Working in Market - South Korea

Distribution system

The South Korean travel distribution system is complex, with consumers using a combination of traditional and online channels to plan and book travel. There is no formal distinction between wholesalers, retail agencies and OTAs in the South Korean market. The outbound leisure travel market for Australia consists of roughly 30 per cent group travel and 70 per cent Free and Independent Travel (FIT). In particular, the number of Koreans who separately book products such as flight, accommodation, day tours and attraction tickets is on the rise. Consumer demand of purchasing pre-arranged itinerary tours may continue to drop.

Since the overseas travel restriction was lifted in 1989, the size of Korea’s outbound travel market saw a double-digit growth almost every year till 2019, proving that Koreans are avid and resilient travellers with a significant potential of the market. Pre-pandemic, South Korea had one of the highest ratios in terms of overseas travel per capita.

Due to the advanced online infrastructure in South Korea, most Korean travel agencies stopped producing printed brochures earlier than other markets and have been distributing their products via online, enabling them to adopt and amend the products easily with dynamic pricing.        

In South Korea, there are seven travel agencies who are listed on KOSPI (Korea Stock Price Index) or KOSDAQ (Korea Securities Dealers Automated Quotation) - Hanatour, MODETOUR, Very Good Tour, YB Tour, Lotte Tour, Sejoong Tour and RedCap Tour. Apart from two agencies -  Sejoong Tour and RedCap Tour - whose business models are mainly for corporate/business trips and inbound rent-a-car business, the main business line for the rest of five agencies is outbound leisure travels.

Wholesalers / large agents

Commission level: 10% - 20% (or net price)

• Hanatour and MODETOUR are the largest wholesalers distributing their own products to two types of retail agents – general agents and franchisees. Since the pandemic, the remaining number of franchisees from both wholesalers is approximately 1000 throughout South Korea.
• Hanatour, the largest wholesale agency who once continued to increase “Hanatour” branded franchised retail agencies, is now switching its strategy to go directly for consumers. The agency also closed down many of their branch offices handling ground operations globally to make the organisation slimmer. In recent years, Hanatour has been investing in expansion more into the FIT market by developing its online booking system and infrastructure, aiming to transform its business model from wholesale to retail and receive bookings directly from consumers to reduce the commission fee given to its retail agencies nationwide. 
• MODETOUR, one of the major agencies with the longest outbound travel history, is facing increasing competition particularly from other rising big retail agency players Yellow Balloon and Very Good Tour.
• Large retail agents such as Lotte Tour, Lotte Holidays (formerly Lotte JTB) and Hanjin (a.k.a. KAL Tour) are engaged in both retail and wholesale activities, however the proportion of wholesale activities remains small.

Retail agents

Commission level: 9% - 20%

• Very Good Tour and Yellow Balloon continue to show significant success in growing their businesses in the retail agent space. Leveraging of TVC’s and celebrity marketing have aided in improving awareness and brand image in these businesses. As volumes have increased and more attention is placed on consumer experience and feedback, the perceived quality of the product sold is also increasing.
• By volume, the main retail agencies in South Korea are: Very Good Tour, Yellow Balloon, Hanjin Travel (Kal Tour), Lotte Tour, Kyowon Tour (formerly known as KRT Tour), Online Tour and Doctor Tour.
• There are several active FIT retail agents and retail agents prioritising HYTs (High Yield Travellers).

Online

Commission level: 5% - 10%

• All major travel agencies have an online presence so the number of direct consumer enquiries and visits to offline agents is limited. The volume of purchasing tour products for flight, accommodation and tours via mobile has increased.
• Among OTAs, Interpark Tour, whose mother company is Interpark, one of the largest online shopping malls in Korea, has solidified its position in the market reporting rapid growth in FIT travel, hotel and air ticket bookings online. During the pandemic, Yanolja merged with Interpark Tour.
• Tide Square, one of the fastest growing travel agencies also has built a solid ground of corporate and leisure travellers through the strength of “PRIVIA Travel”, mainly offering travel services for Hyundai cardholders, as well as “Tourvis”, serving a corporate business travel management for the SK Group.
• The importance and influence of non-traditional travel agencies such as My Real Trip, Yanolja and Triple is increasing. My Real Trip offers an online platform to connect travellers and sellers. ITOs and attraction companies around the globe can easily feature their products of their admission tickets and day tours. At the same time, travellers can purchase those products and leave their reviews to earn more points or receive added values. My Real Trip expanded its business allowing consumers to book flights and accommodation, contributing to a significant increase in the revenue.  
• Triple, merged with Interpark and Yanolja, on the other hand, operate a mobile app, providing realistic and interesting reviews and recommendations from the users. When selecting a travel destination, the app provides travel inspiration, recommended itineraries, hotels and restaurants for potential travellers.

