[Into the Stocks] Growing Travel Demand... Hana Tour Takes Off

June Reservation Rate Up 2567.8% YoY
Expecting Profit Turnaround with Business Normalization Next Year
Capital Increase Also Seen as Resolving Financial Risk

[Image source=Yonhap News]

[Asia Economy Reporter Lee Jung-yoon] Hana Tour, which was hit hard when the skies were closed due to the COVID-19 pandemic, has seen a sharp increase in reservation rates as the Omicron wave subsides and countries prepare to welcome travelers, signaling the full-scale resumption of overseas travel. Although concerns remain due to high inflation and rising oil prices, analysis suggests that positive factors outweigh the negatives.

According to the Korea Exchange on the 20th, Hana Tour closed at 66,500 KRW, up 3.91% from the previous trading day. On the 16th, it closed at 64,000 KRW, up 2.89%, showing an upward trend for two consecutive trading days. However, on this day, the domestic stock market showed weakness, resulting in a downward trend.

Hana Tour had been expected to benefit from reopening but had shown weakness until recently. The stock price rose from around 61,000 KRW at the end of January to a peak of 88,900 KRW on April 6, but then declined back to the late January level. This was due to concerns that the number of travelers would not increase significantly because of the Omicron variant followed by rising oil prices, which caused fuel surcharges on international airline tickets to reach record highs and airline ticket prices to soar. Additionally, the U.S. Consumer Price Index (CPI) in May hit its highest level in 41 years, contributing to economic uncertainty due to inflation.

Despite these negative factors, expectations are rising as travel gradually reopens. In the second half of this year, when overseas travel is expected to fully resume, and from 2023 when operations are predicted to return to normal, a significant increase in performance is anticipated. First, the Japanese government has allowed entry for tourism purposes starting this month. However, to prevent the spread of COVID-19, only group tours accompanied by guides from travel agencies are permitted for the time being. Since the 8th of this month, Incheon International Airport Corporation has lifted major regulations on international flights, such as arrival slot restrictions and curfews.

Hana Tour's reservation rate for June increased by 2567.8% compared to the previous year, and the July reservation rate rose by 998.0%. Samsung Securities analyzed that Hana Tour would record an operating loss of 75.3 billion KRW this year but predicted a turnaround to operating profit of 52 billion KRW in 2023 when operations normalize. Furthermore, Hana Tour conducted a paid-in capital increase to secure operating funds, raising over 100 billion KRW, which is seen as resolving the capital strength issue, the biggest risk.

Experts have given positive evaluations of Hana Tour. Ki-hoon Lee, a researcher at Hana Financial Investment, said, "There has been a situation where people could not travel for the past two and a half years, so there may be revenge consumption. Although prices have risen significantly due to factors like oil price increases, resulting in fewer travelers, we expect a rebound when normalization occurs around the second half of the year or the end of the year."

Jin-hyup Lee, a researcher at Yuanta Securities, said, "It is true that rising oil prices and expensive inflation make traveling difficult. However, because people have not been able to travel for a long time due to the COVID-19 pandemic, resistance to price increases is expected to be low."