Korea’s tourism posts biggest deficit in 5 years

Travelers move around Incheon International Airport on May 6. [NEWS1]

 
Korea recorded its biggest deficit in tourism in five years as the number of Korean travelers going overseas overwhelmed foreign tourists coming to the country.
 
The spending habits of Korean tourists, who open their wallets easily when abroad, in contrast to inbound tourists’ prioritization of experiences over shopping also factored into the shortfall in this year’s first quarter.
Korea recorded a $3.9 billion tourism deficit, according to the Bank of Korea’s Economic Statistics System. This is the second largest tourism deficit after the third quarter of 2018, which saw $4.17 billion in losses. Even the services trade, which makes up the majority of travel imports, has been in the red for 23 months straight.
 
This means the travel and services industry trade deficit shaved off much of Korea’s surplus in product exports, resulting in a surplus of $16.84 billion in its current account for the first quarter.
 

Korea’s trade travel balance by quarter from 2022 to the first quarter of 2024 [AHN DA-YOUNG]

 
The larger travel industry deficit is due to the number of outbound Korean travelers far outpacing the number of inbound tourists after the end of the Covid-19 pandemic. According to the Ministry of Culture, Sports and Tourism, 7.42 million Korean tourists traveled overseas in this year’s first quarter, recovering to around 94.4 percent of the 7.86 million outbound tourists recorded in the first quarter of 2019.
 
But the number of foreign visitors to Korea in this year’s first quarter, at 3.4 million, only amounted to 88.6 percent of pre-pandemic levels recorded five years ago.
 
The difference in Korean and foreign tourists’ consumption is further amplifying the tourism deficit. Koreans spent $7.44 billion overseas while traveling in this year’s first quarter, which is only a 7.2 percent decrease compared to the $8.02 billion spent in 2019’s first quarter. Considering the decreased number of outbound travelers, this means Korean tourists have been spending similarly to before.
 
A 38-year-old office worker, only identified by the surname Choi, spent a week in Japan in February over the Lunar New Year holiday, taking advantage of the weak yen to enjoy local food in Osaka and Kyoto, and coming back with a bag full of souvenirs such as liquor and ramen.
 
“I opened up my wallet more easily than in Korea because the prices seemed cheap for the products’ value,” Choi said.
 

Korea’s travel industry deficit widened after the Covid-19 pandemic [AHN DA-YOUNG]

 
On the other hand, travel imports — the amount of money foreign tourists used for goods and services in Korea — amounted to $3.54 billion in this year’s first quarter, a 29 percent decrease compared to the $4.99 billion posted five years ago. This shows a stark cut in foreign tourists’ consumption compared to travel before Covid-19. This is mostly due to the number of Chinese visitors, especially group tourists, not returning at the same rate. Furthermore, tourists nowadays tend to prioritize experiences such as camping, food tours and K-pop events, like concerts, during their stay rather than shopping.
 
The portion of Chinese tourists who said they considered shopping as a factor in choosing Korea as their travel destination dropped from 72.5 percent in 2019 to 49.5 percent last year, according to the Korea Culture and Tourism Institute. Though shopping used to be the main purpose of travel for 95.1 percent of all Chinese tourists in 2019, that dropped to 68.2 percent in 2023.
 
Korea’s duty-free industry also recorded operating losses or decreased profit in the first quarter despite the increase in travelers.
 
“Foreign tourists, who used to center their travel around locations and shopping, are now prioritizing experiences, especially as more of them come on solo trips,” said Lee Hoon, a professor at Hanyang University’s Department of Tourism.
 
“Chinese tourists, who are now making repeat visits to Korea, are just shopping for themselves instead of for family and relatives as they did before.”
 
Korea’s travel industry is predicted to continue its current pattern of logging deficits for the foreseeable future. Some say that policies should be amended to simultaneously draw larger numbers of foreign tourists as well as lengthen their stay in order to improve the tourism balance.
 
The spending and length of stay by tourists could be increased by encouraging them to visit places other than Seoul, where they heavily concentrate, such as Busan, Gwangju and Gyeongju,” Prof. Lee said. “The widespread perception of domestic tourist spots being ‘rip-offs’ should also be worked on to attract Korean travelers.”

BY JUNG JONG-HOON [[email protected]]