Aussie Specialists

• The Aussie Specialist Program (ASP) is the primary platform for Tourism Australia to train and develop front line travel sellers to best sell Australia.
• There are over 1400 qualified Aussie Specialists in South Korea. This includes 10 ‘Premier Aussie Specialists’, recognised with Premier status for their extensive knowledge of the destination, commitment to selling Australia and ongoing learning via the Aussie Specialist Program.

Inbound Tour Operators

Commission level: ± 10% or net rate

Inbound Tour Operators (ITOs) provide a vital link between Australian product and South Korean group travel agents with about one third of the business to Australia handled through ITOs. Due to the fierce competition among ITOs, they create quite inexpensive tours and often offer minus-profit tour products to the retail agents to receive group package customers. Then, when touring with the customers they bring them to designated shopping stores to augment revenue. This trend will may fade away with the growing FIT markets. Yet, “unwanted shopping” has been a hurdle to increase the number of repeat travellers. In addition, the fact that most of the shopping stores contracted with Korean ITOs are located in Sydney was the reason why Korean ITOs are more interested in distributing Sydney focused tour products. 

Most major ITOs operate offices in Seoul, however there are no set patterns in business relations between the Australian and Seoul offices. Since most of Korea ITOs are based in three States of New South Wales, Victoria and Queensland considering the travel demand, it is needed to nurture more ITOs for other regions so more diversified tour products can be explored.

Some ITOs assume a wholesaler role for the honeymoon market, particularly in regional cities of South Korea.

Key ITOs located in Australia include:

• Sydney based ITOs: HT Hoju Pty Ltd (previously Hana Tour Oceania), New Line Korea Tours, Hoju Pacific Tours, S.S.K Travel (a.k.a. HI Hojoo), Zigzag Tour, Travel Center and Honew Tours
• Melbourne based ITOs: My Way Travel, Joy Tour and Chaeum Tour
• Queensland based ITOs: One Awesome Holiday, OZ Gekko and dTour

Key ITO branches in Seoul include: Newline Korea Tours, Hoju Pacific Tours and Honew Tour.

Trends

Distribution

• The structure and function of distribution channels in this market is complex and changes rapidly. Consumers tend to use a combination of traditional distribution partners and online options to research and book travel.
• Due to gaining popularity as travel destination, many broadcasting companies are making programs featuring Australia and some TV programs relating to  general products have been  aired featuring Australia as well.

Planning and purchasing travel

• The total trip spend on leisure travel to Australia by South Koreans was AUD$1.1 billion in 2023, growing by 323% compared to 2022, while the average trip spend was AUD$3,214, dropping by 5% compared to 2022 (Source: IVS 2023).
  
• The lack of diversified products in the group market drives a consumer focus on price. This is the differentiating factor in the group travel segment rather than product inclusions. Group tour prices are also affected by high airfares in peak season. During peak season in Korea, longer itineraries and higher priced packages are incentivised sales options for leading travel agencies.
• Consumers prefer Korean language information and brochures. However, younger South Korean consumers are slightly more comfortable using English language websites for research and bookings.
• Airlines use sales promotions to drive consumers to book airfares and travel packages online. Booking lead times are comparatively shorter for shorter itineraries (6 days), approximately two to three weeks prior to departure and longer for longer itineraries (more than 8 days), more than a month prior to departure. Word-of-mouth and online peer reviews are becoming increasingly influential in South Korea.
  

Special interest

• Special interest travel continues to be introduced. Awareness of major events have all grown in South Korea.
• Luxury, campervan, bush walking travel, golf, and outback experiences have been strongly exposed into the market as niche products and new destinations. These concepts are currently being delivered by FIT and specialty agents.

Planning a visit to market

Top tips for sales calls

• The South Korean travel trade generally prefer visual materials as well as collateral in Korean language.
• It is helpful to have a translator on sales calls for more effective communication.
• The South Korean travel trade value punctuality and it is a good idea to reconfirm your meeting in advance.
• Bring product information, promotional ideas and specially discounted rates.
• South Koreans value personal relationships. Persistent visits and contact can assist in this process.
• Learning and using simple Korean words on sales calls can be a good icebreaker during meetings.
• The best time for sales calls is March to April and mid-October to November.
• The key market centres to visit are Seoul, followed by Busan and Daegu.
  
• For more general information on sales calls and planning a visit to market, you can refer to ATEC’s Tourism Export Toolkit.