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Special Report

Asia’s Market Boom

The global tourism market paradigms are shifting. Bolstered by growth in the convention and the casino industries, the number of tour- ists to Asia is rapidly increasing. Russian tourists visiting for medical purposes have emerged as big customers for the Korean tourism market. Travel has already started to change the world, with Asia’s “holiday economy” drawing much attention.

Keum Ki-yong Tourism Spurs Asian Economic Growth _P88

Park Hyun-bong visa-free Travel Boosts Russian Tourism to Korea; Target Market Spreads from to _P96 Special Report | Asia’s Tourism Market Boom Research Institute

Keum Ki-yong _ Research Fellow, The Seoul Institute Tourism Spurs Asian Economic Growth [email protected]

Asia’s tourism market is growing rapidly. The number of Chinese outbound tourists reached about 98 million last year, meaning nearly 100 mil- lion Chinese tourists traveled to some other part of the world in 2013 alone. This clearly shows how the landscape of the global tourism market is changing. According to the United Nations World Tourism Organization (UNWTO), the number of international tourist arrivals reached 1.087 billion last year, with Europe accounting for 52%, Asia and the Pacific accounting for 23%, and the Ameri- cas some 16%. By traditional measures, the Euro- pean region is still the frontrunner in the global

Shutter Stock Shutter tourism market.

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But tourism market growth rates show that Asia Global Tourism by the Numbers is emerging as an area to pay close attention to. According to a recent UNWTO report, internation- al tourist arrivals worldwide grew an annual aver- 9% of world GDP age of 4.5% during 2003-2013. During the same pe- riod, the average annual growth rate of international tourist arrivals in Asia and the Pacific 6% of the world exports reached 8.1%, more than twice the 3.3% of Europe. At the center of such high growth in the Asian tourism market lie Southeast Asia (, Indo- nesia, the , and Myanmar) and South 1.087billion Asia (, the Maldives, and Sri Lanka). Interna- international tourists in 2013 tional tourist arrivals in the two Asian subregions grew an annual average of 9.5% over the past ten years, twice as high as the world rate and three 1 in 11 jobs times higher than that of Europe. If this trend con- 1/11 tinues, Asia is expected to overtake Europe in

Source: U NWTO Tourism Highlights 2014 terms of international tourist arrivals within 18 years.

Tourism growth rate in Southeast Asia twice the global average

In the past, Asia’s tourism market grew mainly due to tourism from traditional advanced countries such as and the U.S., as well as those in Eu- rope. But more recently, , India, the so- If the Asian tourism market continues to grow at the present rate, called four Asian dragons (South Korea, Taiwan, Hong Kong, and Singapore), and other emerging Asia is expected to overtake Europe in terms of international tourist arrivals Asian countries have greatly contributed to the within 18 years. growing number of tourists in the Asian region. These results can also be explained by the gravity model, which suggests that travel flows are pro- portional to economic size and inversely propor- tional to geographic distance. Shutter Stock An industrial factor that could explain the char-

90 autumn 2014 VOL.16 POSRI Chindia plus Quarterly 91 Special Report | Asia’s Tourism Market Boom Research Institute

(L-R) Advertising sign for Korean cosmetics brand Laneige, Korean actor So Ji-sub, Gyeongbokgung Palace, Seoul at night, Namsangol Hanok Village [Shutter Stock, JoongAng Photo]

acteristics of Asia’s rapidly growing tourism mar- the international meetings chart for cities: Singa- gapore and Manila are attracting an increasing veloped culture and high economic standards, ket is the growth of the meetings, conventions, ex- pore (1st), Seoul (4th), and Tokyo (5th). The re- number of tourists. In addition, other Asian coun- there is less variation among European cultures hibitions, and casino industry. The momentum of markable development of Asia’s convention in- tries, including South Korea, Japan, and , due to their geographical proximity on the same the convention industry, which is often described dustry has contributed greatly to growth in the which previously allowed gambling only on a lim- continent. On the contrary, Asian countries are using the rather vague term MICE—meetings, in- Asian tourism market. ited basis, are now reviewing or implementing spread out over both continental land and islands; centives, conventions, exhibitions—has shifted to The casino industry is also emerging as a plans to invest in large-scale casino projects. The but even on the continent, they are divided along Asia. According to the Union of International As- growth engine for the Asian tourism market. In center of international casino tourism is shifting to geographical and political lines, which have led sociations (UIA), Asia was not among the top five the past, Asia’s only world-class casino cities were the Asian region. them to develop their own distinctive cultures. countries or cities for international meetings in Macau and Malaysia’s Genting Highlands. Howev- Aside from economic factors, the high growth Asia’s attractiveness as a tourist market could be 2003. Ten years later, however, three Asian coun- er, after Singapore legalized gambling in 2010, in Asia’s tourism market can also be attributed to higher than that of any other region. tries were among the top five for international which paved the way for the opening of the Sen- cultural factors. Broadly speaking, global culture A good example that shows the importance of meetings: Singapore, which held 21st place in tosa and the Marina Bay Sands casinos in 2013, can be broken down into European and Asian cultural demand and related trends in today’s tour- 2003, ranked first in 2013; South Korea emerged the Philippines also launched a large-scale USD 1.2 cultures on the basis of land and population. ism market is the South Korean cultural phenome- from 18th to 3rd place, and Japan from 13th to 4th billion casino on Manila Bay last year. Having While Europe still maintains its status as the non called Hallyu, or the Korean Wave, which be- place. Three Asian capitals were also at the top of joined the ranks of world-class casino cities, Sin- world’s largest tourist market due to its highly-de- gan booming in the late 1990s. According to

