By Jenna Gibson
It’s official – new numbers from March confirm that China’s THAAD retaliation has significantly cut into South Korea’s tourism industry.
According to new data released today by the Korea Tourism Organization, the number of Chinese tourists arriving in South Korea fell 40 percent year-on-year in March 2017.
Only 360,782 Chinese visitors came to South Korea in March, down from 601,671 in March last year.
Considering that China’s alleged travel ban only took effect on March 15, about halfway through the month, it’s possible that April’s drop could be even more dire.
South Korea’s tourism industry is heavily reliant on Chinese visitors – in 2016, they made up 47 percent of all tourist arrivals and 70 percent of sales at Korean duty free shops.
According to a previous KEI article, “Chinese tourists spent an average of $2,391 per person while visiting Korea – meaning the 8 million Chinese tourists who visited Korea in 2016 brought nearly $20 billion into the local economy.” So, if the 40 percent cut in visitors results in a corresponding drop in revenue, the Korean tourism industry could lose up to $7.7 billion as a direct result of China’s THAAD retaliation.
There is a silver lining in the March tourism data. Despite this massive 40 percent drop in visitors from China, the total number of people entering South Korea in March was down only 11.2 percent over March 2016. This is thanks in large part to a 22 percent jump in visitors from Japan, the second-largest group of tourists in Korea after China.
Other countries such as Taiwan, Myanmar, Vietnam and Mongolia also showed significant increases. This may be a good sign for the Korean government, which is heavily targeting Southeast Asia and the Middle East to diversify the industry and decrease their reliance on tourists from China.
The Ministry of Culture, Sports and Tourism is reportedly focusing more on advertising in Southeast Asia and Japan, and Seoul has started posting signs at major tourist destinations in Bahasa Indonesia, Malaysian, Thai and Vietnamese.
In addition, the KTO has been increasing their focus on tourists from Muslim-majority countries, helping local restaurants get halal accreditation and even hosting a Halal Restaurant Week at the end of last year to highlight Korean food options for Muslim visitors.
Meanwhile, just after the ban took effect, the Korean Ministry of Trade, Industry and Energy promised to provide 400 billion ($349 million) to support businesses affected by the THAAD retaliation, including those in the tourism industry.
This is not the first crisis that the Korean tourism agency has dealt with in recent years. During the peak of the Middle East Respiratory Syndrome (MERS) outbreak in July 2015, total tourism arrivals were down 53.3 percent over the year before, including a 63.1 percent drop in arrivals from China. Later that year, the Korea Culture and Tourism Institute estimated that MERS cost the tourist industry 3.4 trillion won ($3 billion) in lost revenue. The fact that the tourism industry was able to bounce back from that significantly greater drop bodes well for its ability to deal with this crisis as well.
While it remains to be seen how deep this THAAD spat will cut the Korean tourism industry over time, it is clear from these new numbers that the Chinese retaliation should not be taken lightly. As the THAAD system continues to go through the deployment process, Korea will have to keep an eye on the immediate as well as secondary effects of China’s policies.
Jenna Gibson is the Director of Communications at the Korea Economic Institute of America. The views expressed here are the author’s alone.
Graphic by Jenna Gibson. Photo from Tom Page’s photostream on flickr Creative Commons.