[Impeachment of Yoon Seok-yeol] High Exchange Rates and Diplomatic Vacuum Hit Hard... Hotel and Duty-Free Industries Breathe a Sigh of Relief

Constitutional Court Upholds President Yoon’s Impeachment on the 4th
Early Presidential Election Process Begins
Resumption of State Visits and Summits
Expectations for Recovery in VIP and Government Events and Room Demand
Duty-Free Industry Eyes Breakthrough Amid Market Slump

On the 4th, as the Constitutional Court upheld the impeachment of President Yoon Seok-yeol, the distribution industry is closely monitoring whether the political instability that lasted for four months following the December 3 emergency martial law incident last year will be resolved and whether this will create an opportunity for business improvement. In particular, the hotel and duty-free industries, which are greatly influenced by the consumption sentiment of both domestic and foreign tourists, are paying attention to whether the early presidential election will resolve the confusion and bring about a reversal of the stagnant atmosphere.

Duty-free shop within the duty-free zone of Incheon Airport Terminal 1. Photo by Yonhap News

Top-tier hotels in Seoul are hoping for a swift normalization of high-level diplomatic and government-centered external events that had stalled after the emergency martial law incident. A representative from a major hotel said on the day, "Before the emergency martial law, events such as state visits and summits attracted delegations and staff as customers, and they accounted for about 8% to a maximum of 15% of the total annual guests using the rooms," adding, "During the period when the National Assembly passed the impeachment motion against the president and the head of state was absent, visits from overseas VIPs were cut off, and this demand disappeared."

He continued, "Forums and banquets involving high-ranking officials at the ministerial level or above were also canceled or did not take place, so there were no opportunities to host large-scale events related to these," and added, "With the Constitutional Court's recent acceptance of the impeachment, the uncertainty in this area has been resolved, and we are closely watching whether the political situation will return to normal and demand will revive."

The hotel industry is also accelerating preparations for the Asia-Pacific Economic Cooperation (APEC) summit to be held in Gyeongju, Gyeongbuk, this October. Before the summit where heads of state from major countries gather, four high-level meetings involving delegations from each country are scheduled to be held in Jeju and Incheon, with preparations underway for events and state guest accommodations. An industry official said, "Most preparations for the staff have been completed, but the participation of major leaders such as U.S. President Donald Trump and Chinese President Xi Jinping remains uncertain," adding, "If the early presidential election resolves the presidential work gap and diplomatic normalization is achieved, there is a possibility that the scale and composition of APEC participants could change."

The duty-free industry hopes that concerns about the rise in exchange rates triggered by the emergency martial law incident and political turmoil affecting inbound tourism will ease. According to the Korea Duty Free Association, the number of monthly visitors to domestic duty-free shops in January was 2.29 million, an increase of only 1.5% compared to the same period last year, while sales amounted to 954.4 billion won, a 40.0% decrease from 1.5909 trillion won in the same period last year. Although the number of users at Incheon International Airport during the longest nine-day holiday at the end of January reached about 2.18 million, the highest ever, duty-free shops did not enjoy any special demand. The number of duty-free shop visitors in February was about 2.099 million, a 1.73% decrease from 2.14 million in the same period last year, and sales slightly increased by 8.53% to 1.006 trillion won.

A duty-free industry official said, "The number of foreign tourists visiting Korea has recovered to pre-COVID-19 levels, but the main reason for the decline in performance is that Chinese tourists, who have strong purchasing power in the duty-free market, have reduced their spending due to the domestic economic downturn," while also noting, "It is clear that the emergency martial law incident raised exchange rates, which also affected domestic customers' use of duty-free shops."

Another official emphasized, "To attract tourists with high per capita spending, not only differentiated products at the private sector level but also support from the government and related agencies are necessary," adding, "Diplomatic capabilities between heads of state, which can play a control tower role in this area, must be supported."