Travel Industry: Poor Performance but Stock Prices Rise

Expected to Show the Greatest Growth Potential Post-COVID-19

[Image source=Yonhap News]

[Asia Economy Reporter Park Jihwan] Although the domestic travel industry continues to experience sluggish performance, operating in a state close to a temporary closure, stock prices are maintaining a high rally. This is interpreted as reflecting expectations that the industry will show the greatest growth potential since the COVID-19 pandemic.

According to the Financial Supervisory Service on the 12th, Modetour announced that its operating loss in the first quarter of this year increased by 194.6% compared to the same period last year, reaching 4.3 billion KRW. Sales plunged 94.5% year-on-year to 2.436 billion KRW. Earlier, Hana Tour, the number one company in the domestic travel industry, also reported a first-quarter operating loss of 41.754 billion KRW, up 90.39% from the same period last year. Its sales dropped 91.9% to 7.024 billion KRW.

The travel industry is considered one of the sectors most severely impacted by the COVID-19 pandemic. Since being in a near shutdown state from last year due to the pandemic, the industry has endured through intensive self-help measures such as business restructuring and unpaid leave.

Despite the worst performance indicators in the travel industry, stock prices have shown an upward rally. The average stock price increase rate since the beginning of the year has reached 20%. Stock prices have also significantly surpassed pre-COVID-19 levels. Modetour’s stock price rose 15.8% from the start of the year until the day before yesterday. Compared to early January last year, before COVID-19, it increased by 31.5%. Hana Tour’s stock price rose 22.9% since the beginning of the year and 30.3% compared to January last year. Norangpungseon (18.7%) and Chamjoeun Travel (23.6%) also showed around 20% increases compared to the start of the year.

This reflects expectations that travel demand will explode due to full-scale vaccination and over a year of pent-up revenge consumption. Discussions on vaccine passports are intensifying, and analyses suggest that the resumption of travel activities could be significantly accelerated, further raising expectations. Ji Inhae, a researcher at Hanwha Investment & Securities, forecasted, "As vaccinations proceed and contact-based stocks gain attention again, the travel industry will undoubtedly be a major sector."

However, there is also advice to exercise caution when investing, as it is difficult to prematurely predict the timing of performance normalization, and recent sharp stock price increases reflect high expectations. Lee Namsu, a researcher at Kiwoom Securities, evaluated, "While a rapid recovery of deferred demand is expected, there will be a time lag where recovery among the 20-30 age group, who mainly engage in individual free travel (FIT), will occur before the 40-50 age group, the main customers of package tours. It appears to be a period requiring a conservative approach."