Korea Tourism Industry Hit Hard by China's New Travel Law

A new Chinese law that bans certain travel-agency pricing practices has devastated South Korean travel businesses that have come to rely heavily on the recent influx of Chinese tourists.

China’s central government recently passed law banning certain practices in which Korean travel agencies had engaged to lure large numbers of Chinese tourists with cheap package tours. Among the banned practices are tours that include shopping stops, extra charges for various services, and asking for tips as a routine part of tours.

Many Korean tour companies had been using these practices to make up for the lack of profit margins on the bargain package tours used to attract customers. The new law is designed to discourage what some see as a deceptive practice. Many Chinese tourists buy the packages only to find themselves being herded into shopping stops and other establishments that pay commissions to tour operators.

The new law has forced Korean travel agencies to raise pricing on package tours by 30-40%. That has led to a plunge in the number of Chinese tourists visiting Korea in October, the first month after the new law took effect.

Hana Tour, Korea’s biggest travel agency, said Thursday that the number of Chinese tourist bookings plunged 60% from 10,000 in September to 4,000 in October. Mode Tour, another leading tour operator, saw Chinese bookings fall from 13,000 in September to just 5,000 in October.

Despite the influx due to China’s national Autumn holiday week in early October, the number of Chinese tourists dropped in October to less than half the level of September.

“There have been almost no Chinese customers since the national holiday,” one travel agent told Chosun Ilbo. “It feels even more serious because we had so many Chinese customers until September.”

Travel agencies and tour operators aren’t the only ones hurt by the new law. Department stores and duty free shops are now facing a bleak holiday season without the large influx of Chinese who had taken the edge off Korea’s recession.

“Business is expected to suffer a considerable drop if the number of Chinese tourists plummets,” said a department store executive. “We’ll have to think of a new promotional strategy.”