'High Exchange Rate Hits Hard': Travel Industry Sees Sharp Drop in Q2 Profitability... Operating Profit Plunges 40%

HanaTour Sees 44% Drop in Second-Quarter Operating Profit Year-on-Year
Impact of Middle East War and Increased Fuel Surcharges
Decline in Total Outbound Travelers and Package Tour Users
Modetour Also Expected to Turn to Losses... Initiates

The travel industry has taken a direct hit due to the high exchange rate and the aftermath of the Middle East war between the United States and Iran. Major outbound travel agencies, specializing in organizing overseas trips for Korean nationals, received deteriorating business performance in the second quarter of this year. As cost burdens, such as fuel surcharges, reflected in overseas travel increased, demand for related travel products has declined.

A car is parked in the parking lot of Incheon Airport. The Asia Business Daily Database

According to the Financial Supervisory Service’s electronic disclosure system and the related industry on August 5, Hanatour’s operating profit for the second quarter was provisionally tallied at 5.4 billion won, down 43.6% compared to the same period last year. During the same period, sales also fell by 3.8% to 115.4 billion won.

The company analyzed that its poor performance was due to reduced overall travel demand caused by an increase in international oil prices—driven by the ongoing war in the Middle East between the United States and Iran since March this year—leading to higher fuel surcharges. As demand for travel products decreased, Hanatour strategically adjusted product prices in response, which resulted in a decrease in operating profit margin. In fact, the total number of outbound travelers for Hanatour in the second quarter was about 894,000, and the number of travelers using its planned package products was 450,000, each marking a 2% decrease from the same period last year.

However, the number of Free Independent Travelers (FIT), who purchase airline tickets, hotel stays, and local tickets separately, reached 1.11 million in the second quarter, up 10% compared to the previous year, proving a trend that overseas travelers are preferring independent travel schedules over group packages. Furthermore, Hanatour’s portion of mid- to high-end premium packages, based on Gross Merchandise Value (GMV), accounted for 55%, setting a new all-time high for a single quarter.

The outlook is also unfavorable for Modetour, which will announce its second-quarter results in the middle of this month. According to the securities industry, Modetour’s operating profit for the second quarter is expected to turn negative to -3 billion won, a reversal from 2.7 billion won in the same period last year. During the same period, revenue is projected to decline by 29.5% to 28 billion won.

Last month, Modetour decided to enter an emergency management system by internal policy, taking into account the market situation until management returns to normal. During this period, registered executives' remuneration will be reduced by 20%, department heads by 15%, and unregistered executives by 10%, respectively. The company is also promoting cost reduction through organizational restructuring and personnel adjustments.

As the peak vacation season begins, the departure area at Incheon International Airport is bustling with crowds. Yonhap News

The industry expects that, with the announcement of lower fuel surcharges starting in June and the exchange rate having dropped to the 1,400 won-range from last month, overseas travel demand will recover in the third quarter, coinciding with the summer vacation and Chuseok holidays. An industry official stated, "Recently, with surcharges decreasing and the exchange rate stabilizing, overseas travel bookings have gradually started to recover, especially targeting the Chuseok holidays in September. We are closely watching the trend, as interest is increasing not only for long-haul destinations with high profitability, such as Europe and the Americas, but also for Southeast Asia, where demand had slowed due to the impact of fuel surcharges."

This content was produced with the assistance of AI translation services.