Korea’s Hanatour sees 1st profit in over 3 yrs on high-end service
HanaPack 2.0 succeeds as it removes optional activities such as shopping that tour operators profit from
By May 03, 2023 (Gmt+09:00)
Hanatour Service Inc., South Korea’s top travel agency, enjoyed its first quarterly profit in more than three years as it focused on high-end package tours to take advantage of surging demand for international trips with most global COVID-19 restrictions lifted.
Hanatour on Wednesday reported an operating profit of 5.6 billion won ($4.2 million) in the January-March period, swinging from a loss of 29.7 billion won a year earlier, as sales surged by 8.4 times to 83 billion won, the largest amount since the second quarter of 2020. The company had been in red since the third quarter of 2019, even before the outbreak of COVID-19.
“The HanaPack 2.0, which is about 30% more expensive than normal holiday packages, contributed to the turnaround,” said a company official, referring to its premium package tour program, which made up 60% of its total sales.
The travel agency introduced the high-end service, which does not include optional activities such as shopping and dining at Korean restaurants in other countries, in July last year.
South Korean travel agencies usually offer cheap tour packages but require customers to participate in such activities. The business model allows travel agencies to pay less to local travel operators, which earn fees from shopping malls and restaurants.
DEFYING INDUSTRY DOUBTS
The South Korean travel industry, which doubted the success of HanaPack 2.0, has concentrated on low-cost travel packages.
Its smaller rivals including Yellow Balloon Tour Co., Interpark Corp., Modetour Network Inc. and Very Good Tour Co. have been rushing to attract tourists with cheaper programs since Japan resumed visa-free entry for individual travelers in October 2022.
Hanatour, however, maintained the No. 1 position with the premium service.
“It is hard to ask local tour operators, who compensate losses from low-priced packages through optional activities such as shopping, to stop those existing practices,” said the Hanatour official. “We maintained that they can make profits with properly priced services, while giving penalties for violating our policies.”
The company also arranged various new activities for the HanaPack 2.0, which replace shopping in the tour package. The success of the high-end program proved Hanatour’s capabilities in travel curation, which online tourism platforms such as Yanolja and GC Company Corp. may not easily obtain, industry sources said.
The premium tour package, however, faces risks from a slowing economy and the growing preference for individual trips to group tours, some industry sources said.
“It costs about 7 million won per person for a 10-day trip to Western Europe,” said one of the sources. “Reservations sharply dropped in April when the economic slowdown hit consumers.”
Write to Dong-Hui Park at donghuip@hankyung.com
Jongwoo Cheon edited this article.
