Korea travel sector has to continue investing in infrastructure in order to handle the growing number of travellers, reveals a study by Amadeus in partnership with Frost & Sullivan.
The study titled "Shaping the Future of Travel in Korea" talks about the four effects that Amadeus had identified as trends that will shape travel industry in Asia Pacific.
Kora is currently the third largest outbound travel market in Asia-Pacific (after China and Japan).
Travel scene in Korea
In 1980, there were less than 350,000 international departures. However, in 2012, Korea generated almost 14 million departures with an average annual growth rate of over 12%.
International departures from Korea are now equivalent to 25% of the population – double the level of Japan and one of the highest in Asia Pacific.
Inbound travel is growing - the government met its target of 10 million visitors in 2012 and continues to reach record numbers for arrivals in 2013. Much of this growth is coming from China, India and Indonesia, as Korea continues to develop its reputation as a ‘cool’ destination.
Below are the four effects that will shape the future of travel in Korea to 2030:
1. The Me Effect: Increasing individualism of the Korean traveller
Korea is now the third largest business travel market in Asia, with business travel expenses growing on average by 6% every year over the past decade, primarily as a result of spending by large multinationals.
Majority of business travellers from Korea are male, with females accounting to 22% of overall business travel, the lowest portion in the Asia Pacific region outside Japan.
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Female business travellers as percentage of total[/caption]
The government is actively encouraging growth in the SME sector, which accounts for 85% of total employment in Korea, and this is likely to stimulate an increase in SME business travel. The SME traveller is likely to be more focused on budget travel and doing business in neighbouring markets such as Japan and China.
Korean culture is moving away from its traditional family and group-orientated leisure travel and moving towards more individualism, driving an increase in the numbers of Free Independent Travellers (“FITs”). Only 9% of Korean leisure travellers typically travel solo, compared to almost one quarter in Japan.
70% of Koreans now travel independently, and almost 40% of leisure travel bookings are researched online.
Almost 50% of Korean travellers have close family members living overseas, with 90% keen to visit them. These travellers form the Visiting Friends and Relatives (VFR) travel group.
Within the Asia Pacific region, the growth of VFR travel is likely to stimulate travel to countries such as China, Japan, Australia and New Zealand, where large numbers of ethnic Koreans live.
2. The Red Tape Effect: Breaking down of barriers to travel
The number of inbound business travellers has changed little over the past decade as Korea has generally not been a target market for most overseas companies. Only 215,000 business travellers visited Korea in 2012, mainly from China, Japan and India. But the size of the Korean economy and improved access to its market is likely to increase interest from overseas companies, driving more inbound business travel.
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Inbound visitors to Korea, 1990 – 2012[/caption]
Inbound leisure travel numbers are also growing rapidly, almost doubling in number over the past decade. Much of this increase is being driven by its Asian neighbours, China, Indonesia and Thailand.
The Korean government has eased visa restrictions on travellers from countries such as India and Indonesia to further encourage travel from these rapidly growing markets. This has implications for service providers such as hotels and airlines in Korea to accommodate this growing inbound market, for example through greater proficiency in English and more active marketing outside Korea.
Korea is also increasingly being seen as a “cool” destination by young Asians. This research showed that Korea is among the top three preferred destinations for 18-30 year old travellers from all countries except India.
3. The Leapfrog Effect: Technology and infrastructure
Koreans are tech savvy travellers, with 66% of Korean leisure travellers generally booking trips online. Virtually every Korean up to the age of 50 uses the Internet, averaging over two hours per day. Well over half of Koreans buy products and services on the Internet, including travel.
Korea also has the highest smartphone penetration in the world, estimated at 73% in 2013. Koreans are more confident than most in using their smartphones to make travel arrangements and bookings when travelling, encouraged by their experiences with fast and reliable mobile broadband networks in Korea. Interestingly, Google's recent study revealed that 21% in Asia still do not trust mobile devices when paying for travel products.
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Use of smartphones to make travel arrangements and bookings, by country[/caption]
Travel providers will therefore need to use the internet and mobile technologies to reach Korean travellers, who are managing their own travel arrangements online.
Korea has a highly developed social media culture; two-thirds of the population is active, including virtually everyone aged in their 20’s. 80% of Korean leisure travellers use social media during their travel, one of the highest rates of usage in the region and double the numbers from Japan.
4. The Barbell Effect: Growth at the upper and lower ends of the market
Whilst the numbers of travellers to Asia Pacific destinations will more than double over the period to 2030, traveller requirements will become more extreme at the upper and lower ends of the economic spectrum.
Although there will be many more travellers from emerging countries, they will generally be travelling on a budget – and this will stimulate rapid growth at the budget end of the travel scale, whether on budget airlines or in economy hotels.
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Proportion of travellers that have used budget airlines in past 12 months[/caption]
In order to capture the growing traveller numbers from emerging economies, Korea will need to increasingly cater for the budget traveller with facilities such as budget airlines and hotels.
There will be a growing demand for luxury travel, as the number of high net worth individuals increases, particularly in markets such as China, India and Indonesia.
NB: Korean girl image via Shutterstock.