Korea’s tourism industry approaching a crisis
Earlier this month, an unnamed Korean travel agency received a group of Chinese tourists from a travel agency based in Harbin, Heilongjiang Province. The group of 20 tourists was scheduled to travel to Seoul and Jeju for five days and four nights, yet they only paid 900 yuan each for the package — or roughly 162,000 won ($139.77) — even though it is normally impossible to fly from China to Korea for that amount.
Such a low-priced travel package seems unlikely to exist, but it is actually happening in Korea. What makes it possible is the so-called poll tax practice, in which Korean travel agencies pay a certain amount to the Chinese companies for each traveler.
Under common sense, the Korean agency should receive money from the Chinese agency to pay for transportation, accommodation and food expenses in Korea; in contrast, it has to pay 300 yuan per tourist to the Chinese travel agency. Korean travel companies are, in other words, purchasing the Chinese customers. This is where the “dirt-cheap tourism” begins.
Ecology of “dirt-cheap tourism”
Korean travel agencies have no choice but to give Chinese travel agencies money, or the “poll tax,” because there are so many Korean companies competing to receive Chinese tourists. And this fierce competition among the Korean agencies makes the poll tax increase, so it reaches up to 700 yuan per person for those who are likely to shop a lot while in Korea.
As soon as the Chinese tourists arrive at the airport in Korea, all the expenses must be paid by the Korean travel agencies. So in order to make even a little profit, the Korean companies have to save money, which forces them to look for the cheapest hotels, usually outside of Seoul, and restaurants to accommodate the travelers.
“At least 1,500 yuan is needed for hotel, food, transportation and entrance fees,” A representative from the Korean agency said, adding, “We paid 300 yuan to the Chinese agency, so the total expense is 1,800 yuan per tourist.” This means that the company should generate profits of at least 1,800 yuan per tourist, and there is only way to make it happen — shopping.
Korean travel agencies receive a 7 percent commission from duty-free shops, which they consider to be low. Thus they bring the tourists to other shopping venues with which they have special contracts to get more commission. In the case of ginseng, they can get a commission of 30 percent.
“In order to cover operating costs, such as office rental fees and staff salaries, tourists should spend at least 1.5 million won each in the shopping arcades,” the travel agency representative said. Accordingly, the Chinese tourists are brought to six shopping malls in just two days.
Korean tour guides also compete to serve affluent Chinese tourists who are likely to shop a lot — they even buy tourists, too. A tour guide who worked with the visitors from Harbin paid a total of 2,000 yuan to the Korean travel agency, which is 100 yuan per tourist. Therefore, the guide should also try hard to make them shop in a shopping arcade to get more commissions.
“I want to give sincere explanations on Korean culture, but, in fact, I have to flatter them to make them shop more,” the guide said. “Every explanation I give is related to shopping.”
In this way, the vicious cycle ongoing among Chinese tourists, travel agencies, tour guides and contracted shopping centers has damaged the quality travel in Korea.
The greatest victim of this vicious cycle is the image of Korea among potential visitors. A local daily newspaper in Nanchang in China’s Jiangxi Province reported about this kind of travel in October under the headline, “Korean tourism ends up being pathetic.” One person interviewed in the article joined a package tour of six days and five nights that included visits to Seoul and Jeju Island. It cost 3,919 yuan, or about 700,000 won. Despite the higher price, this trip was also part of the dirt-cheap travel trend. The guide constantly demanded that he shop more and more. The guide didn’t even let the bus depart from the shopping center because the tourists has not bought enough.
“Those who didn’t buy anything should go to the shop again. Let’s get off the bus right now,” he said, according to the article.
Chinese travelers generally agree that they should shop a certain amount because they have chosen to visit Korea at a cheap price. However, the problem was that there was nothing they wanted to buy at the shopping malls that the guide brought them to.
While they were willing to buy famous brands, such as cosmetics from Sulwhasoo or electric rice cookers from Cuckoo — both of which are very popular among Chinese tourists — the shops they visited only sold off-brand products, but the guide pressured them to buy anyway. Such experiences are likely to give these Chinese tourists a negative impression of Korea.
In fact, shopping is one of the main reasons why Chinese travelers visit Korea. “It is the Korean cosmetics, popular sites that have appeared in Korean dramas, stylish clothes and icons that we love,” said Yuan Yuan, who visited Korea last year.
However, she also noted that she was not satisfied with cheap guided tour and the condition of the hotel. “When we go traveling, we can afford the whole cost,” she said, adding, “If it is worthwhile, even a little expensive, we will try, I suppose.” She paid 3,200 yuan for the group tour package.
She also said that the tour guide seemed reliable as he was good at Chinese, but he pestered the tourists to buy products at the shopping centers they visited, though it was tolerable.
Not all Chinese travelers encounter this type of dirt-cheap travel, yet it seems evident that this growing sector affects many visitors to Korea.
Taking note of this trend, the Korean government has started taking actions to tackle the current practices prevalent among Korean travel agencies. The actions aim to prevent domestic travel agencies from selling travel packages at rock-bottom prices, and to nurture a healthy environment in the Korean tourism industry.
