Shares of HanaTour, Mode Tour plunging despite peak travel season

Chilly Korea-Japan relations, Hungary boat crash hurt tour agencies

By Nam Hyun-woo

Shares of HanaTour, Mode Tour and other domestic tour agencies are showing no sign of a rebound as many consumers boycott trips to Japan, a popular summer holiday destination, and stay home instead, according to industry analysts Sunday.

They also attributed the prolonged downturn to weakened consumer sentiment for package tours after a fatal boat accident in Hungary in May, which raised questions about the quality of programs provided by travel agencies.

According to the Korea Exchange, the share price of HanaTour had declined by 43.54 percent to 43,700 won, Friday, from 77,400 won, March 20. Its rival Mode Tour also suffered a 32 percent drop to 16,900 won from 24,850 during the same period.

Smaller tour agencies showed a similar downward trend, with Yellow Balloon Tour and Very Good Tour shedding 37 percent and 24.6 percent, respectively.

Since the third quarter of last year, domestic tour agencies have been reeling from a decline in the number of tourists going Japan, which is their No. 1 destination in terms of sales.

The agencies pinned high hopes on this year's summer vacation season, but a growing number of customers are cancelling trips amid the rising anti-Japan sentiment in Korea.

Domestic consumers have been staging boycotts of Japanese products after Tokyo implemented export restrictions on core materials needed to make semiconductors, July 4, in an apparent retaliation for last year's Supreme Court rulings here against Japanese firms over compensation for forced wartime labor.

According to sources, the number of customers that booked trips to Japan with HanaTour since July 8 averaged 500 a day, less than half of the 1,100 before. The number of tourists booking Japan trips via Modetour and Yellow Balloon this month also declined by 70 percent from a year earlier.

This is hurting not only their sales but also investor sentiment, analysts said.

“The market had expected a recovery in the number of Japan-bound tourists to lead a rebound in HanaTour's total outbound tourists during the summer vacation season,” DB Financial Investment analyst Hwang Hyun-joon said. “However, the recovery will likely be delayed due to Japan's export restrictions against Korea.” Hwang cut his price target on HanaTour to 60,000 won from 90,000 won.

Domestic consumers' negative sentiment towards agencies' package tour programs is another factor dragging their outlook down, industry officials said.

Package tour programs have come under fire for their tight schedules and questionable quality, after a boat carrying 33 Koreans on a package tour was involved in a collision with a larger vessel and sank in the Danube on May 29. Seven were rescued, 24 were confirmed dead and two remain missing.

“Trips to Japan account for nearly 30 percent of sales of major tour agencies in Korea,” an industry official said. “The ongoing spat between Korea and Japan is dealing another heavy blow to domestic consumers' already aggravated sentiment towards package tours. It seems inevitable for travel agencies to suffer difficulties for a while.”