92 autumn 2014 VOL.16 POSRI Chindia plus Quarterly 93 Special Report | Asia’s Tourism Market Boom Research Institute

earned about KRW 12 trillion in international tour- tourists as a major culprit for surging deficits in the Arrivals (millions) ism receipts. Given that the city of Seoul’s entire balance of payments. At that time, the country International Tourism Arrivals (mil. peope) Annual growth budget last year was about 20 trillion, it is easy to only blamed outbound tourists without trying to 2003 2006 2010 2013 2003-2013 see how large an economic impact the tourism in- increase the wealth brought in by inbound tour- World 697 842 948 1,087 4.5 dustry has had on the economy. ists. Today it’s a completely different world: the

Europe 408.6 462.1 484.8 563.4 3.3 In this regard, it may be worth recalling how number of inbound foreign tourists has jumped so South Korea in the 1990s restricted the “golden rapidly that there aren’t enough rooms to accom- Asia & Pacific 114.2 166.8 204.9 248.1 8.1 egg” tourism industry as an extravagant luxury, modate them, raising concerns about how to en- Northeast Asia 61.7 94.3 111.5 127 7.5 and in the early to mid-2000s branded outbound sure them a proper welcome. Southeast Asia 37 53.1 70 93.1 9.7

Oceania 9 10.5 11.4 12.5 3.3

South Asia 6.4 8.9 12 15.5 9.2

Americas 113.1 135.8 150.6 167.9 9.7

Africa 30.7 41.4 49.9 55.8 3.3

Middle East 30 41.4 58.2 51.6 9.2 The Ties that Bind Global Economy and Tourism

Source: U NWTO Tourism Highlights 2014 As the natural ecosystem evolves organically through symbiotic relationships among its constituent parts, the global economy also develops through symbiosis involving the exchange of goods and people among countries. From the early and mid-1990s to the global financial crisis of 2008, the global econo- growth statistics for major East Asian tourism mar- top tourism source market in the world with about my could be described as a “goldilocks economy,” enjoying high growth that was not too high coupled kets during the past decade, China’s tourism mar- 100 million international departures. By destina- with low levels of unemployment and inflation that were not too low. The goldilocks period, led by the ket grew by an annual average of 5.4%, while Ja- tion, Hong Kong received the largest number of neoliberal economic paradigm, witnessed the emergence of several global and region economic com- munities, including the EC (European Community, later the European Union), NAFTA (North American pan’s grew by 7.2%, Hong Kong’s by 5.6%, and Chinese tourists at 6.75 million and Thailand the Free Trade Agreement), and ASEAN+3 (Association of Southeast Asian Nations). Also, aside from these Korea’s by 9.8%. This signifies that the Korean second largest at 5 million, followed by South Ko- regional economic communities, each country has been active in concluding bilateral free trade agree- tourism market has expanded more rapidly than rea at 3.44 million, Macau at 3.13 million and Tai- ments with its trade partners around the world. It is widely accepted that neoliberal global economic that of any other country, demonstrating the pow- wan at 2.82 million. These numbers show that Chi- policies, under the banner of liberalization, globalization, and privatization, fell from their peak after the er of cultural demand for travel. nese tourist destinations are concentrated in 2008 global financial crisis. However, it is also true that they have played a role in driving the global neighboring countries. According to UNWTO esti- economy. mates, China’s international tourism expenditures As the international economy is built on the exchange of goods, people, and intangible services, the reached USD 128.6 billion last year alone. tourism market has played an important role in world economic growth by promoting exchanges in Tourism, a growth engine for two key areas—people and services. According to another paper by this author that was published in High growth in Asia’s tourism market reflects the Asian economy an international scholarly journal, causality analysis using a dynamic econometric model to assess the the surging number of Chinese tourists. According causal link between international travel and international trade found that the causality direction runs The UNWTO has released a report that shows the to government statistics, about 12.17 million for- from travel flows to trade flows, without reverse or interactive causality between the two. This shows economic effects generated by some 1.087 billion eign tourists entered South Korea last year, gener- how important a role international tourism plays in the global economy. This theory is often cited as tourists last year. Tourism accounted for 9% of ating revenues of about USD 14.3 billion or KRW reasoning for arguments that the international economic policy direction should be changed through global GDP and 6% of world exports, and was tied 15 trillion. With about 10 million foreign visitors tourism promotion. The time has come for travel flows to lead the way for flows of international trade. to one out of 11 jobs worldwide. China was the last year to Seoul alone, the South Korean capital