A so-called three strike system will be introduced, in which the Ministry of Culture, Sports and Tourism will weed out the travel agencies that operate with poor pricing practices through an electronic supervision system. While the ministry had been suspending the qualifications for offending travel companies within a two-year cycle, the newly adopted system will let the ministry revoke licenses at any time. The system consists of three steps: warning, one-month suspension of operations and cancellation of licenses.
In addition, the ministry is carrying out an evaluation of travel agencies in order to sort out under-qualified companies. The evaluation criteria include operation performance, observation of the laws and others.
Furthermore, the travel agencies that are caught employing unqualified tour guides two times will not be able to continue operating, while in the past the limit was three times. Currently, tour guides have to pass an exam in order to receive a certificate to operate legally, and the exam is conducted by the Human Resources Development Service of Korea and the Tourism Ministry.
Other actions include installing reporting centers where people can report legal violations to the Korea Tourism Organization and jointly inspecting violations with the police.
Furthermore, the government is willing to take cooperative actions with the governments of China and Japan. “We recognize that there is a need for cooperation between foreign countries, especially China and Japan,” said Wang Gi-young, a deputy officer of the International Tourism Division of at the Tourism Ministry.
He also mentioned that the related issues will be discussed in detail at the Trilateral Tourism Ministers’ Meeting, organized by Trilateral Cooperation Secretariat, that will be held later this year.
Despite the fact that the government is starting to take targeted actions to root out dirt-cheap travel, some experts are concerned about whether these measures can really solve the problem in the long term.
The biggest reason behind the worries is the government’s obsession with numbers. No matter if tourists are satisfied with their travel in Korea, the primary objective of the government is to increase the total number of foreign travelers to Korea.
Out of the 13.23 million people who visited Korea last year, 5.98 million of them were Chinese tourists, accounting for 45.2 percent of the total number. And the government’s foreign tourism goals for this year are a large step up: the ministry aims to attract 16.5 million visitors, a 25 percent increase over last year, and 8 million Chinese tourists, which is a 34 percent increase from last year.
The situation is paradoxical: On one hand, the government is trying to reign in dirt-cheap travel, but on the other hand it is aiming to bring even more tourists to Korea.
Industry experts say that the growing sector of dirt-cheap travel cannot be changed with regulations only. Since a lot of Korean travel agencies attract Chinese tourists on price competitiveness, and the regulations are likely to drive up the prices, the changes are likely to result in a reduced number of travelers to Korea.
For example, a Korea travel package sells for around 2,000 to 3,000 yuan in Shanghai, while a travel package to Thailand costs around 1,000 to 2,000 yuan. In addition, travel packages to Japan, which costs around 4,000 to 5,000 yuan now, will soon be a threat to the Korean travel industry because the prices are likely to fall due to the weakening of the yen and strong internal competition. Based on these trends, Korean travel packages have to become cheaper to survive.
“We will encounter a dilemma where we have to give up a certain amount of tourists due to stronger regulations,” said Han Hwa-jun, the chief manager of a Chinese branch of the Korea Tourism Organization. “However, we should take further actions with the strong will to reorganize the market system.”
To promote long-term growth, travel industry experts say that the government should abandon its obsession with numbers, otherwise the new regulations will have no effect.
Furthermore, they emphasize the need to determine whether the tourism goals are practical — whether Korea can even accommodate eight million Chinese tourists.
“Myeong-dong, which was the center of Korean culture, is being polluted by street touting and shoddy food,” said Choi No-seok, the vice president of the Korea Tourism Association, pointing to the massive influx of foreign travelers.
Long-term solution needed
Industry experts say that tourism can be seen from two opposing perspectives: industry and culture. If the government pushes toward developing the tourism industry, the overall image of Korean culture will deteriorate in the long-term, according to Chang Byung-kwon, a professor of hotel tourism at Howon University.
“President Park should order a new approach to advance the quality of Korean tourism, saying that 10 million tourists are enough,” an executive of the Korea Association of Travel Agents said. In this way, the working-level officers can improve the overall quality of the tourism instead of being obsessed with quantity.
In other words, a more long-term, systematic approach is needed. “Currently, management of cruise tourism, medical tourism and duty-free shops are done by different offices,” Choi said. The three sectors are managed by the Ministry of Oceans and Fisheries, the Ministry of Health and Welfare, and the Korea Customs Service, respectively. “In this type of system, any systemic tourism policy cannot be born.”
Korea is in dire need to have a central office where effective tourism policies are managed. Currently, there is only one governmental organization that governs international tourism: the International Tourism Division under the Tourism Policy Bureau of the Tourism Ministry. While the division was formed 30 years ago, it has not gone through a systemic change since Korea has begun attracting over 10 million foreign tourists annually.
Therefore, experts argue that a central office should be set up to develop a new infrastructure to make travel more satisfying in terms of quality. A relevant example to look to can be found in Japan, which launched the Japan National Tourism Organization, mainly targeting Chinese travelers, in 2008.
Chinese travelers have been one of the three major factors that sustained the Koran economy despite the global financial crisis of the late 2000s, along with Korean-made smartphones and cars. It has also become an important channel that connects Korean and Chinese markets.
However, the trend of dirt-cheap travel is weakening the overall brand image of Korea, and experts warn that something must be done as soon as possible.
BY HAN WOO-DUK, KIM HYE JUN