visited Korea from January to May this year and the latter is the number of Korean tourists who visited Japan during the same period. The number of Koreans visiting Japan is about four times the number of Japanese visiting Korea. Considering that Japan’s population is 2.4 times that of Korea, it means nine times more Koreans visit Japan.

This phenomenon is evident when we look at the declining number of tourists visiting Jeju Island. As of July 1, the number of Koreans who visited Jeju this year decreased by 390,000 compared to the number from the same period last year. On the other hand, the number of foreign tourists visiting Jeju only increased by about 190,000. This is because an increasing number of Koreans are going abroad rather than visiting domestic tourist destinations.

According to the Japan Tourism Agency, foreigners visiting Japan for tourism and leisure purposes spent an average of 186,813 yen ($1,346.23) during the first quarter of this year. If we simply calculate that 2.583 million Korean visitors to Japan had each spent that average amount from January till May, it means that the Korean tourists spent over 4.4 trillion won ($3.5 billion) in Japan during the five months. This is an amount you can only earn by selling 220,000 units of Avante, the semi-midsize sedan of Hyundai Motor.

Why are Korean tourists are shunning domestic destinations and heading to Japan? There are various reasons. Some say that it is an outcome of Japan’s strategic development of tourism industry, while others say it is the result of the weak yen and price differences.

Among those reasons, most Koreans say that they no longer choose domestic travels due to high prices. In fact, Koreans turned away from domestic trips first. As prices have risen sharply, the number of Koreans who would rather go to Japan than travel to Jeju has increased rapidly. According to the Jeju Tourism Organization, the proportion of visitors to Jeju who responded that “prices are expensive” as a complaint nearly doubled from 29 percent in 2014 to 53.4 percent last year.

In the aftermath of the pandemic, Korea’s consumer price index rose significantly on year from 0.5 percent in 2020 to 2.5 percent in 2021 and 5.1 percent in 2022. This year, the figure went down from 5 percent in January to 4 percent in February and March and then 3 percent in April and May. However, as the summer vacation season nears, prices related to vacation are skyrocketing by more than 10 percent.

According to Statistics Korea, the price of vacation villas last month rose 13.4 percent from the same period last year. Hotel fees rose 11.1 percent and the prices of sports tickets rose 11.7 percent. As prices change, the perception has changed from “Japan is expensive and Korea is cheap” to “Japan is cheap and Korea is expensive.” With the weak yen added to this, the idea has settled down that trips to Japan are a better deal. In fact, the price of McDonald’s Big Mac has long been cheaper in Japan than in Korea, and most items such as clothing, electronics and alcoholic beverages are also cheaper in Japan.

As K-contents of Korean cultural products are gaining popularity around the world, more and more foreigners want to visit Korea. But could foreigners enjoy their tours when prices are not even affordable to Koreans? In Japan, the number of foreign tourists rose to 68 percent of the pre-pandemic level. But the number of foreign tourists to Korea was restored to only the half of what it was in 2019. Recently, the government pressured food and liquor industries to lower prices of instant noodles, soju and beer. The artificial measure to control the prices of some specific items cannot cope with the situation where prices are rising in all areas.

As the consumer price index entered the 2-percent range in June, the government seemed relieved, saying, “The trend of slowing inflation is clear.” But the slowdown is largely attributed to the 18 to 25 percent drop in oil prices. In fact, the core consumer price index, excluding agricultural produce and oil, is still running high in the 4-percent range. It is necessary to devise countermeasures after thinking about how to lower the consumer prices through deregulation and institutional improvement before we miss the opportunity offered by the K-contents’ popularity.