"2,000 Won per Chinese Tourist"... 'But I Didn't Do That?' South Korea's Designated Travel Agencies Lending Only Their Names

[Korea Trips Sold at Rock-Bottom Prices] - ④ Gaps in Oversight of Chinese Group Tours

Designated Agencies Lend Their Names and Operate at a Loss
Limits to Enforcement Under Document-Based Renewal Evaluations
Three of Five Complaints Could Not

On July 13, a complaint from a group of Chinese tourists was filed with the Korea Tourism Organization’s Tourism Complaint Center. The complaint said, “During our trip to Korea, we were not provided with lunch or transportation back to our hotel because our shopping sales were low.” The tourists appealed what they described as unfair treatment, but the complaint was closed as “unable to process.” The responsible company could not be identified because the name of the domestic travel agency and the itinerary could not be confirmed. Although basic services had been discontinued during the trip, no one could even be identified to hold responsible.

Chinese group tourists wait by the roadside in front of Doota in Dongdaemun, Seoul, on the night of the 14th of last month. They were unable to get to their accommodations for more than three hours after tour bus service was suspended over disputes about shopping sales and travel expense settlements. Photo by Kim Heeyoon

Gaps in oversight of ultra-low-cost Chinese group tour packages are coming to light. The Ministry of Culture, Sports and Tourism designates travel agencies responsible for attracting Chinese group tourists and conducts renewal evaluations every two years. However, it has limited ability to identify companies that borrow the names of designated agencies to operate tour groups themselves. The Korea Tourism Organization has no authority to directly investigate or penalize general travel agencies, and it is unclear how much of the actual contractual and settlement arrangements the Korea Association of Travel Agents (KATA) checks during its on-site inspections. Calls are growing for an oversight system that can identify who is responsible for attracting tourists, operating tours on the ground and providing redress for harm.

Three of Five Complaints Unable to Be Processed... Accountability Gap

According to data obtained by The Asia Business Daily from the Korea Tourism Organization, five complaints concerning travel agencies and Chinese tourists were filed from January to September this year. Three were classified as unable to process because the companies complained about could not be identified. Unresolved cases included forced shopping, insulting remarks by guides, and requests for refunds after tourists purchased high-priced health products.

By contrast, the other two cases, in which the travel agencies were identified, were resolved with refunds and apologies. A complaint filed on March 5 about visits to shops outside the itinerary and pressure to post reviews was referred to KATA, which secured a full refund of the travel costs and recommended guide training, among other measures. Another complaint, filed on July 1, concerned inadequate seating information for a ferry tour package. It was closed after the travel agency apologized and provided a refund. The outcome of the redress process depended on whether the responsible company could be identified.

It has not been confirmed whether the three unprocessed cases involved designated travel agencies lending their names to other companies. However, arrangements in which the company that attracts tourists differs from the one that actually operates the itinerary are not uncommon in South Korea’s travel industry.

Mr. A, who runs a domestic inbound travel agency, pays a designated travel agency 2,000 won for each Chinese tourist he attracts. This is the fee for borrowing the name of a qualified agency because his own company has not been designated. “At first, I paid 3,000 won per person, but now I pay 2,000 won,” he said. Bank transfer records he provided also confirmed the payments.

Even when a company attracts tourists by borrowing another agency’s name, making a profit is not easy. If it does not receive sufficient ground handling fees from the Chinese outbound travel agency, the domestic company must cover accommodation, transportation and meal costs, then make up the shortfall with shopping commissions. If shopping sales fall short of expectations, the domestic company bears the losses.

Mr. A also admitted that his tour operations have repeatedly run at a loss. “Chinese outbound agencies don’t send tourists while making a loss. The problem ultimately lies with the travel agency receiving the visitors in South Korea,” he said. Some companies also receive commissions from shopping venues in advance and use the money for operating costs. But if they fail to generate the expected sales, they can fall into a vicious cycle of having to attract more tour groups to repay the advance, he explained.

Under this arrangement, the designated travel agency that lends its name may receive credit for attracting the tourists, while another company handles accommodation and transportation contracts and manages the on-the-ground itinerary. When the company overseen by the government differs from the one providing the actual services, it can become difficult to determine who is responsible when tourists are harmed.

Renewal Evaluation Every Two Years... Limits to Detecting Name Lending

The Ministry of Culture, Sports and Tourism designates travel agencies responsible for attracting Chinese group tourists, and each designation is valid for two years. When it expires, the ministry conducts a renewal evaluation to decide whether to extend the agency’s designation. In this year’s evaluation, 30 points were allocated for results in attracting Chinese group tourists, and 35 points for results in operating regional tourism and high-value-added products, among other criteria. The number of tourists attracted is calculated using data such as the Ministry of Justice’s records of group visa and visa-free entry approvals by company.

The problem is that the figures for tourists attracted on paper may not match the company actually operating the tours. Even if tourists enter the country under a designated agency’s name and a non-designated company handles their accommodation, transportation and guiding, the number of tourists attracted alone is not enough to determine whether the agency’s name has been lent.

