IVIS Country Analysis – South Korea

SOUTH KOREA

617,573 Arrivals in the United States

Loss of 21,124 over 2002, -3.3%

45.4% of all South Korean Long-Haul Travel

-4.9% over 2002

SUMMARY

Total outbound travel from South Korea declined by 5.6 percent in 2003 over 2002. Still, South Korean outbound travel generated nearly 6.8 million arrivals to destinations worldwide. The decline in outbound travel was as a result of the outbreak of Severe Acute Respiratory Syndrome (SARS) in the region. Nearly all intraregional short-haul travel in Asia was shut down for more than a month in 2003 due to SARS. South Korean long-haul travel in 2003 actually grew 1.7 percent over 2002. Arrivals to the United States declined 3.3 percent year-over-year. Because South Korean arrivals to the U.S. declined as long-haul travel increased, the U.S. market share (MSI) also declined 4.9 percent in 2003 over 2002. Still, the U.S. retained nearly one half (45.4%) of the South Korean long-haul market in 2003.

After robust growth in 2002, South Korea's economy became sluggish in 2003. Real GDP increased just 2.5 percent in 2003 year-over-year. Real private consumption declined 1.4 percent during the same time period. Inflation was not a problem as consumer prices increased only 3.6 percent in 2003. The South Korean government had been encouraging private consumption by keeping interest rates artificially low. This policy increased credit delinquencies to the point of threatening the South Korean banking system. Still, to encourage private consumption, the government has eliminated sales taxes on luxury goods.

The value of the South Korean won appreciated 4.9 percent against the U.S. dollar in 2003 over 2002 and appreciated 6.2 percent against other world currencies. Typically, a strong currency encourages outbound travel and travel to the U.S. Due to SARS, South Korea was an exception to this rule in 2003.

With nearly one half (45.4%) of the market in 2003, the United States is by far the most popular country destination for long-haul travelers from South Korea. Other competitive country destinations are Italy (16.7%), Canada (11.0%), and the United Kingdom (8.1%). Among these countries, Canada and the U.S. lost long-haul market share in 2003.

Source: Global Insight

Regionally, the United States has the highest market share of long-haul travel market from South Korea, with 45.4 percent of the market in 2003. With 37.8 percent of this market in 2003, Europe is the second most popular long-haul regional destination for South Korean travel. Other regional destinations that are distant competitors include Africa (2.1%), South/Central America (2.0%) and the Middle East (1.7%). Among these regions, Europe, Africa, and the Middle East all gained share of the South Korean long-haul travel market in 2003.

Source: Global Insight