Characteristics and Prospects of South Korea’s Inbound Tourism Markets
Korea needs to prepare a customized strategy for each of its Asian target market in anticipation of increasing international tourist arrivals.
There needs a comprehensive mid-to-long-term analysis of trends in Korea’s inbound tourism markets
At present, there is no comprehensive long-term analysis of trends in Korea’s inbound tourism markets. It is necessary to take anticipatory measures to cope with any sudden or long-lasting changes that might happen in those markets. In this context, this research first examines patterns in global and regional tourism markets. Next it studies trends in Korea’s main inbound tourism markets. The study then closely looks at the characteristics of changes found in international tourism demand for Korea. Lastly it derives conclusions and policy recommendations from those analyses.
2. Main Findings
The Asian tourism market is clearly on an upward trajectory with the East and Southeast Asian markets growing by leaps and boundsIn Korea, tourism is one of the fast-growing economic sectors. The number of international tourists worldwide exceeded 1.1 billion in 2013. It was a result of steady growth at the average annual rate of 4 percent from 1995 to 2013. Since 2013, the figure has been growing faster by on average 4.7% per year.
For long, Europe has been the most-visited destination in the world. From 1995 till 2013, the number of international arrivals in the region increased at the average annual growth rate of 3.7 percent. This has given Europe the largest share of international arrivals among other nation. The second runner-up is Asia. The number of inbound tourists to East and Southeast Asia grew each by on average 7.6 percent and 6.8 percent a year, respectively. Owing to this trend, Europe experienced a decline in its share of international tourism market: from 56 percent in 2005 to 51 percent in 2013. Meanwhile, East and Southeast Asia enjoyed increase in their shares – each rose by 3 percent point and 4 percent point, respectively.
<Table 1> International Arrivals by Region of Origin
|No. of int’l tourist arrival||Annual growth rate|
|Region / Year||1995||2000||2005||2010||2013||1990s||2000s||2010s||’95~’13|
<Figure 1> Each Region’s Share of Total International Arrivals
According to this study, people tend to travel to culturally familiar places even it takes long to get there. For instance, Britons and Americans often choose one another’s country for their travel destinations. Drawn to cultural similarity, French are inclined to make a trip to Canada.
The study also shows that political or diplomatic conflict between countries do not hamper the flow of tourists. Oftentimes, there exists conflict of interests among nations close to borders or territorial waters. The same is true of countries in Asia. In particular, there has been relentless strife between Korea and Japan; the Philippines and China; and Japan and China. Yet, they all have welcomed visitors from each other. This is also the case with Korea and Taiwan: Many Taiwanese hold anti-Korea sentiment. The animosity was set on fire, for a referee made unfair calls against a Taiwanese player in Taekwondo competition at the 1988 Seoul Olympic Games. Though Korean pop culture has swept the country, the feeling still prevails. Nevertheless, the number of Taiwanese making a trip to Korea is increasing every year.
Korea reported 14 million international tourist arrivals in 2014, with a record high growth rate since the Seoul Olympic Games
The number of international visitors in Korea has been on the rise for the past 25 years. In 1980, the country had slightly less than one million arrivals. The number kept increasing by on average 8.2 percent a year. Finally, it surpassed 10 million in 2012 and then reached 14.2 million in 2014. In the 1980s, the average annual growth rate was as high as 12%. However, it diminished to 5.2 pecent in the 1990s and further to 4.4 percent in the 2000s. Fortunately, the fall ceased in 2010. From then till 2014, the number of international arrivals went up by on average 13 percent annually.
The Korean tourism economy has proved resilient. It has experienced a few declines in the number of international arrivals – namely, in 1996, 2001 and 2003. Each fall was, however, offset by increased flow of inbound visitors in the following year. The international tourism market suffered severely from the global financial crisis and the outbreak of H1N1 in 2009. Yet the Korean tourism sector was not as badly affected by them: The number of incoming tourists continued to increase unabated. As a result, Korea reported over 14 million inbound tourists in 2014. It was a 17 percent increase from the previous year. Not only that, it marked the highest growth rate since the 1988 Olympic Games.
