Korea looks to sweeten tourist offerings as China's view of Japan sours

Chinese group tourists returning to Korea are starting to ignite Korea’s duty-free and tourism industries, but experts say the sectors will need time to flare up.

Chinese group tourists arrive at Jeju on Aug. 31 for the first time in six years and five months on passenger ferry Blue Dream Star. [LOTTE DUTY FREE]

Chinese group tourists returning to Korea are starting to ignite Korea’s duty-free and tourism industries, but experts say the sectors will need time to flare up.

Chinese tourists flooded Jeju Port when Blue Dream Star, a ferry from Shanghai, berthed at the international cruise terminal in Jeju Island at 2 p.m. on Aug. 31 for the first time in six years and five months. Of the 1,275 passengers on board, 661 were group tourists. These tourists jumped on 20 rented buses to head to downtown Jeju for duty-free shopping. By 5 p.m., Lotte Duty Free and Shilla Duty Free shops in Yeon-dong, Jeju, were filled with Chinese tourists who formed long queues in front of Jeju’s local specials.

“The resumption of cruise trips from China is expected to stimulate the region’s economy and play a critical role in creating jobs,” said Yoon Jae-pil, manager of the Shilla Duty Free store in Yeon-dong.

A traditional Korean dance and music performance welcomes Chinese tourists arriving at Jeju on the Blue Dream Star ferry on Aug. 31. [NEWS1]

The Chinese government imposed a travel ban for group tours to Korea in March 2017 in retaliation for the deployment of the Terminal High Altitude Area Defense, or Thaad, on Korean soil. Only individual Chinese tourists could travel to Korea.

There were 8 million Chinese tourists who visited Korea in 2017, but the group travel ban halved the figure to 4.17 million in 2017. The headcount plunged further to 170,000 in 2021 due to the Covid-19 outbreak.

The number of Chinese cruise passengers to Jeju, which peaked at 1.21 million in 2016, also tumbled to 190,000 in 2017 and 21,700 in 2018.

These numbers had a turnaround when China’s Tourism Ministry lifted the travel ban imposed on group tours to Korea and 77 other countries on Aug. 10.

Ro-Ro passenger ship New Golden Bridge V departing from Qingdao carrying some 110 passengers arrived at Incheon on Aug. 11, reconnecting Korea-China car ferry routes for the first time since January 2020. Fifty-three cruise vessels setting sail from Shanghai requested to berth at ports in Jeju the same day.

The graph shows the number of Korea-bound tourists between 2016 and August 2023. [KOREA TOURISM ORGANIZATION]

Duty-free businesses reap early fruits

Hopes are highest in the duty-free sector that barely saw customers enter its stores following the Thaad retaliation.

On Aug. 23, 150 Chinese tourists who entered Korea on a ferry flocked Lotte Duty Free shop in Myeong-dong, central Seoul. It was the first time the store had hosted more than 100 Chinese tourists at once since March 2017.

“They mostly bought cosmetics brands such as K-beauty products and had a high preference for food items like tangerine-flavored chocolates and seasoned gim (laver),” said Park Young-bin, head of public relations at Lotte Duty Free.

“Sales to Chinese tourists that week were 16 percent higher than the week before [Aug. 16-22].”

The industry rolled up its sleeves to greet the Chinese travelers. Lotte Duty Free is holding sales promotions at its branches in Seoul, Busan and Jeju and will reshuffle the brands sold at these stores.

Chinese group tourists visit a duty free shop in Yeon-dong, Jeju, on Aug. 31. [YONHAP]

Shilla Duty Free will also hold sales promotions specifically targeting Chinese tourists and have Chinese-speaking interpreters at its stores.

“It will take at least two or three months for the group tours to translate into sales because it will take time to receive visas in China and tour agencies to gather customers with travel packages,” said Lee Seok-chun, the deputy head of communications at Hotel Shilla.

“Chinese tourists’ return will pick up pace from the National Day holidays [Sep. 29 to Oct. 6], the largest holiday season in China.”

The tourism sector is eyeing increased tour demand too.

Jeju Tourism Organization expects up to 20,000 Chinese tourists will visit Korea during the September-December period. Of the 334 berthing requests made to Jeju port authorities as of Aug. 18 to harbor at the island next year, 264 were by ferries departing from China.