94 autumn 2014 VOL.16 POSRI Chindia plus Quarterly 95 Special Report | Russian Tourists to Korea, the “Second Youke” Research Institute

Park Hyun-bong _ Director, Office, Korea Tourism Organization [email protected]

Recently, the Korean tourism industry has wit- Visa-free Travel Boosts Russian nessed the emergence of important new custom- ers. Under a recently opened visa waiver program between Korea and , Russian tourists have Tourism to Korea been arriving in droves. Their numbers have in- creased so much that they’re often called the sec- Target Market Spreads from ond youke (遊客), a Chinese term for tourists. Al- though the total number of Russian travelers to Russian Far East to Moscow Korea is far lower than that of Chinese, Japanese and American travelers, at the individual level they are among the leaders in spending. The average Russian traveler to Korea spent USD 2,100 last year alone, right behind the USD 2,270 dropped by the average youke, the indisputed leaders in tourist spending. And at luxury department stores, Rus- sian tourists were clearly the best customers, opening their wallets to the tune of USD 4,000 per person. They also remained in the country 1.5 times longer than other foreign tourists, staying an average of 10.9 days.

“Era of 500,000 Russian tourists” within five years

China sends the largest number of international tourists to Korea, followed by Japan, the U.S., Tai- wan, Hong Kong, and Thailand. Compared to these countries, the scale of Russian tourism falls far short. But considering the rapidly increasing number of Russian medical tourists to Korea, Rus- sia may be able to approach the level of the U.S. and Thailand within just a few years, sending as many as 500,000 tourists to Korea. Since Seoul and Moscow established diplomatic relations in 1991, Korea has welcomed increasing numbers of Rus-

Shutter Stock Shutter sian tourists, reaching a record high of 168,000 in

96 autumn 2014 VOL.16 POSRI Chindia plus Quarterly 97 Special Report | Russian Tourists to Korea, the “Second Youke” Research Institute