<Table 2> Total Number of International Arrivals in Korea
Eight of Korea’s top ten inbound tourism markets are in either East or Southeast Asia
At the country level, China and Japan were the largest inbound tourism markets to Korea as of 2014. That represents 60 percent of total market share. However, the number of Japanese travelers has dropped drastically since 2012. Meanwhile tourists from other major Asian nations has grown at a faster rate: China at 45 percent; Taiwan at 12%; Hong Kong at 25 percent; Thailand at 16 percent; the Philippines at 10 percent; Malaysia at 21 percent; and Indonesia at 22 percent. Like this, Korea has emerged as a popular travel destination. It largely owes to the Korean wave, so-called “Han Ryu”.
<Table 3> The Number of Visitors from Korea’s Top Ten Inbound Tourism Markets
|Rank||Country||No. of int’l arrivals||Annual Growth||Rank||Country||No. of int’l arrivals||Annual Growth|
<Figure 3> Number of Visitors by Region of Origin
Visitors have different purposes of travel, but most comes for leisure, and recreation
Visitors’ trip purposes are found to vary by region. As of 2014, travelers from North America were mostly public officials. They outnumber students and businessmen. Meanwhile, visitors from Central and South America are not so much as business people as students. Unlike them, those from the Middle East are mostly businessmen. Their number surpassed that of people reporting their purposes of visits as “other.” Since 2008, less and less international visitors have traveled to Korea for business. One plausible explanation is that the global economy has not fully recovered from the 2008 crisis. Alternatively, it may be simply a result of businessmen ticking the box besides “leisure, recreation and holidays” on the disembarkation form – they often do so as they plan to spend some time in sightseeing after serving their professional purposes.
<Table 4> Inbound Tourism by Purpose of Visit
|Purpose of visit||No. of visitors(1,000)||Annual growth rate(%)|
|Leisure, recreation and holidays||4,304||6,293||10,778||6.9||14.4||10.7|
|Business and Professional||258||269||259||0.8||-0.9||0.1|
Income is the most influential determinant of tourism demand, while cost plays an insignificant role
<Table 5> Regression Analysis of Korea’s Top Five Inbound Tourism Market
|China||Japan||The U.S.||Taiwan||Hong Kong|
|GDP per capita||3.58***||1.998***||5.541***||3.044***||7.797***|
|Exchange rate for a foreign currency to won||-1.146||0.597***||0.98***||-5.99||1.283|
|SARS||Refer to the note below||-0.248**||-0.157**||0.0452||Refer to the note below|
|* p<0.10 ** p<0.05 *** p<0.01
(Note: SARS is not applicable to China and Hong Kong, for each is analyzed for the period since 2008 and 2007, respectively)
The number of international arrivals in Korea is expected to reach 20 million by 2018, while Seoul will take another two years to attain the same score
<Table 6> Trend Function of International Visitors to Korea
|Total no. of international visitors in Korea||Optimistic forecast|
|Visitors from the top five inbound tourism markets|
The number of inbound tourists in Seoul has been predicted by applying the average Seoul visit rate between 2012 and 2014. The result shows that the number would reach 12.3-13.8 million by 2016. Then, Seoul would record 20 million international tourists by 2020. Again, the city will attain those numbers a year earlier if the demand continues to grow at two digit rate.
<Figure 4> Forecast of International Visitors in Korea and Seoul from Korea’s Top Five Inbound Tourism Markets
The Chinese market is forecasted to grow at the most rapid rate. Meanwhile, the number of Japanese visiting the country would continue to rise, maintaining its title as Korea’s second biggest inbound tourism market. ]
The forecast also shows that there would be more visitors from Taiwan than America. In the meantime, the number of visitors from Hong Kong would go up by on average 6.9~26 percent every year. It may well emerge as the second fastest-growing market behind China. Yet, it is premature to make such a conclusion, for the margin of forecast is large.
