Incheon International Airport Corporation (IIAC) has bolstered its half-yearly duty free and travel retail sales by 4% year-on-year, despite the pronounced impact of THAAD on South Korea’s Chinese arrivals.

IIAC Deputy Executive Director of Concession Marketing Group Bum-Ho Kim confirmed the uplift during an interview with TRBusiness for the annual Top 10 Airports report.

“Although Chinese passengers visiting Korea have been diminishing due to THAAD – resulting in decreased duty free sales – the balanced passenger composition of Koreans, comprising over 50%, and other nationalities can offset the decrease and contribute to tackling this difficulty,” he said.

Bum-Ho Kim, Deputy Executive Director of Concession Marketing Group, IIAC.

FURTHER GAINS EXPECTED…

Having rode out the MERS viral respiratory crisis in 2015, traffic picked up in 2016 (+17.5%) to reach 57.8m as duty free spending increased by 14.7%, and the momentum is set to continue this year.

“If there are no further challenges, I am expecting 2017 to exceed $2bn again with robust sales of Korean and diversified foreign passengers,” added Kim.

“Half yearly in 2017, PAX increased around 9% (compared) to the same period in 2016 – if it keeps on track, it will exceed 60m.”

Spend per pax registered at $67 during HY1 and IIAC says it expects this level to sustain throughout 2017.

SPENDING MIX CHANGE

The Korean to Chinese PAX spending mix at Incheon stands at approximately 50:30, Kim updates TRBusiness, but this could change should the challenge from THAAD prolong.

This could result in a possible drop in China’s share of travel retail and duty free sales to less than 30%, as Korean passengers pick up the slack to increase their share of sales to approximately 55%, Kim indicates.

Chinese arrivals to South Korea have dropped by 35% to 1,997,985 between January to May this year. Click to enlarge. Source: Korea Tourism Organisation. 

As well documented, China’s reaction to the deployment of the THAAD system has been stern, resulting in a significant drop in Chinese tourists since its installation earlier this year.

Duty free operators in turn have turned to other nationalities to help dampen the impact of falling numbers.

According to the most recently available May statistics from the Korea Tourism Organisation, growth in Chinese arrivals to South Korea nosedived by 64.1% in May at 253,359 arrivals compared to 705,844 compared to the same period in the previous year.

This corresponds to an accumulative monthly drop of -34.7% to 1,997,985 between January to May.

On a brighter note, visitor arrivals from Taiwan increased by 21.1% to total 372,809 during the period, alongside Japan with growth of +9.3% to 939,499.

Korean departures have grown by 18.9% to reach 10,522,636 between January to May. Click to enlarge. Source: Korea Tourism Organisation.

Meanwhile, Korean departures rose by 18.9% to total 10,522,636.

As reported exclusively by TRBusiness, the impact of THAAD had a marked effect on the recent Incheon Terminal 2 tender, as operators surveyed the decline in Chinese travellers to South Korea.

However, the arrival of new President Moon-Jae offers hope to many that the situation regarding Chinese arrivals will recover moving forward.