A ministry official said, “The renewal evaluation determines whether to extend a designated travel agency’s status for another two years, so it has limitations in screening for name lending. If illegal activity is suspected, we conduct a separate investigation and determine whether to impose administrative measures, such as revoking the designation.” The ministry cross-checks settlement records during the evaluation, but this year it found no clear indications to raise suspicions of name lending.

There have also been cases in which a designated travel agency lost its designation after illegal activity was confirmed. In connection with an incident in which a group of Chinese tourists was abandoned, reported by The Asia Business Daily on July 21, the ministry revoked the travel agency’s designation at the end of August. “We took action because we determined that abandoning tourists undermined order in the travel industry. In addition to the media report, we had received related tips and were investigating,” the ministry official said.

To uncover name lending, investigators traced event-related documents and the flow of funds. In 2024, the name of a non-designated travel agency was found repeatedly in event instructions issued by a designated agency. After checking the relationship between the two companies and their account transactions, the ministry revoked the designated agency’s status in May of that year. The company is still pursuing a lawsuit over the measure. Earlier, in 2014, three travel agencies were also stripped of their designations after attracting tourists under the names of designated agencies and assigning the actual domestic tours to non-designated companies.

According to the ministry, companies that lend only their names may not maintain proper settlement records because they do not operate tour groups themselves. Comparing tourist-attraction figures with income and expenditure records in corporate bank accounts can provide clues to transactions suspected of involving name lending.

However, it is not easy to obtain the relevant records. If a company suspected of violations refuses to submit its bank transaction records, it is difficult to obtain them by force. Nor do regular renewal evaluations examine the flow of funds at every company.

From September to October this year, KATA sought to conduct on-site inspections to assess the operating status of 130 designated travel agencies for Chinese tourists across the country. The publicly disclosed inspection items cover basic information, including company operations, representatives, contact details and addresses.

The ministry views the inspections as a survey of companies’ business operations, separate from the renewal evaluation, to verify whether they are actually operating and gather information for future designation and oversight. However, it has not been established to what extent the inspections checked which companies actually operated the tour groups or examined their contractual and settlement arrangements. While procedures are in place to check designation eligibility and business operations, there are still constraints on continuously tracking the actual operation of tour groups and the flow of funds.

"Strengthen Accountability for Name Lending"... Proposal for a Pre-Registration System

KATA’s position is that both the designated travel agency that lent its name and the company that actually operated the tour group should be held responsible. The association regularly provides designated travel agencies with training on preventing name lending and instructs them to report any related cases they discover.

Last June, Chinese group tourists were left unattended for hours by their travel agency outside a tax-refund shop in downtown Seoul after refusing to shop. Police were called after the agency canceled the rest of the tour itinerary and left the scene. Photo provided by a reader.

Reforming the business model for ultra-low-cost tour packages is also seen as a challenge. A KATA official emphasized, “The practices of Chinese outbound travel agencies either failing to pay domestic designated agencies fair ground handling fees or demanding excessive commissions for bringing in tourists are hindering the qualitative growth of the inbound tourism industry.”

The association believes that when tourists are harmed, domestic designated travel agencies should take responsibility for providing at least basic accommodation, transportation and meals. When tourists’ itineraries were halted in June, KATA visited the site, provided essential services and asked the ministry to take action against the company involved.

The Korea Tourism Organization checks in advance the local selling price, the number of visits to shopping venues and whether qualified guides are employed, but only for tourism products it supports. It conducts undercover monitoring when necessary and may restrict support or exclude companies with problems from future projects. However, it has no authority to directly investigate or impose administrative penalties on general travel agencies for illegal conduct.

Experts say a system is needed to identify in advance not only whether an agency is designated, but also which company actually operates the tour group.

Lim Hyeong-taek, a professor in the Department of Tourism and Hotel Management at Sun Moon University, proposed, “A system should be introduced that holds designated travel agencies jointly liable regardless of who actually operates the travel product, and revokes their designation if they are caught lending their names—a one-strike-out policy.”

Another proposal is to register guides, vehicles and subcontracting details electronically before a tour departs. The aim is to identify the guides who will accompany tourists and the companies providing vehicles in advance, making it possible to confirm which company is actually operating the tour.

There have also been proposals to enable tourists to identify the responsible company themselves. “Tourists should be given a QR code containing information about the designated travel agency and tour guide so that the company can be identified immediately if harm occurs,” Professor Lim said. He also said standard contracts and electronic tax invoices linked to the National Tax Service should be required for shopping commission transactions, and cash settlements should be prohibited.

Managing the number of tourists attracted is not enough to understand how travel products are actually operated. That is why an oversight system is needed to examine arrangements in which the designated travel agency on paper differs from the company actually operating the tour, and to verify contractual and settlement relationships. At the very least, authorities must prevent situations in which they cannot even identify a travel agency to hold responsible when tourists report harm.

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