South Korea is laying out its stall to attract a greater share of outbound Chinese visitors. And it is being joined in the bid to grab a greater share of Asian tourism by Japan, which is ramping up its tourism activities ahead of its hosting of the 2020 Olympics.
The South Korean campaign is being planned on a number of fronts. Recently the government has approved plans for two new, major entertainment complexes that will include casinos. International brands are also starting to make their mark in the country.
According to official figures from the South Korean tourist promotion agency, the number of Chinese tourists rose over 40% in 2014, compared with the previous year. Recent years have seen visitor numbers climb, from 7.8m in 2009 to 12.1m in 2013.
The country’s government has decided to approve the development of two new major casino resorts, in a bid to grow tourism receipts by USD3.25bn. The projects will require operators to invest up to USD1bn each, creating integrated resorts with a total of around 5,000 rooms and foreigner-only casinos. Government plans also include an expansion of duty free shops to encourage visitor spending.
Among those already declaring an interest in the new projects is Philippines investor Bloomberry Resorts, owner of a Manila casino resort. The company has signed to buy a 12.2 ha construction plot in the Incheon Free Economic Zone, and says it could have a development complete and opened inside five years, depending on government approvals.
Already approved are two resorts in Incheon, involving the commitment of Caesars Entertainment and Japan’s Sega Sammy Holdings, both in joint venture with local partners. The first of these is expected to open in 2018. In addition, a joint venture linking Genting Singapore and Landing International is looking to develop an integrated resort on Jeju island.
Among those exploiting the opportunities in the South Korean is US group Vantage Hospitality, which opted to expand operations in the country in 2012 with the signing of a master licence agreement covering its Value Inn and Value Hotel brands. Local partner Service Legend opened their first hotel, a 300 room property in Suwon, in late 2013 and is working on a 307 room hotel in Sejong City, due to open in 2016. It has recently added sites in Seogwipo and Jeju City to the pipeline. In Jeju, an 18 storey new build hotel will include 357 rooms.
“Jeju Island is one of the most popular leisure destinations in Asia, so we are very pleased that the continued development of our Lexington brand will take place there. Jeju is also the most wanted MICE destination in South Korea, so these multi-purpose hotels will also appeal to that crucial segment,” said Bill Hanley, Vantage’s group president of international development.
Also expanding in the country is IHG. It recently signed a management agreement that will see the opening of a 268 room Holiday Inn in South Korea’s second city, Busan. The property will open in 2017 in partnership with SiLee Ltd, a company new to the hospitality sector.
Karin Sheppard, COO Australasia, Japan, Korea and AMEA franchising, said: “There is thriving tourism across South Korea’s major cities and as its second largest city Busan is also one of the fastest growing destinations in the country. We’ve identified a number of opportunities for growth and are especially pleased to be entering Busan with one of our most well-loved brands.”
Currently, IHG has eight properties open in the country, running under Holiday Inn and InterContinental flags. It opened a 202 room Holiday Inn in the high tech city of Songdo last autumn.
And the Chinese boost is also being enjoyed in Japan, which counted a record 13.4 million foreign tourists last year, up 29% on the previous year. The volume from China nearly doubled year on year, accounting for 18% of all visitors; South Korean and Taiwanese visitors each account for more than 20% of arrivals.
A target of 20 million visitors has been set for 2020, when Tokyo will host the summer Olympics. An easing of visa restrictions is one route being used to help grow visitor numbers.
The country is recovering from a period when several problems hit tourist numbers, including an earthquake, the tsunami and ensuing nuclear accident. Also hitting consumer confidence were diplomatic flare-ups between China and South Korea, now settled. Overall visitor numbers have doubled since 2011, while Chinese tourist numbers were up 83% last year and those from South Korea rose 12% to 2.8 million.
As in South Korea, the Japanese are also using duty free shopping as an extra incentive to get visitors to spend, and last autumn allowed a wider range of goods into a tax exemption plan for overseas visitors. Tourists avoid the 8% local sales tax, and their spending now accounts for up to 10% of revenues at some Japanese department stores.
Hotel operators are noticing the change in trade. At the Prince chain, owned by Seibu, foreign guests account for around a sixth of business, and numbers were up 19% in the last six months.
Chinese shoppers are reckoned to have spent USD61bn in 2014 on luxury goods worldwide, with spending outside China up 21%, according to Bain & Co research, with one consultant calling them “the alpha consumers of global commerce today”.
HA Perspective [by Chris Bown]: The Chinese are coming – and their near neighbours are as keen to grab a slice of the action, as are destinations further afield. Make it easy, and they will surely come; the air fare is a lot less than for a trip to Europe.
While its more northerly neighbour has been making all the headlines, South Korea’s government is making some strategic moves to grow the country’s tourism business. Its major casino destinations, designed specifically for foreigner use only, sees the country setting out its stall as the Macau of the north, ready to tempt the high rolling VIP gamblers of Shanghai and Qingdao, as well as its many millions who will shortly be in a position to afford their first foreign vacation. Vantage, a company more used to peddling its affiliate brand structure in the US, was early to spot the opportunities and is gaining traction, while others look to follow.
Japan has had a torrid time, with natural disasters adding to the challenge of reviving a flagging economy. Finally, the graph has turned in the right direction, and the company needs to ensure its infrastructure is geared up over the next five years to prepare it for the Olympics, and to maximise its Olympic legacy. Look to London, to see how a host city can keep the hotels full, and the visitors coming, after the event. The question remains as to whether international hotel chains can gain traction in this, the most impenetrable of markets.