<Table 7> Forecast of International Visitors in Korea
|2016||2018||2020||Annual growth rate|
|No. of int’l visitors in Korea||16,353-16,962||18,804-20,145||21,623-23,926||9.0-7.2|
|No. of int’l visitors in Seoul||13,289- 13,785||15,281-16,371||17,572-19,444||9.0-7.2|
|Total no. of visitors from Korea’s top five inbound tourism markets||12,293||15,531||19,752||12.6|
3. Conclusions and Policy Recommendations
The following conclusions and policy recommendations have been derived from the analysis of trends in Korea’s inbound tourism markets.
Entice visitors from a wider range of countries besides China and Japan
International visitors travel to Korea for different reasons: business, education, government work, and others. They often engage in leisure activities while serving those purposes. In fact, a recent coinage “bleisure (business combined with leisure)” reflects this trend. Korea should map out a plan to deal with this new change. Other countries already have taken actions. For instance, Southeast Asian countries such as Thailand and Singapore have launched marketing programs in accordance with the rising popularity of the so-called “MICE (meeting, incentives, convention, and events) trip.” Another example is New Zealand. It has long been investing its resources in promoting tourism to international visitors, whose main purpose of visit is to study. Like these countries, Korea ought to come up with a strategy to attract and satisfy international visitors with various purposes of trip. Certainly, Seoul should participate in the endeavor.
In the past, the Korean tourism economy heavily depended on the Japanese market. Now, it does so on the Chinese market. Consequently, the economy always has been dependent to the conditions of those two markets. In order to overcome this problem, Korea must put more efforts into attracting a wider range of international visitors besides Chinese and Japanese. This asks for a tailored strategy for each target group. This, in turn, requires a careful study of historical, cultural, political and economic backgrounds of other countries. For example, China and Taiwan both belong to the Greater China region. Yet they use different languages: The former uses traditional Chinese while the latter uses the simplified version. On top of this, Taiwanese culture is considerably different from the mainland. It is largely due to their long exposure to Japanese media contents. Given that, a strategy found effective with China may not work with Taiwan. Another example is ASEAN member states. Though Southeast Asian nations can be grouped as one, they all have different political systems, economies, and cultures. Thus, a customized strategy must be devised for each nation.
There have been some changes in the characteristics of tourism demand in a number of countries. In the case of Japan, it is one of the most rapidly aging countries worldwide. A recent study has estimated that people older than 60 would represent 60 percent of total population of Japanese tourists. Meanwhile, less and less Japanese in their 20s would travel overseas. The number is forecasted to be lower than in 2000. Korea Tourism Organization recently has released a report on the marketing survey of Japanese tourists. It shows that they consider cost the foremost factor in deciding where to travel. In particular, young generations in 10s and 20s prioritize cost above all. By contrast, older groups regard other factors like convenience equally important. Under such circumstances, Korea should consider shifting the focus of its current tourism marketing strategy from affordability to quality experience.
Continue to target the Chinese and Taiwanese markets, while implementing a new strategy for the Japanese market
China has established itself as the biggest inbound tourism market to Korea. Its GDP per capita is expected to continue to rise. Its tourism demand for Korea is also likely to maintain high for a while. Therefore, Korea should keep its eyes on this market. Taiwan is another market that requires attention.
Korea had once severed its diplomatic relation with Taiwan. Consequently, there had been a very little inflow of visitors from Taiwan. However, Taiwanese tourism demand for Korea picked up in 2000. Since then, it has been growing steadily. Nevertheless, Taiwanese still much prefer traveling to Japan and Hong Kong. Korea ought to find a way to attract Taiwanese tourists. A specially tailored marketing strategy is to be implemented.
Then, Korea may be able to welcome at least one million Taiwanese visitors in a short time.
Many experts blame the exchange rate for decrease in the number of Japanese tourists. Yet, it doesn’t explain the increased flow of Japanese tourists to other countries. A new strategy needs to be planned out for the Japanese market.
Finally, the number of tourists from Hong Kong has been growing fast since mid-2000. It would rise further in a short time if Korea pours more efforts into enticing them.