Strong Currency Chills Inbound Market

The following is the first in three-part articles on the troubled Korean tourism industry. _ ED

By Kim Rahn
Staff Reporter

Korea seems to be losing its charm as a tourist destination as the strong currency hits the inbound travel market hard. For the past five years, the won has gained by more than 40 percent _ one of the highest in the world.

Riding high on the strong won, a record high 14 million Koreans are expected to go overseas this year but the 2007 target of attracting 7 million inbound travelers may not be realized. Korea ranks eighth in the world in the number of outbound travelers after Germany, the United Kingdom, the United States, China, France, Japan and Spain.

Korean outbound travelers have spent $8.4 billion more than foreign inbound tourists last year. The gap is expected to widen this year, according to the Korea Tourism Organization (KTO). Korea is one of the most expensive cities for global trotters. The recent strong won has kept many foreign tourists away from Korea and is encouraging locals to go overseas, especially to Japan.

Lodging

Seoul's prices for accommodations are one of the highest in the world.

According to the 2007 Corporate Travel Index by Business Travel News, an American businessman needs to pay $396 to stay in Seoul for one day including hotel fees, food and other expenses such as taxi fares.

The figure is the eighth highest among the world's 100 cities excluding American cities _ Moscow topped the ranking, followed by London and Paris. Seoul even surpassed Tokyo, which ranked 25th.

Expenses may be lower for ordinary tourists, who neither need to stay at a five-star hotel nor eat at fancy restaurants for business entertaining. Nevertheless, the cost for food and shopping and other tourist activities are not particularly impressive.

The high cost is mainly due to lodging, which makes up the largest portion of travel costs.

At Seoul's COEX InterContinental the average one-night rate was 336,797 won in 2005, according to the Federation of Korean Industries. The rates of similar quality hotels in Asia were 259,938 won for the Shangri-La in Hong Kong; 157,338 won for the InterContinental in Singapore; 146,592 won for the Shangri-La in China; and 304,559 won for the Akasaka Prince in Japan.

The rate has become even higher since the government abolished a system of cutting value added tax on hotel rooms for foreigners in 2004. The abolishment resulted in about a 10 percent rise in hotel prices.

The government re-adopted the tax cut in July.

Due to high hotel-room rates, some travel agencies accommodate tourists at cheap, low-end motels outside of Seoul. However, efforts to reduce travel costs have drawn complaints from many inbound tourists for substandard services.

``I don't usually stay at hotels as I know they are pricey. Tourist inns, or motels are reasonable although not all inns are clean. Some blankets and pillows are not actually cleaned before new guests guest arrive,'' said a Filipino in Korea, who identified himself as Alfonso.

To solve the problem, KTO has developed a medium- and low-priced hotel chain brand named Benikea, from ``Best Night in Korea.''

It was designed to provide economic rates and quality services and five hotels have joined. But it may take time for Benikea to get recognition among tourists.

Exchange rate

Travel expenses in Korea have become even higher due to the won's rise against foreign currency, especially against the yen.

The won-yen exchange rate has fallen to less than 750 won per 100 yen, the lowest in about 10 years since the 1997 financial crisis in Asia.

As Japanese travelers make up about 40 percent of total visitors to Korea, the strong won has significantly influenced the Korean tourism market.

Lotte Hotel in central Seoul, the most popular hotel among Japanese, has seen a reduction of guests by 0.8-15 percent over the past two and half years.

Korean tourists to Japan are expected to approach 2.4 million this year from 1.7 million in 2005, according to the Japan National Tourism Organization.

Koreans can shop at lower prices in Japan than in Seoul, and shops at major shopping areas such as Roppongi Hills have prepared Korean-language information leaflets.

Golfers who used to head to Southeast Asia are now heading to Japan.

It costs about 300,000 won to play one round of golf in Korea, and a two-day golf trip to Jeju Island, including airfare and lodging, costs some 450,000 won.

However, if you pay an additional 100,000 won, you can play golf in Japan _ a three-day golf trip to Kagoshima in Japan is priced at 549,000 won by Hana Tour. Korean travelers are engrossed in what is called ``Buy Japan'' shopping thanks to the cheaper yen. This is a reverse trend prevalent a few years ago.

The won's strength against the dollar and the yen has led to not only a reduction in the number of visitors but also to the amount of money tourists spend here. In 2000, a foreign traveler spent an average $1,279, but it dropped to $938 in 2005. On the other hand, the money a Korean traveler spent overseas increased from $1,120 in 2000 to $1,185 in 2005, according to the Korea Culture and Tourism Institute.

``Increasing the number of visitors is important, but inviting high-end visitors is more important,'' Cho Minho, a professor at Hanyang University's tourism division, said.

``It is impossible to forcibly cut hotel rates or other fees. Rather, Korea should develop a varied range of tourist programs, from low-cost ones for backpackers to luxurious ones for high-end customers,'' he said.

rahnita@koreatimes.co.kr