stitutional changes and policies. A case in point is zation were planning return visits to Korea. This is measures taken by both governments, such as a also true for travel agencies in Vladivostok selling visa waiver program that took effect this January, Korea tour products. Second, the purpose of their and the designation of the “2014-2015 Korea-Russia visits to Korea is diversifying from the typical tour- Mutual Visit Years.” Thanks to such measures, ist attractions in the capital area to various festi- some 107,000 Russian travelers visited Korea in the vals, performances, and experience tours across first half of this year, an increase of more than 20% the country. Third, the majority of Russian visitors year-on-year. If this trend continues, more than to Korea were from the Far East, but this year the 200,000 are expected to enter Korea this source of visitors began to diversify to the north- year, and the era of 500,000 Russian arrivals is ex- ern areas including the Republic and the pected to begin as early as 2019. southern region including . Fourth, travelers Travel agencies in the Russian Far East seem will have a greater flight selection from Russia to to be fully enjoying the Korea-bound tourism Korea from the second half of this year. Irregular boom. In the aftermath of the global financial cri- charter flights will operate, on a temporary basis, sis, the international tourism market shrunk by 4% from , the capital of the Sakha Republic, in 2009. The tourism industry in the country’s far and Ulan-Ude, the capital of the Republic of Burya- eastern region also had difficult times. The num- tia, located on the eastern shore of , to ber of outbound tourists from the Russian Far Incheon, Korea. In addition to Korea’s national flag East to Thailand, China and other Asian countries carrier, Russia’s national airline also operates fell by 30-50%. But Russian travelers to Korea be- flights from Irkutsk in Siberia to Incheon. Under gan to surge by more than 50% in the second half the visa waiver program, Russia’s untapped mar- Russian visitors to the Pacific International Tourism Expo (PITE) take in a show at the South Korean exhibition booth established in of 2009, reviving Russia’s local tourism market. kets have started to take modest but voluntary ac- commemoration of the “2014-2015 Korea-Russia Mutual Visit Years.” The expo was held in Vladivostok earlier this year. During a conference related to Korea tourism tions. held at the time, one executive at Russia’s leading travel agency was even moved to say that “Korea has saved us.” Russian travelers have contributed Key challenges in promoting Korea 2003. But since then, the number of Russian tour- In order to realize the era of 500,000 not only to the Korean economy, but also more tourism in Russia ists has dropped every year before bottoming out significantly to the development of the Russian at 136,000 in 2008. More recently, however, follow- Russian arrivals to Korea, the cur- tourism industry. What should be done to realize the era of 500,000 ing the Korea Tourism Organization’s (KTO) rent tourism marketing landscape The number of Russian tourists to Korea is ex- Russian tourists to Korea? First of all, in order to launching of various tourism marketing campaigns pected to grow by more than 20% each year. Meet- maintain continuous quantitative growth, the cur- with market-oriented themed tours, the number of should be expanded to western ing such expectations is a daunting task, but there rent tourism marketing landscape should be ex- Russian tourists to Korea reached a new high of Russia, including Moscow. are four positive factors that make this projection panded to western Russia, including Moscow. Un- 175,000 last year. viable. First, the return visit rate of Russian tourists til now, Russians’ tours to Korea have generally Until last year, the rise in Russian tourism to to Korea, especially from the far eastern region, is taken place over short distances, mostly from the Korea was attributed to effective marketing, but rising. About 60% of recent Russian visitors to the eastern part of the country. Now full-scale Korea this year such increases are being spurred by in- Vladivostok branch of the Korea Tourism Organi- tourism promotion campaigns must be launched

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Themed Tour Programs, “Selling Refrigerators to Eskimos”

Ru-Ski : Ski Tours Exclusive for Russians Ru-Ski is an interesting tour program that takes its name from “russki,” the word for “Russian.” Ru-Ski means Russians riding skis. Russia receives more snowfall than Korea, but lacks ski re- sorts with glide worthy slopes long enough to satisfy Russian skiers. The result of niche market- ing, this tour program is a good example of “selling refrigerators to Eskimos.”

English village Tours Recently, Russia has also been swept up in a fervor for learning foreign languages, especially English. Aiming at Russians in the Far East and Siberia who may not be able to learn English in English-speaking countries, this tour program consists of three-to-six week training programs at English Villages in Korea operated by local governments, including Incheon, Paju, and Yangpyeong. This is a niche product, taking advantage of a situation where Russia’s summer holiday usually starts about a month-and-a-half earlier than Korea’s.

Medical Tourism Russian skiers participating in the First Ru-Ski Festival learn how to ski at Yongpyong , Korea [JoongAng Photo] Russian medical tours to Korea began after legislation was passed in Korea in May 2009 to allow state-licensed clinics and hospitals to attract foreign patients directly. Today, it is the hottest Korea tour program for Russians. Medical tourism has been growing by an annual average of 100%. About 24,000 Russian medical tourists visited Korea last year, accounting for 15% of all Russian in burgeoning Siberia and areas to the west. Di- es and content tailored to Russian tourists, and im- travelers to Korea. rectly targeting customers to the west of the Ural proved infrastructure. A good example is online Mountains, which holds 80% of the country’s pop- and offline tourism materials in Russian. Unfortu- ulation, South Korea should find more travel agen- nately, Korea’s local governments and tourism-re- cies that offer Korea tours. It should also continue lated institutions lack proper Russian tourism ma- to strengthen marketing in the field through efforts terials due to an abundance of restrictions. Taking such as developing detailed theme tours. If it can advantage of the “2014-2015 Korea-Russia Mutual do these things, South Korea’s prospects for realiz- Visit Years,” South Korea must devote all of its en- ing the era of 500,000 Russian tourists will become ergies to preparing Russian tourism materials. Im- much brighter. proving services is a particularly urgent task if it At the same time, South Korea should bear in wants to satisfy Russia’s recently growing demand mind two other factors: the development of servic- for medical tourism. Shutter Stock

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