"A Cream Costing 15,000 Won to Make Sells for 350,000 Won"... The 'Break-Even Point' That Fits Strangely Well

[South Korea Tours Sold at Rock-Bottom Prices] ② "Shopping Hostage-Taking" Leaves Tourists Stranded

Shopping commissions from a group of 21 tourists totaled 1.3 million won
Domestic agencies pay referral fees to Chinese operators despite tour-co

Domestic travel agencies that bring in Chinese tourists pay money to Chinese travel agencies instead. This is the so-called “minus tour fee,” in which they pay 20,000 to 40,000 won per tourist. Domestic travel agencies, which also cover accommodation, meals and transportation, make up the costs with shopping commissions. If tourists do not buy anything, the agencies have to absorb the losses. Behind ultra-low-cost trips to Korea lies a distorted business practice in which travel expenses depend on tourists’ shopping.

A photo of the cosmetic product provided by a director of the Foreign Tourist Protection Center (below) and a screenshot of the brand's online price listing (above). Related products are listed online for 350,000 to 830,000 won. The product and brand names have been redacted. Screenshots from the Foreign Tourist Protection Center and an online sales site.

Settlement records obtained by The Asia Business Daily from a domestic inbound travel agency confirm that this practice is widespread. The 21 Chinese tourists who visited Korea from May 21 to 23, 2026, spent 1.86 million won on cosmetics. Two ginseng-related products were sold, while no products related to Hovenia dulcis were sold. The domestic travel agency received 1.3 million won in shopping commissions, or about 61,900 won per tourist.

The ground expenses for this tour group, including accommodation, meals and vehicles, are estimated at 140,000 to 150,000 won per person, or 2.94 million to 3.15 million won in total. Shopping commissions alone covered less than half of the tour expenses.

Separate settlement records show that 15 tourists took part in paid optional tours costing 350 yuan per person. The amount allocated to the company after commissions and expenses were deducted was 424,000 won. Combined with shopping commissions, total revenue was 1.724 million won, leaving a shortfall of 1.216 million to 1.426 million won compared with the estimated tour expenses. The final profit or loss could vary depending on whether there was a separate settlement with the Chinese tour operator.

The 2026 settlement statement for a Chinese group tour obtained by The Asia Business Daily (left) and the actual commission payment standards applied to tour guides (right). Shopping commissions from 21 tourists totaled approximately 1.3 million won. The commission table specifies performance bonuses based on shopping and optional tour sales, as well as conditions under which no additional commission is paid for non-cooperation. Company names and personally identifying information have been redacted. Photo by Kim Heeyoon.

Ground Fees That Once Reached $150 Are Now Zero... Agencies Now Pay Passenger Recruitment Fees Too

Minus tour fees stem from fierce competition between Chinese tour operators that send tourists abroad and domestic agencies that receive them. In the past, Chinese travel agencies recruited tourists and paid domestic operators ground fees for accommodation, transportation and meals. As price competition intensified, transactions emerged in which domestic travel agencies paid money to secure tourist groups, going beyond “zero-fee” deals in which no ground fees were paid.

A travel industry official with experience in both Chinese tour operations and domestic reception said, “Ground fees that used to be $150 per tourist fell to $100, then $50 and $30, before eventually reaching zero. Now, there are cases in which domestic travel agencies pay Chinese tour operators 20,000 to 40,000 won per tourist.”

In these transactions, Chinese tour operators recruit tourists, while domestic travel agencies cover passenger recruitment fees and accommodation, transportation and meal expenses, then recoup the costs through sales commissions from shopping centers. This creates the paradox that the more tourists an agency brings in, the greater its costs. Based on costs provided by an industry official, assuming a group of 30, domestic tour expenses would total 4.2 million to 4.5 million won. Adding a passenger recruitment fee of 40,000 won per person would raise total costs to 5.4 million to 5.7 million won.

Assuming the travel agency ultimately receives 50% of shopping sales in commissions, shopping revenue of 10.8 million to 11.4 million won would be needed to recover costs. This means each tourist would have to spend 360,000 to 380,000 won to reach the break-even point. Shopping performance, rather than travel package sales, determines profitability.

The actual shopping commission revenue generated by 21 Chinese tourists who visited Korea from May 21 to 23, 2026, was 1.3 million won, just 44.2% of the estimated ground tour expenses of 2.94 million won, calculated at 140,000 won per person. A Chinese-language tour leader commission sheet obtained alongside the figures specifies performance-based compensation, including 3% of cosmetics sales and 10% of optional tour sales, and states that no additional commission will be paid if the group does not cooperate with shopping or optional tours. Source: Settlement statement from a domestic inbound travel agency and tour leader commission sheet.

