Working in Market - South Korea
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 book a-la-carte tour products such as flight, accommodation, day tours and attraction tickets separately is rapidly on the rise while the consumer’s demand of purchasing pre-arranged itinerary tours is likely to dwindle.
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. In pre-Covid, out of 50 million population in South Korea, the number of overseas trips that Koreans took was 29 million, recording one of the highest ratio in terms of overseas travel per capita. Due to the advanced online infrastructure in South Korea, most of all 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 - Hanatour, Modetour, Very Good Tour, YB Tour, Lotte Tour, Sejoong Tour and RedCap Tour. Apart from two agencies of 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. The total number of franchisees from both wholesalers is around 1,000 throughout South Korea although the number of their franchises has sharply reduced during the prolonged pandemic.
- 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 players of retail travel agencies of Yellow Balloon and Very Good Tour. Modetour’s presence in the FIT space still remains weaker than Interpark and newly risen OTAs such as My Real Trip, Triple and Tide Square with growth predominantly across group package tours and ticket sales.
- 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.
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 and Lotte Holidays (formerly LotteJTB). Amongst the agents, Very Good Tour and Yellow balloon are growing faster than other agencies handling more volume each year. A combination or consumer confidence and marketing investment is driving a change. As their reputation, volumes and buying power improves, so too does their competitiveness against traditionally larger retailers.
- As at April 2021, there are 830 qualified Aussie Specialists in South Korea.
- 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 850 qualified ASP in Korea nationwide as of November 2021.
ONLINE AGENTS & ONLINE PLATFORMS
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 to purchase tour products for flight, accommodation and tours via mobile far exceeds than via PC.
- 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. Expansion to package tours is going through difficult time due to their main business focusing on FIT segment. During the COVID-19, Yanolja merged Interpark Tour.
- Tide Square, one of the fastest growing travel agencies also has built a solid ground of corporate and leisure travelers through the strength of “PRIVIA Travel” operated in close partnership with Hyundai Card, as well as “Tourvis”, a leading corporate business travel and corporate membership shopping mall the services the SK Group. The agency continues to expand its business by acquiring or opening flight and accommodation booking apps such as Playwings and AllStay.
- In the meantime, the importance and influence of non-traditional travel agencies such as My Real Trip, Yanolja and Triple is getting bigger. My Real Trip offers an online platform to connect between 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 flight and accommodation, contributing to a significant increase in the revenue.
- Triple, 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 gives through travel contents, recommendable itineraries, hotels and restaurants for the potential travellers. With its user-friendly IT technology and in-depth contents, Triple already reached 1 million downloads in Korea. Yanolja, the number 1 player in terms of accommodation bookings for domestic travels gained its firm position during the era of COVID-19, became strategic investor of Triple in 2020 and Interpark in 2021.
Commission Level: 5% - 10%
- There are a number of active FIT agents in South Korea including Hi Hojoo and Mumum Tour who are dedicated for Australia. Other FIT players of Naeil Tour, Seygero, Blue Travel, and N Style who develop customized FIT tours need to be further nurtured.
HIGH VALUE TRAVEL AGENTS
Commission Level: 10%+
- There are a few number of KDPs prioritizing HVTs (High Value Travellers). Among them, both of Kal Pak, a subsidiary of Korean Air and Chalet Travel are members of Virtuoso Travel. They are keen to develop unique and bespoke tour products according to their customers’ needs and wants. Those customers are well advanced travellers so they request luxury accommodation, private tours and often Korean speaking tour guides.
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 by undercut the margin 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 the designated shopping stores and force them unnecessary shopping to offset their profit. This trend will be faded away with growing FITs. 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
- 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 the popularity as travel destination, many of broadcasting companies are making programs featuring Australia and some of TV programs of general products have been made and aired featuring Australia as well.
- TV Home shopping as a purchasing tool continues to have a place in the market however this has proven challenging recently as saturation of travel related sales occurs across channels.
Planning and purchasing travel
- 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. The booking window is expected to be shorter as uncertainty continues after the Covid-19. Word-of-mouth and online peer reviews are becoming increasingly influential in South Korea.
- 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'.
Key Distribution Partners
Tourism Australia is a partnership marketing organisation and works closely with airlines and travel companies on cooperative marketing to drive conversion in all priority markets.
These targeted travel companies, including wholesalers, retail and online travel agencies, form Tourism Australia’s Key Distribution Partner (KDP) program with the intention to increase total booking value of visitors to Australia.
Each KDP is selected based on the fit with Tourism Australia’s market strategy, a shared target customer profile, shared funding of marketing activity, a commitment to training their frontline sales team through the Aussie Specialist Program and a commitment to selling quality Australian product and experiences.
Below are a selection of Key Distribution Partners that Tourism Australia is partnering with from South Korea.
WHERE TO FIND MORE INFORMATION
Tourism Australia’s activities in South Korea are managed from its Seoul office. For more information visit Tourism Australia’s corporate website at www.tourism.australia.com.
Australian State and Territory Tourism Organisations operating in South Korea include: Destination NSW, Tourism and Events Queensland and Tourism Western Australia.
- An overview on the travel distribution system
- A quick reference on key booking and travel periods for markets
- Republic of Korea (South Korea) Country Brief published by the Department of Foreign Affairs and Trade at www.dfat.gov.au/geo
- For additional statistical reports refer to the ABS and TRA websites, www.abs.gov.au and www.tra.gov.au