Foreign and domestic investment grows in Korea's tourism industry to meet growing demand
"Where should I go to get away from it all?" is a question asked the world over when vacation plans are being made. Due to a growing number of attractive destinations around the world and the subsequent increase in efforts to promote them, the decision-making process is not an easy one, indeed. Adding further difficulty this year is whether the funds are available to make a trip abroad or even domestically for some in light of the ongoing economic malaise, which, as the United Nations' World Tourism Organization (UNWTO) has predicted, will negatively affect global tourism to the tune of two percent in terms of tourist arrivals worldwide -- the first such slide since 2003.
Although previous efforts by the Korean government to attract foreign tourists to Korea's shores -- particularly Visit Korea 2001 -- fell somewhat short of expectations, the country's tourism deficit -- that is, the amount of money spent by inbound tourists compared to that spent by overseas-bound Korean tourists -- shrank in 2008 to US$3.1 billion, thanks primarily to the weakened won. Foreign tourists spent US$9.3 billion -- a 61.3-percent year-on-year rise -- while spending by South Koreans abroad slumped 22 percent to US$12.4 billion. A total of 6.89 million foreign tourists visited South Korea last year, up 6.9 percent from 2007, while 13 percent more Koreans chose to stay home in 2008 than in 2007.
The overwhelming majority of foreign tourists in 2008 were Japanese -- 2.38 million -- while Chinese and American visitors accounted for 1.17 million and 610,000, respectively. Disregarding nationality, for 2007, nearly 71 percent of inbound tourists came to Korea as part of a tour, and the average stay in the same year was 10.9 days, a 61-percent year-on-year increase. By age, visitors to Korea were generally evenly distributed with 15.6 percent being in their 20s, 19.3 percent in their 30s, 18.4 percent in their 40s and 15.3 percent in their 50s.
The Korea Tourism Organization (KTO) in an end-of-the-year report last year announced that it would develop higher value-added tourist programs and improve the country's infrastructure in the tourism sector to raise the number of inbound tourists to 7.5 million, so earning Korea US$10 billion in tourism revenues. Specific areas in which the KTO will focus its efforts during 2009 include promoting firstly the convention industry (290 conventions are tentatively scheduled for this year alone); promotional visits (gratis) organized by the domestic travel agency business; "green tourism" to capitalize on Korea's ecological resources; as well as domestic travel, particularly among honeymooners and golfers.
ROOM SHORTAGE
On a larger scale, pre-crisis figures released by the UNWTO predicted a bright future for tourism in the greater Asia region, which bodes well for Korea in light of her existing and expanding tourism sector infrastructure. A UNWTO report stated that jobs within this burgeoning industry would grow from 880,000 in 2007 to 1 million by 2012 in Korea, and that tourism revenues for the country would increase from US$5.8 billion to US$13 billion for the same period. Moreover, the domestic market is growing at an annual average of 7.3 percent. Taking into consideration the current number of hotel rooms, however, should the number of foreign visitors reach 10 million annually by 2012, there would be a shortage of 30,000 rooms per day.
To offer a brief overview of the Korean tourism industry by sector beginning with hotels, as of December 2007, there were over 65,000 rooms available in nearly 630 hotels across the nation. Foreign occupancy for 2006 in the top three tiers of hotels in Seoul -- Tier-1, Tier-2 and First Class, as ranked according to the Korean system -- were 53 percent, 54 percent, and 51 percent out of the total, respectively, a level that drops significantly -- to the mid-thirty-percent level -- when one looks at other large cities in Korea. Tier-1 hotels on the resort island of Jeju off the southern coast of the peninsula, in contrast to those in Seoul, averaged 42-percent occupancy by foreign guests. According the London-based Hotel Price Index released annually by Hotels.com, the average hotel stay per night in Seoul in 2007 cost £86, down from £98 a year earlier. A relatively new entry to the Korean accommodations scene is the pension, of which there some 4,000 to 5,000, approximately two thousand of which are officially registered with the Korea Federation of Pensions.
Theme parks are an important component of the tourism mix, and since the establishment of the five-day work week several years ago, visits to these recreational areas are likely to increase in number. As of 2008, 14 theme parks operated in Korea, attracting 33 million visitors nationwide as of 2006, 25 million in the greater Seoul region alone. Everland, located in the city of Yongin on the outskirts of Seoul, ranked seventh among the world's top 10 theme parks as of 2005 in terms of number of visits, while Lotte World in Seoul found itself in the top 15.