Chinese group tourists board rental buses to tour downtown Jeju on Aug. 31. [YONHAP]

Bigger fruits need more time

The group tours resulted in immediate sales increases in the related sectors, but these sales are widely expected to fall short of pre-pandemic levels due to the reduced number of flights and tightening Korea-China ties.

The number of Korea-bound Chinese tourists during the first half of 2023 stood at 540,000, which was eight times greater than the previous year but still at 20 percent of the figure in 2019.

The boarding rate for Ro-Ro ferries also lingers at 20 percent.

“We need more time to see the boarding rate rise to 80 percent as it was before the Covid-19 pandemic,” said Choi Yong-seok, secretary general for the Korea-China Carferry Association.

Recent economic data that points to China’s slowing economy is another threat to Korean industries.

One out of five young Chinese people are unemployed amid a teetering housing market. Retail sales rose by 2.5 percent on year in July, missing Reuters’ market estimate of a 4.5 percent increase. It had increased 3.1 percent on year in June.

Menu signboards written in Chinese characters are displayed at a takeout cafe in Myeong-dong, central Seoul, on Monday. [NEWS1]

“An economic slump sparked by the real estate market has thinned the Chinese people’s consumption and is turning them away from overseas trips to go on domestic trips,” said Seo Ji-yong, professor of business administration at Sangmyung University.

“Those visiting Korea are less likely to purchase beauty products in bulk since Korea’s inflation has pumped up prices.”

The shrinking presence of Korean culture in China drove down the Chinese people’s taste for Korean products, too.

“Korea-made content needs to garner popularity to result in sponsorships and sales, but such channels have been clogged following China’s ban on Korean content,” said a spokesperson for a cosmetics firm.

“With the exception of a few high-end brands, most have been replaced by low-cost Chinese cosmetics.”

A recent survey conducted by a Japanese research firm showed that Korea was sixth on the list of desired overseas trip destinations for Chinese people. Japan topped the list with 16 percent while 6 percent chose Korea.

Tour packages to Japan outnumbered those to Korea by a factor of nine. On Qunar, a Chinese online travel agency, there were 978 group tour programs heading to Japan from Beijing, Shanghai, Guangzhou and Shenzen, but only 103 programs headed for Korea.

A discount notice is written in Chinese characters at a store in Myeong-dong, central Seoul, on Monday. [NEWS1]

Efforts to turn ‘No Japan’ into ‘Yes Korea’

Ironically, tour-related industries in Korea are expecting to benefit from Japan’s release of treated Fukushima waters that began on Aug. 24.

China followed up with a total ban on Japanese seafood products, a vast expansion from existing restrictions imposed on seafood imports from Fukushima prefecture after the Fukushima Daiichi nuclear power plant collapsed in 2011.

China’s growing animosity against Japan may trigger more Chinese travelers to flood Korea, as they did in 2012 when a territorial dispute between China and Japan ignited over Senkaku Islands, a chain of islands in the East China Sea.

“Most ferry tours from China stop by Jeju during their cruise to Japan, but tourists may choose to cancel their trips in Japan and stay in Korea longer if the anti-Japanese sentiment intensifies,” said a spokesperson for a duty-free company.

The Korean government is rolling out the carpet for the Chinese group tourists.

Korea Tourist Police officers of the Seoul Metropolitan Police Agency patrol the streets of Myeong-dong in central Seoul on Sep. 1. [NEWS1]

The Tourism Ministry and Finance Ministry announced Monday that it will waive the e-visa issuance fee of 18,000 won ($14) for Chinese group tourists for the remainder of 2023. The visa fee exemption benefit has been put back in place for the first time since December 2019.

Some 250,000 locations in Korea will begin to accept WeChat Pay and Alipay, the mobile payment services widely used in China.

Immediate tax refunds will be available at 200 additional cosmetics shops and pharmacies in major tourist districts such as Myeong-dong in central Seoul or Jeju.

The government will stamp out tour packages that force shopping at exorbitant prices and uncertified tour guides to improve the quality of group tours in Korea.

“The government and people will amass efforts to develop various K-culture tour packages [...] into a must-take tour program in tandem with the ‘2023-2024 Visit Korea Year Initiative’,” Tourism Minister Park Bo-gyoon said.

BY HUR JUNG-YEON, CHOI CHOONG-IL AND SOHN DONG-JOO [sohn.dongjoo@joongang.co.kr]