"Entertainment and Leisure Industry Q1 Losses... Hotel Shilla and Kangwon Land Expected to Recover Quickly"

[Asia Economy Reporter Minji Lee] Entertainment and leisure-related companies are expected to record operating losses in the first quarter. This is based on the assessment that the decline in inbound and outbound travelers and duty-free sales will hit their lowest point in March and April.

On the 29th, Shinhan Financial Investment estimated that the number of inbound and outbound travelers in 2020 will be 27.21 million, a 41% decrease compared to the previous year. Outbound travelers are expected to show the largest decline in April, decreasing by 92% year-on-year, followed by gradual recovery. Inbound travelers are also expected to decrease by 90% to 163,000 in the same month. The number of Chinese inbound travelers is expected to decrease by 4.26 million compared to a year ago, forming a low point in March and April.

This year, domestic duty-free store sales are expected to be $20.9 billion (25.1 trillion KRW), a 1.9% decrease compared to the previous year. The sales growth rate is expected to decline by 42% year-on-year to $1.1 billion in March. However, it is expected to improve to 29.7% in April.

Sung Jun-won, a researcher at Shinhan Financial Investment, explained, “Currently, there are almost no general tourists visiting domestic duty-free stores, but Chinese po-tari-sang (small-scale traders) are gradually continuing their visits. As the domestic market in China slowly recovers from March and retaliatory consumption continues, Korea’s duty-free sales will also enter a recovery phase.”

Operating profits for the first quarter are expected to record losses for Hotel Shilla (-28.7 billion KRW), Hana Tour (-14.9 billion KRW), Modetour (-7.9 billion KRW), and Paradise (-10.3 billion KRW). Kangwon Land and GKL are expected to post profits of 41.9 billion KRW and 8.3 billion KRW, respectively, but these figures are expected to decrease by 66% and 51% compared to the first quarter of last year.

Going forward, performance is expected to improve first for Hotel Shilla, which is visited by po-tari-sang, and Kangwon Land, which relies mostly on domestic sales. VIP customers from China and Japan for GKL and Paradise are expected to return in May and June. Hana Tour and Modetour are expected to recover the latest, with domestic departures gradually increasing from July to September.