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 and retail agencies in the South Korean market. The outbound leisure travel market for Australia consists of around 40 per cent group travel and 60 per cent Free and Independent Travel (FIT).

Wholesalers/ Large Agents

Commission Level: 5% - 12%

• 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 for both wholesalers is around 2,000 throughout South Korea.
• Hanatour, the largest wholesale agency, has increased its own overseas offices for land operations as well as catering to outbound travel from these offices as part of its diversification strategy. These overseas offices also focus on the development of in-bound group travel to Korea and other destinations beyond their own regions. Hanatour is continuing to increase the number of its Inbound Tour Operators (ITOs) in order to streamline and reduce land operation fees. In recent years, Hanatour has been investing in expansion into the FIT market utilizing the brand ‘Hana Free’. Lately promotion of the ‘HanaFree’ branding is being scaled back in order to prevent brand dilution with a drive towards the core brand ‘Hanatour’ for FIT to leverage its brand power. Strong performance in hotel and air bookings have resulted from stabilisation of online booking engines and digital marketing strategies. Additionally, Hanatour has expanded its business to include two Hotels in Korea for the inbound market and one in Japan focused on outbound and direct hotel bookings. In 2015 diversification into Duty free stores saw the launch of SM Dutyfree in both Incheon airport and CBD locations. After a slow start and a loss in its first year of ADU20mil combined with the recent ban on group travel to Korea from China is impacting the sustainability of the duty free operation.
• Modetour is facing increasing competition particularly from Interpark in the package tour space as well Yellow Balloon and Very Good Tour in the discounted package product space as it confronts the challenge of developing and investing in new business models or maintaining the current traditional market strategy. Modetour’s presence in the FIT space still remains weaker than Hanatour and Interpark with growth predominantly across package and ticket sales.
• Large agents such as Lotte Tour, Lotte Holidays (formerly LotteJTB) and Hanjin are engaged in both retail and wholesale activities however the proportion of wholesale activities remains small.
• 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.
• Interpark 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 absence of team leader who left at the end of last year. Their activity of the expansion has significantly been reduced and the number of the booking of package has been impacted.

Retail Agents

Commission Level: 9% - 20% % for major travel agencies only

• By volume, the main retail agencies in South Korea are: Freedom Tour, Hanjin, KRT, Lotte Holidays (formerly LotteJTB), Lotte Tour, Tour2000, Very Good Tour, Yellow balloon. 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 competiveness against traditionally larger retailers.
• There are a number of active FIT agents in South Korea including Hanafree, Naeil Tour, Interpark, Blue Travel, IOS, Seygero and Webtour, who develop customised FIT packages, but as yet there is no clear dominant market leader. Currently by total volume, Naeil Tour is leading the market for FIT products and Interpark is leading for online air ticket bookings. For Australia in particular Segyero is presently the leader in FIT products on offer.
• New business trend – ITOs for the FIT market are opening branch offices in Korea. The trend extends to sales as they are also engaged in B to C direct sales which are enhanced by access these to local sales offices.  Lower cost data roaming is also impacting pre-booking of product in favour of booking when they arrive, impacting particularly traditional retail FIT agents. Many travellers are purchasing transportation passes, attraction vouchers and activities before and after arrival via online channels.
• Transportation passes, attractions and individual activity vouchers are rising particularly in ease of booking via mobile. Socuripass, myrealtrip and other specialised voucher booking websites are placing pressure on traditional travel agents to provide options for the consumer in an easy to purchase manner. Vouchers currently available include transportation, day tours, attraction and activities.

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. The ‘New ASP’ program launched in February 2016 in Korea.
• As at December 2017, there were 1,340 qualified Aussie Specialists in South Korea.

Online

Commission Level: 8% - 10%

• All major travel agencies have an online presence, however the number of direct consumer enquiries and visits to offline agents is still high.
• Interpark has a high percentage of online only bookings particularly air.
• Trend to mobile first in travel information collection though many travelers will still utilise a PC to make the actual booking.

Inbound Tour Operators

Commission Level: 5% - 10%

• 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.
• Most major ITOs operate offices in Seoul, however there are no set patterns in business relations between the Australian and Seoul offices.
• Some ITOs assume a wholesaler role for the honeymoon market, particularly in regional cities of South Korea.
• Key ITOs located in Sydney and the Gold Coast include: Blue Sky Tours,  Good Memory Tours, Hanatour Oceania, Hoju Tour (formerly Harbour City International), Honew Tours, I Tour, New Line Korea Tours, OZ Korea Travel,  Paran Travel, Royal Holiday Travel, S.S.K Travel (HIHOJoo), Travel Center, Win Hanaro Tour, Wonderful Pacific.
• Key ITOs in Seoul include:  Australia Tour, Honew Tour, I Travel, Key World, Newline Korea Tours, Oceania Tour, OTT, Paran Travel, Road Tour and Travel, Tour TTL, Wonderful Pacific.
• A new breed of FIT focused organisations including  Avela, Hanul and Travel Center are emerging as strong players in the industry working as both ITO’s, retailer and wholesalers in one.

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.
• The FIT segment accounts for approximately 50 per cent of the outbound leisure market for Australia. Most FIT consumers book accommodation and air tickets online, while a small percentage use FIT specialized agents.
• Individual activity vouchers for transportation, attraction and tourism activities is rapidly growing on the back of online booking development. This trend is leading some big players to invest on developing on-line flat form of this business.
• Recent on-going successes in returning the market to growth through 2016-2017 identified operational weakness as a consequence of the reduced number of ITO’s and guides. ITO’s are slowly adapting how to enhance operational functions particularly guides and hotels.
• Special interest travel continues to be introduced. Awareness of major events in Australia such as: Vivid Sydney, the Sydney Royal Easter Show, the Gold Coast Marathon and Melbourne Cup, have all grown in South Korea.
• Multi-cities, longer stay products, outback experiences, bush-walking and self-drive (campervan) are also continuously promoted in market. SYD/MEL/OOL, 3-city itineraries have now stabilised as key products evidence that longer stay itineraries with a higher price point, are able to work in the market. Uluru is also increasing in popularity as a result of increased marketing attention on the destination particularly with FIT agents.
• Due to gaining the popularity as travel destination, many of broadcasting companies are making programs featuring Australia and some of TV Commercials of general products have been made and aired featuring AU as well.
• 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.
• The percentage of young FIT booking tourism products after arrival is increasing through ITOs and travel agents based in Sydney such as Travel Center. Affordable data roaming is making it easier for Korean travelers to book at any time before or during their trip with a trend to book once in country rather than prior to departure.
• 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

• Luxury, campervan, bush walking travel and outback experiences including Uluru for Australia has 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 hard copies of brochures and 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, please see Tourism Australia’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.

• Chalet Travel
• Hana Tour
• Hanjin Travel (Kal Tour)
• Hi Hojoo (SSK Tour)
• Interpark Tour
• Lotte JTB
• Lotte Tour
• Mode Tour
• My Real Trip
• Naeil Tour
• Very Good Tour
• YB Tour

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.

Also see:

• 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