LAYING BETS
Legal gambling is a popular pastime in Korea, one in which it is possible to indulge at several venues around the country. In addition to the 17 casinos in operation domestically, in which only one -- Gangwon Land -- are Korean nationals legally permitted to patronize, gambling is permitted at the facilities of the Korea Racing Authority (of which Seoul Race Course is the largest), attracting an incredible 20 million visitors annually; at a number of off-track betting sites around the country; at a speed boat racing facility on the Han River to the east of Seoul; and at a velodrome located within the capital city's Olympic Park where punters lay their bets on as many as 18 bicycle races over the course of a weekend. Korean casinos received some 630,000 foreign visitors in 2003, 680,000 in 2004, 570,000 in 2005 and 990,000 in 2006. Annual earnings at Korean casinos -- excluding those at Gangwon Land -- have risen by 6.7 percent on average from 2003 to 2006, a year when their total take amounted to 480.9 billion won.
Far more popular than gambling in Korea is golf, a sport which is increasingly attracting a much wider demographic as prices per round come down and the number of golf courses goes up. As this issue goes to press, according to the Korean Golf Course Business Association, there are currently 439 courses in Korea, including both public and private operations. The current administration of President Lee Myung-Bak has gone so far as to press for lower golfing fees in Korea to cut down on the number of Koreans going overseas to play instead of doing so upon their native soil. In 2005, for example, 550,000 persons travelled abroad to play golf, a number that increased by 12 percent on average per year to reach 1.25 million by 2007. In 2008 alone, currency outflows neared 2 trillion won due to golf trips abroad.
To boost investment in the tourism and leisure sector, the government is implementing a public/private partnership action plan. The Plan includes the advancement of tourism-related marketing by promoting the national brand, the "2010-2012 Visit Korea" campaign," as well as the expansion of large-scale tourism resources under the concept of "family-stay, and one-stop recreation". Six tourism zones will also be developed with the goal of focusing on Korea's regional strengths to nurture both the quality of the domestic tourism industry and the quantity of global-standard tourist facilities. The six zones are as follows: South Coast Tourism Belt, North Gyeongsang Province Confucian Tourism Zone, West Coast Tourism Belt, Mt. Jiri Tourism Zone, East Coast Tourism Zone, and the Peace Tourism Belt near the Demilitarized Zone that separates the two Koreas.
QUENCHING WANDERLUST
The promise of a greater number of inbound tourists has attracted a number of large-scale foreign investments. For instance, the Jeju Free International City Development Center (JDC) reported Aug. 11th 2008 that the Berjaya Group of Malaysia registered an investment -- a joint venture with the JDC, in fact -- to build the proposed Jeju Yerae Leisure Residential Complex. Targeted toward a sharp influx of tourists from the Chinese mainland as well as domestic tourists, when compete, the Complex will be the first foreign-invested leisure town in Jeju and the largest foreign investment since the JDC was established. It will consist of a world-class hotel, condominium, medical/recuperation facility, shopping center, casino and various cultural facilities.
Another foreign-investment tourism project in the works originates in the Middle East and is destined to be realized in the popular Busan resort of Haeundae Beach. The Al Ahli Group (AAG) of Dubai is expected to start construction on a theme park in 2011 in cooperation with the government of the city of Busan (see Cover Story, July/August 2008).
It is not only foreign investors, it should be pointed out, who are trying to get a piece of an ever-growing pie in terms of tourism-generated revenues. Domestically financed projects are underway on both on the mainland and Jeju. As of July 2008, for example, the total value of spending for tourism projects on Jeju's 47 development sites bigger than 100,000 square meters, amounting to 60.76 million square meters in total, stood at 16.82 trillion won. The island's new tourist destinations, which will feature a wide range of entertainment facilities such as resorts, ecosystem museums, business services as well as marine leisure sports activities, are expected to attract more local tourists as Koreans stay closer to home due to the weaker won.
Capitalizing on the potential of the region's stunning coastline and the growing enthusiasm domestically and internationally for boating, the South Jeolla provincial government reported in late 2008 that work is under way for the construction of 10 marine tourism infrastructure facilities (51 billion won), 10 marine resorts (1.58 trillion won), two fishing village tourist complexes (11 billion won) and six home ports for cruise vessels (164 billion won). Province officials are predicting that the infrastructure facilities, when finished, will help invigorate marine tourism in the region.
With a sharp eye on the future, the Korean government is instituting policy changes, investing large sums of money in infrastructure across the country, and working diligently to promote the growth potential of the Korean tourism industry to foreign companies. As millions of Chinese tourists seek to find ways of quenching their newfound wanderlust without going too far, and Korean tourists begin to explore previously unseen or underdeveloped areas within their own country, the pieces are being put in place to turn Korea into one of the most attractive tourist destinations in the Northeast Asian corridor.
