HSBC expects Korean tourism to expand further

Ronald Man HSBC economist

Tourism is likely to remain one of the few bright spots in the Korean economy, saddled by an aging workforce, sliding industrial competiveness and hefty household debt.

Korea will continue to benefit from an influx of travelers from China and other Asian countries and improved global awareness, according to a report by HSBC, which believes that the tourism industry will expand further in 2013.

Tourism will play a critical role in helping Korea weather the economic downturn easily this year by driving growth in gross domestic product (GDP) and creating jobs, said the British banking group.

“Tourism revenue continued to surge in 2012 and had already reached a record high by November. Should the momentum in tourism be sustained, it should support Korea’s labor market and support domestic demand while export growth gradually recovers,” said Ronald Man, an HSBC economist, in the report.

Man estimated that the travel and tourism industry added a record $62 billion to the Korean economy last year, based on data from the World Travel Tourism Council, contributing roughly 5.4 percent to the country’s GDP.

He said that the local tourism industry will gain momentum this year thanks to a meaningful economic recovery in China, Korea’s second-largest source of tourists. China accounted for almost 25 percent of total tourist arrivals in Korea in 2012, up from just 10 percent a decade ago.

The HSBC report said that the Korean tourism industry benefited last year from intensifying territorial disputes between China and Japan over a group of islands in the East China Sea. An increasing number of Chinese tourists changed their destinations from Japan to Korea. In November, Chinese tourist arrivals plunged 44 percent year-on-year in Japan, but stayed strong in Korea, increasing by 17 percent in the same month, it said.

The report titled “Heading for Gangnam” also noted boosted global awareness of Korean culture as a key factor in making the nation’s tourism industry brighter.

“In the second half of 2012, while global trade surprised on the downside and dragged down world growth, many danced happily to Psy’s viral music video Gangnam Style,” the report said.

Thanks to this rising global interest in Korean culture, the number of tourists visiting Korea exceeded 10 million last year for the first time.

Barclays echoed the positive forecast by HSBC, suggesting that investors pick up stocks of Korean leisure and retail companies. The U.K.-based bank said that the increasing numbers of inbound visitors to Korea made leisure and retail stocks attractive in its report last month.

“On the back of solid growth in Chinese VIP players, good supply control, and rational competitive behavior, we expect Paradise and GKL to continue to benefit from this long-term structural growth story,” said Barclays. <The Korea Times/Kim Jae-won>