Duty-free sales climb despite spat

Although the Chinese government has been trying to curb the number of tourists to Korea since Seoul decided to install a U.S. missile defense system, recent government data show that Beijing’s efforts have had no impact on sales at local duty-free stores.

In fact, revenue at the nation’s duty-free stores, excluding those in airports and harbors, rose 43.5 percent year on year from 6.18 trillion won ($5.35 billion) in 2015 to 8.87 trillion won last year, the Korea Customs Service said Thursday.

“Sales at duty-free stores improved last year from the base effect coming from the outbreak of Middle East Respiratory syndrome that lowered the number of tourists visiting the country in 2015,” said a customs agency official.

The customs service said profit from tourist groups jumped 62.5 percent year on year, accounting for more than 50 percent of total sales reported by duty-free shops.

“We don’t have the specific data of sales generated by Chinese tourists but it at least appears that they didn’t have much negative impact on the duty-free market as sales have improved,” the official said.

However, according to Skyscanner, a global search engine that compares prices for flights, hotels and car rentals, the number of Chinese searching for travel to Korea rose 152 percent last year. The data released Thursday showed Seoul was the most preferred destination for Chinese after Hong Kong.

However, the government has warned that the amount of rebates duty-free stores are paying out is rapidly rising. The customs agency said the amount of rebates paid by duty-free stores jumped 71.8 percent year on year to 967.2 billion won. The rebates are paid by duty-free stores to travel agencies that bring groups of tourists to their stores. Rebates accounted for 10.9 percent of their total sales.

“We understand not only duty-free stores but also department stores, hotels and restaurants are using the rebate system as a marketing tool to attract more number of tourists at once but the rebate system will have a negative impact on weakening the country’s tourism competitiveness as fewer tourists will be satisfied due to the low quality and low prices tour packages,” said the customs agency official.

“We will monitor closely and announce how much local duty-free stores pay as rebates to have them lower the amount eventually.”

Large duty-free stores paid 20.1 percent of their sales as rebates on average and small to midsize shops paid 26.1 percent on average, suggesting smaller companies are working to attract customers.

BY KIM YOUNG-NAM [kim.youngnam@joongang.co.kr]