SEOUL– South Korea’s duty-free shops are struggling to cope with lean times caused by a drop in Chinese tourists and a corresponding decline in sales by reducing the number of employees, outlets and operating hours, industry sources said Friday.
The number of Chinese tourists have dropped for five straight months after Beijing protested the deployment of a U.S. anti-missile system here in March. Chinese visitors accounted for nearly half of 17 million foreigners visiting the country last year.
The reduction is directly linked to Beijing’s ban on selling package tours to South Korea as Seoul moved forward with the stationing of the Terminal High Altitude Area Defense (THAAD) battery in South Korea.
China views the U.S. missile defense system as a security threat, although South Korea insists the THAAD battery is aimed not at China but at North Korea’s missile and nuclear threats.
Reflecting this, the overall number of foreign visitors to duty-free shops plunged 44.7 percent on-year to 1.05 million in July.
Hanwha Galleria will shut down its store at Jeju International Airport on the southern resort island by the end of the year, although the business license is valid until April 2019.
The duty-free operator said it has reduced manpower to 120 from 200, noting it posted 27 billion won (US$24 million) in operating losses during the first six months of 2017.
Doota Duty Free, a smaller player operated by Doosan Group, said it has decided to close shops three hours early while reducing the number of floors to seven from nine in its duty-free building in eastern Seoul.
SM Duty Free run by South Korea’s leading tour agency Hana Tour reduced the number of floors accommodating duty-free shops at its building in downtown Seoul to four from six.
It has also cut the number of employees to 145 from 178.
Both Doota and SM have suffered from more than 17 billion won in operating losses each for the first half of the year, industry sources said.
Lotte Duty Free, South Korea’s top duty-free operator, also recorded 29.8 billion won of operating losses during the second quarter of the year alone.
HDC Shilla Duty Free, a joint venture between Shilla Hotel and Hyundai Development, meanwhile, reported a whopping 47 percent decrease in operating profits during the second quarter of the year from a year earlier.
Following this trend Shinsegae Duty Free posted 4.4 billion won in operating losses in the second quarter of this year.
The three major duty-free shops — Lotte, Shilla and Shinsegae, which operate outlets at Incheon International Airport — may close their shops there unless the Korea Airports Corp. cut the rent, which is about 900 billion won every year, the sources said.
Source: Yonhap News Agency