Listed Travel Agencies' Q1 Sales Halved... Full-Scale Restructuring Underway

Hana, Modu Tour, Norang Poongseon, Cham Joeun Yeohaeng, Sejung, Lotte Tour Development, Redcap Tour
Comparison of Quarterly Reports on Performance, Salaries, and Number of Employees
Low Possibility of Travel Demand Recovery in the Second Half of the Year

[Asia Economy Reporter Park Hyungsoo] Due to the impact of the novel coronavirus infection (COVID-19), the sales of travel agencies listed on the domestic stock market in the first quarter of this year have been halved.

According to the Financial Supervisory Service on the 15th, the total sales of seven travel agencies?Hana Tour, Modetour, Norangpungseon, Chamjoeun Travel, Sejung, Lotte Tour Development, and Redcap Tour?in the first quarter amounted to 201 billion KRW, a decrease of 148.3 billion KRW (42.5%) compared to 349.3 billion KRW in the same period last year.

During the same period, the operating loss and net loss of the seven travel agencies were recorded at 6.2 billion KRW and 31.4 billion KRW, respectively. This marks a shift to losses compared to an operating profit of 35 billion KRW and net profit of 31.2 billion KRW in the first quarter of last year.

Among the travel agencies, Hana Tour experienced the largest decline in sales. Hana Tour recorded sales of 66.2 billion KRW in the first quarter of this year, down 55.8% from the same period last year. Modetour's sales also decreased by 52.1% year-on-year to 37.4 billion KRW.

In the first quarter of this year, approximately 3.38 million people traveled abroad. Compared to 7.41 million travelers in the same period last year, this represents a 54.3% decrease. The number of outbound travelers plummeted as governments worldwide restricted cross-border movement due to the global outbreak of COVID-19 cases.

Amid the ongoing downturn in the travel industry, the number of employees at the seven travel agencies also declined. According to quarterly reports, the total number of employees at the seven companies was 5,581, down 4.5% from 5,844 in the first quarter of last year. Considering that travel agencies are applying for government employment retention subsidies, there is a possibility of a sharp decrease in employees after the second half of this year. The total payroll for the seven travel agencies in the first quarter was 53.335 billion KRW, a decrease of 2 billion KRW compared to the same period last year. Given the scale of the sales decline, it appears that travel agencies have not yet fully implemented restructuring.

Ji Inhae, a researcher at Hanwha Investment & Securities, said, "Even for large companies, overseas travel package demand has sharply declined, and the speed of market restructuring will accelerate," adding, "Since government subsidies will be cut off after September this year and overseas travel demand is insufficient, many small and medium-sized travel agencies are likely to go bankrupt."

She continued, "From April, travel agencies have been tightening their belts in earnest," adding, "It is common to cut employee salaries by 20-40%, and measures such as voluntary retirement, leave of absence recommendations, mandatory paid leave for all employees, and a three-day workweek are being implemented."