What a difference a year makes. South Korea’s travel market enters 2020 with a sense of anticipation as well as trepidation as to what the first year of the new decade will bring the industry.
Consider the pivotal moments that happened in travel in 2019.
Hyundai rescues Asiana Airlines; JejuAir to take majority stake in Eaststar
As the year ticked to a close and everyone was wondering if
Asiana Airlines would go under, in came Hyundai Development with its
last-minute rescue bid. The consortium has said it will inject $1.7b into the
debt-ridden carrier – no one knows though if the rescue efforts will work
because make no mistake, South Korea’s airline market is one of the most
competitive in the region.
It already has the
highest LCC penetration in North Asia. From 2009 to 2018, its share of seat
capacity grew from 23% to 53% (domestic) and from 1% to 35% (international),
according to CAPA in this report.
With three more low cost airlines set to enter the fray, consolidation can be expected and it happened. In December, Jeju Air announced it would take over a 51.17% stake in Eastar Jet for 69.5 billion won (US$60 million). “The acquisition is aimed at realizing economies of scale, gaining a bigger market share and strengthening the company’s competitiveness in global markets,” a company spokeswoman said.
At WiT Seoul 2019, Seok Joo Lee, president of Jeju Air, said his airline would focus on three key words to face the challenges ahead – one, FIT and digital transformation, two, China and new competitors and three, fleet and network.
IMM Private Equity becomes biggest shareholder in HanaTour
Again, as the year drew to a close (December 24), came the shocking news that Seoul-based private equity house IMM Private Equity will become the largest shareholder of HanaTour Service, in a capital increase by South Korea’s No 1 travel agency.
According to HanaTour, IMM PE will buy HanaTour’s newly issued 2.3 million common shares, or 16.7% of the outstanding shares, for 134.7 billion won ($115.8 million). HanaTour Chairman Park Sang-hwan, currently the biggest shareholder, with 7.83% voting rights, had alluded to the changes to come at his company at WiT Seoul 2019.
At the event, he shared internal data that showed a swing from package demand to FIT-only in the last six years – there was a 29% decrease in package demand and a corresponding 27% increase in FIT-only. The company’s sales is now split 49% FIT-only, 9% FIT +PKG and 42% Package.
Acknowledging the intense competition between OTAs and startups in the FIT market, he said Hanatour required “a new business model that could satisfy customers’ various needs” and “on demand” products.
Yanolja acquires DailyHotel
Yanoja, South Korea’s leading accommodation booking site operator, which took in a US$180m investment round led by Booking Holdings in June 2019, announced a few months later that it would acquire Dailyhotel, the country’s largest booking platform for luxury hotels and restaurants. The price was not disclosed.
Dailyhotel, launched in 2013, is an online and mobile reservation site for about 400,000 hotels in 210 countries including most major hotels in Korea such as Shilla hotel, as well as 4,700 pensions and 1,000 fine-dining restaurants.
Yanolja said the acquisition was part of efforts to further diversify its business portfolio to transform into a comprehensive leisure platform provider.
The deal is set to further disrupt South Korea’s accommodation sector. At WiT Seoul 2019, Jong Yoon Kim, CEO of Online Business and Corporate Strategy, Yanolja spoke of the company’s transformation which started two and a half years ago, and its expansion plan which included an investment into Zen Rooms in South-east Asia.
Beyond these pivotal moments, South Korea’s travel market has proved its resilience in a challenging year. Tensions with Japan over wartime history and trade policy led to steep drops in travel to one of its top destinations (60% decrease in September 2019), which must have hurt companies reliant on South Korea-Japan traffic.
However, the overall outbound market remained strong with numbers expected to reach 28m, around the same level as the 28.7m recorded in 2018 – this means more than half of the population of South Korea travelled abroad. Noteworthy are increases in travel to Vietnam (24% in 2019) and to Taiwan (38.6%), possibly beneficiaries of the shift from Japan.
Inbound has also recovered to 2016 levels (17.2m), which was the year when political issues between South Korea and China led to a dramatic 18% drop in inbound numbers to 13.3m in 2017. As of November 2019, inbound numbers stood at slightly over 16m and projections are that it will slightly surpass the 2016 number.
“These are certainly interesting times for South Korea,” said Yeoh Siew Hoon, founder, WiT. “At our event last year, there was a palpable feeling that the market is at inflexion point and the speakers we gathered, from HanaTour to Jeju Air, from Yanolja to MyRealTrip, had one common message – change or wither.
“This is a market with 100% smartphone penetration, and it cannot help but change everything – chats, payments, e-commerce. Personally, I think South Korea is one of the most exciting markets in Asia. I find its blend of ultra-modern and super-tradition intriguing, reflected in its entertainment and pop culture. The startups you meet are both innovative and aggressive.
“It’s a market that challenges you to think, and not to just accept what you see, but to question and to really get to know the nuances. This, we have learnt after four years of organizing WiT Seoul – it’s a market that takes time to get to know and it’s well worth the investment.”
Added Min Yoon, co-founder of WiT Seoul, and CEO of Tidesquare, “We’re excited about the fifth WiT Seoul. It’s been a challenging 2019 but challenges bring with them many opportunities and innovation always happens at the edge. I feel the South Korean market is at the edge of something new and we will unearth the opportunities that await those who are ready to adapt for the new decade.”
With its theme of “A Bird’s Eye View: 2020 and Beyond”, WiT Seoul 2020, set for April 22 and 23 at the Millennium Hilton Seoul, will examine these pivotal moments, and more, to debate and discuss their implications on the evolution of travel in the country. Last year, more than 350 delegates attended WiT Seoul.
Lead image: Getty Images