3% on Cosmetics Sales... Tour Leader Pay Also Tied to Shopping Performance

Shopping commissions are also directly linked to the pay of staff accompanying tourists. Chinese-language commission guidelines obtained by The Asia Business Daily specify that tour leaders are to receive 3% of cosmetics sales and 10% of paid optional tour sales. For ginseng products, they receive a base commission of 5,000 won, plus additional compensation based on sales performance.

The guidelines also state that “tour leaders who do not cooperate with shopping and optional tours will not receive additional commissions or optional tour commissions.” The system means that tour leaders earn more when they actively encourage tourists to make purchases.

Shopping cards marked “TAX REFUND,” provided to tourists at tax-refund shops, listed guide names and identification numbers. An industry official explained, “Tourists are told that the cards are needed for VAT refunds, but in reality they are used to track shopping performance by travel agency and guide.”

Commissions paid by shopping centers are also substantial. According to industry sources, some pay commissions amounting to about 50% of sales of ginseng and health food products, and 65% to 75% of cosmetics sales. These are the total commission rates paid by shopping centers, with the money divided among domestic travel agencies, guides and Chinese tour leaders.

Kim Jino, director of the Foreign Tourist Protection Center, said, “Some shopping centers have commission rates of 60% to 65%, and there are cases where they exceed 70%.” Kim added, “Our own investigation found that cosmetics with manufacturing costs of about 15,000 won, including packaging, are sold at shopping centers for 320,000 won.”

A supply quote for the product obtained by The Asia Business Daily lists a unit price of 14,660 won, excluding VAT, for an order of 5,000 units. The tax-refund shop has the product manufactured by a manufacturer through a cosmetics company responsible for product sales that is specially related to the shop’s operator, and then sells it in the store. The same cream was being sold online for 350,000 won.

A shopping card marked "TAX REFUND" provided to foreign group tourists at a tax refund store. It contains information identifying the travel agency, visit time, guide, and sales staff. An industry official explained that tourists are told the card is for VAT refunds, but it is actually used to track shopping performance by travel agency and guide. Reporter Kim Heeyoon

Reliance on Shopping Persists Despite Government Penalties... Tourists Bear the Cost

Similar business practices have also been uncovered in China. An investigation by police in Kunming, reported by China’s Xinhua News Agency in 2018, revealed that local travel agencies paid tour operators 100 to 500 yuan per tourist and received commissions of 30% to 90% of shopping center sales in return.

The Korea Culture and Tourism Institute also identified dumping transactions and recouping losses through shopping commissions as longstanding problems in its 2024 report, “Measures to Foster a Fair Environment in the Chinese Group Tour Market to Korea.”

The government has also taken action. In May 2024, the Ministry of Culture, Sports and Tourism imposed a one-month business suspension for the first time on a travel agency specializing in Chinese tourists after it was found to have engaged in practices such as pressuring tourists to shop. In July of the same year, the ministry revised its operational guidelines to include zero-fee tours, pressuring tourists to shop and failure to pay tour guides among the types of violations subject to penalties.

Tourists’ spending habits are also changing. According to the Ministry of Culture, Sports and Tourism, the share of Chinese tourists who shopped fell from 95.1% in 2019 to 68.2% in 2023. Despite the growing trend toward independent travel and discretionary spending, some low-cost group tours still depend on sales at designated shopping centers.

Jung Jiyeon, a professor in the Department of Tourism at Hanyang University, said, “The problem is that basic tour fees do not cover the costs of essential services, and no funds are set aside to prepare for weak shopping sales. A shortage of income for local tour operators leads to cuts in guide pay or delays in payments to vehicle and accommodation providers, ultimately leaving tourists facing service disruptions.” She added, “If losses on cheap tours are covered through coerced shopping and the sacrifice of guides, that is closer to shifting costs onto others than offering a discount.”

Foreign tourists browse products at a cosmetics specialty tax refund shop in South Korea. Industry sources say that in some cases, 65-75% of cosmetics sales are paid in commissions to travel agencies and guides. Photo provided by a reader.

The incident on October 14, when more than 60 Chinese tourists were stranded for over three hours in Dongdaemun, Seoul, was also connected to this structure. A domestic travel agency stopped bus services, citing unpaid ground expenses by a Chinese tour operator and poor shopping sales. The itinerary resumed only after the Chinese side transferred the 27,500 yuan in overdue ground expenses. The tourists had already paid for their trip in China. A dispute between travel agencies over cost settlements led to an interruption in the tour, leaving the tourists to bear the full business risks of ultra-low-cost travel.

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