Hotel and Condo Prices Jump 8% Ahead of Chuseok Holiday... Perceived Inflation Grows Larger

August Condo Fees Up 8.5%
Double-Digit Increase in Public Transportation Costs
Bathing Fees Up 12%·Jjimjilbang Up 11%
Concerns Over Prolonged Impact of Rising Oil Prices

Office worker Mr. A hesitated after planning a rare domestic trip with his family during next month's golden holiday period. The cost of staying at condos near tourist attractions has nearly doubled compared to the COVID-19 period. Mr. A said, "Since I went abroad for summer vacation, I planned a light outing with both sets of parents during Chuseok, but the cost is indeed burdensome."

As the Chuseok holiday approaches, the inflation rate related to domestic travel has nearly reached double digits. This is due to the recent rise in international oil prices, which caused consumer prices last month to rise into the 3% range for the first time in three months, increasing the burden of accommodation and transportation costs. The government has set a goal to fully promote domestic tourism during the Chuseok holiday to revive domestic demand, but ordinary citizens find it increasingly difficult to open their wallets amid soaring prices.

According to Statistics Korea on the 12th, condo usage fees and hotel accommodation fees last month rose by 8.5% and 6.9%, respectively, compared to the same period last year. Despite the continuous decline in the consumer price inflation rate in the first half of this year (from 5.2% to 2.7%), condo and hotel usage fees steadily increased during the same period. The increase in condo usage fees soared from 2.0% in January to 13.4% in June this year, then slightly declined to the 8% range. Hotel accommodation fees also slowed from 12.4% at the beginning of the year to 2.0% in July but rose again last month. A Statistics Korea official analyzed, "Seasonal factors, such as price increases during the peak vacation season for hotels and condos, seem to have played a significant role."

Public transportation fares also rose consecutively. Last month, taxi fares increased by 19.1% compared to a year earlier, marking the largest increase since January 1999 (21.0%) during the foreign exchange crisis. During the same period, city bus and intercity bus fares rose by 8.1% and 10.2%, respectively, recording the highest levels since June 2016 (9.3%) and February 2020 (11.4%). Due to the rise in public transportation fares, the public service price inflation rate last month reached 1.7%, the highest in 1 year and 10 months. Bathhouse fees (11.9%) and jjimjilbang usage fees (11.0%) also continued their double-digit increases.

The fundamental reason behind the continued high inflation rates in tourism and public service prices is analyzed to be partly seasonal factors along with the sharp rise in international oil prices. As of the 11th, West Texas Intermediate (WTI) crude oil prices recorded $87.29 per barrel, maintaining an upward trend. The rapid increase in international oil prices is said to be affecting the rise in service prices such as transportation, dining out, and tourism.

If the inflation rate does not narrow, disruptions to the government's domestic demand revitalization plans are inevitable. If the rise in international oil prices prolongs, the trade balance could worsen again due to increased import costs, and the domestic economy could slow down. These concerns were also raised in the government's 'Chuseok Livelihood Stabilization Measures' announced last month. Although the government stated it would support accommodation coupons for hotels during the Chuseok holiday, some pointed out that the sharp rise in prices during the holiday period could lead to increased accommodation prices, significantly impacting the perceived inflation burden.

Professor Sung Tae-yoon of Yonsei University's Department of Economics said, "There is still considerable inflationary pressure on petroleum products and overall prices," adding, "Even if the consumer price inflation rate decreases around October as the government expects, the inflation felt by the public will still be high."