The political controversy which has surrounded South Korea’s decision to site a US missile defence system on the border with North Korea has come back to bite the country’s tourism industry.

 

This has been highlighted by the recently revealed November 2016 Chinese tourist arrivals growth rate reduction to just +1.8% – or 516,956 visitors – according to the Korea Tourism Organization (KTO).

 

This dramatic fall in the growth rate from what were previously very healthy double-digit monthly numbers is already being felt by the country’s hospitality sector, as Chinese Government disapproval of the proposed missile system seemingly translates into fewer visitor numbers.

 

DANGEROUS OVER-DEPENDENCY ON CHINESE CUSTOMERS…

According to TRBusiness’ retail sources in Seoul, this slowdown is already being felt by South Korea’s duty free retailers and it is predicted to get a lot worse if these growth numbers stay low – or just as likely go negative.

 

Especially as tour operators typically seek to play one retailer off another to earn the highest commissions from what is likely to become an even smaller pool of Chinese visitors/customers in future.

 

[There has already been serious bad publicity related to some tour companies dragging Chinese customers around several non-descript outlets, while trying to persuade them to buy brands they have never heard of at inflated prices-Ed].

 

More broadly, this slowdown obviously increasingly impacts on the country’s leading retailers with the biggest stores such as Lotte Duty Free and Shilla Duty Free in particular.

 

 

However, it will be felt most painfully by the medium-sized duty free retailers in both the short and long term – especially those who are already making losses and who are already unable to source some of the key brands that Chinese tourists routinely include on their shopping lists.

 

Even though last November’s aforementioned 516,956 arrivals number was still more than twice that of any other nationality across the month – including the second-placed Japanese total number of 213,211 – the dramatically reduced Chinese growth number is a big source of concern for some of the smaller operators already struggling with overheads.

 

CHINESE ‘VISITOR GROWTH’ TO SOUTH KOREA HAS VIRTUALLY DISAPPEARED…

This is especially so considering that the +1.8% level is so much lower than the double-digit (percentage) performances shown by visitor numbers from Japan (+29.5%); Taiwan (+35.3%); Hong Kong (+12.8%); Thailand (+35.6%); and Malaysia (+22.2%).

 

If these Chinese arrivals numbers do go negative – which seems highly likely – then retailers may also feel the need to reassess their product mixes.

 

At the same time, it would seem likely that tour operators may also come under the regulation microscope if some of the poor customer service some are clearly providing today is allowed to continue.

 

The full November 2016 visitor arrivals numbers from the Korea Tourism Organization can be viewed here: https://kto.visitkorea.or.kr/eng/tourismStatics/keyFacts/KoreaMonthlyStatistics.kto

 

PHOTO INFORMATION AND CREDIT: The photograph above shows a test firing of a Terminal High Altitude Area Defense (THAAD) interceptor missile back in 2013 by the US Army. THAAD is apparently designed to intercept incoming missiles and the South Korean Government has ordered the system to counter what it sees as the threat from North Korea. However, China has objected to the system being deployed so close to its territory. Even though the plan is to install the system on South Korean soil, China is apparently unhappy that the system has the capability to gather substantial data on surrounding terrain in the region.

SOURCE FOR PHOTO & CREDIT: US Army.