Duty-Free Shops Forgetting 'THAAD', Warm Breeze Until Chinese New Year

Recovery of Chinese Tourists Since November Last Year
December Sales Reach 2.2848 Trillion KRW
42.9% Sharp Growth Compared to Same Period Last Year
Duty-Free Store Foreign Visitors Expected to Exceed 20 Million

[Asia Economy reporters Minyoung Cha and Seungjin Lee] As demand for tourism in China recovers, the number of foreign visitors to domestic duty-free shops, which had once shrunk to 15 million, rebounded to around 20 million last year.

With China, which accounts for a significant portion of duty-free demand, partially lifting retaliatory measures related to the Terminal High Altitude Area Defense (THAAD) system, group tourists are increasing, leading to forecasts that the number of foreigners visiting domestic duty-free shops this year will again set an all-time high.

According to domestic duty-free sales data obtained by the office of Kim Jung-woo, a member of the National Assembly's Planning and Finance Committee from the Democratic Party of Korea, from the Korea Customs Service on the 17th, total domestic duty-free sales in 2019 amounted to 24.8585 trillion won, a 31.1% increase compared to 18.9602 trillion won in 2018. Duty-free sales in December alone also surged 42.9% to 2.2848 trillion won from 1.5985 trillion won the previous year.

December typically sees an increase in individual tourists due to Christmas and year-end travel demand. Additionally, about 3,000 employees from Shanghai Weina Cosmetics, a famous Chinese cosmetics manufacturer and retailer, visited Korea for incentive tourism, enjoying duty-free shopping and contributing to the peak season.

Furthermore, the number of foreign visitors enjoying domestic duty-free shopping last year is estimated to have exceeded 20 million. According to the Korea Duty Free Shops Association, as of November 2019, the number of foreigners visiting domestic duty-free shops was 18,243,121, already surpassing the total foreign visitor count of 18,199,448 in 2018.

The duty-free industry estimates that the number of foreign visitors to domestic duty-free shops in December alone reached at least 1.8 to 2 million. The number of foreign visitors to domestic duty-free shops, which reached 20.63 million in 2016, dropped to 15.11 million in 2017 following the THAAD incident. It then increased to 18.2 million in 2018 and recovered to around 20 million.

This year, the situation is even better. The demand for tourism during the Chinese New Year (Chunje), known as China's largest holiday, is acting as a favorable wind for the duty-free industry from the beginning of the year. Group tourists under Chinese government control are also increasing. On the 9th of this month, about 5,000 employees of Iyongtang, a health food and auxiliary equipment manufacturer from Shenyang, China, visited Korea for a 5-night, 6-day schedule, marking the largest scale since 2017. Approximately 488 elementary and middle school students from Henan Province visited Korea from the 14th to the 16th, and 670 elementary and middle school students from Jiangsu and Henan Provinces will visit on the 18th.

The fact that Ctrip, China's largest travel agency, is attempting to launch group tour packages to Korea also supports this outlook. Ctrip recently started selling a 4-night, 5-day package visiting Bangkok, Thailand, and Seoul but then suspended sales. Ctrip's actions are considered an important indicator of the Chinese government's intentions; although sales were halted, the creation of a Seoul visit package itself is interpreted as a sign of the lifting of the Korean ban (Hanhanryeong) by the Chinese government.

A duty-free industry official said, "Since Chunje is China's largest holiday, movement of Chinese people is expected," adding, "Neighboring countries like Taiwan and Hong Kong have political relations with China, so Korea is expected to benefit positively from substitute demand and other factors." Professor Sangmin Lee of the Department of Convention and Hotel Management at Hannam University said, "At the end of last year, a large number of Chinese incentive tourists visited Incheon, and the incentive tourism sector within the MICE industry performed well," forecasting, "This year, the increase in foreign tourists is likely to bring favorable winds to the entire MICE industry."