Redcap Tour, Turning the COVID-19 Crisis into an Opportunity

Long 'Corona Ordeal' Ends, Travel Ready to Take Off
Only Travel Industry Segment in Profit
Q1 Revenue Up 6.2%
Rental Car Business Operating Profit Rises 18%

The travel industry, which experienced its worst crisis due to COVID-19, is cautiously beginning to recover alongside vaccine supply. Since overseas travel came to a near halt after the outbreak last year, the travel industry was in a state of suspended operations and endured a harsh period marked by painful restructuring. Many businesses closed down, and some attempted to transform into platform companies. With the start of vaccine distribution, the industry is now aiming for a turnaround. They are preparing for the future by launching various niche products such as overseas travel packages for vaccinated individuals and business trip-exclusive products. As some countries resume overseas travel, the travel industry is actively moving to capture the anticipated post-COVID ‘revenge spending’ surge.

[Asia Economy Reporter So-yeon Park] Redcap Tour has been recognized as the only company in the travel industry to turn a profit despite being hit hard by COVID-19. Redcap Tour’s main businesses include travel services, car rentals, and used car sales related to the rental car business. With overseas travel still not resumed, the rental car business drove its performance. As many business trip-specialized travel agencies closed due to the prolonged pandemic, Redcap Tour absorbed this customer demand.

◆Rental Car Business Drives Performance Amid Overseas Travel ‘All Stop’= According to the Financial Supervisory Service’s electronic disclosure system on the 10th, Redcap Tour reported consolidated sales of 63.6 billion KRW in the first quarter of this year, a 6.2% increase compared to the same period last year. Operating profit rose 8.8% to 7.7 billion KRW during the same period. Ordinary profit increased by 10.5%, and net profit rose by 9.8%.

The rental car business was the key driver of this performance growth. Rental car sales reached 61 billion KRW, up 15.4% year-on-year, and operating profit increased 18.5% to 9.3 billion KRW. Both vehicle rental revenue and sales revenue increased due to a rise in long-term rental contracts and used vehicle sales. On the other hand, travel business sales dropped 63.7% year-on-year to 2.5 billion KRW, recording an operating loss of 1.5 billion KRW.

Redcap Tour views positively the fact that the operating losses in the travel business, which had been increasing quarterly last year, decreased for the first time in the first quarter of this year. Cost reductions became possible through phased emergency management measures, leading to expected performance improvements in the travel business, which recorded a total operating loss of 11.9 billion KRW last year.

The rental car division plans to expand its business through vehicle subscription services and the introduction of eco-friendly vehicles. Since entering the vehicle subscription service market last year in partnership with Hyundai Motor Group, Redcap Tour has been expanding related services. Currently, the vehicle subscription service is limited to the Genesis brand, but the company plans to expand the vehicle brands offered. Monthly rental contracts are available, allowing customers to drive a Genesis sedan on weekdays and switch to a Genesis SUV on weekends, proposing a new business model to the industry.

Redcap Tour sees the acceleration of electric vehicle adoption due to eco-friendly policies as an opportunity for growth. The government-led ‘Korean-style Zero Emission Vehicle Transition 100’ campaign, known as KEV100, aims to convert vehicles owned or leased by domestic companies to electric or hydrogen vehicles by 2030. It is expected that demand from corporations and individuals who find it burdensome to purchase eco-friendly vehicles initially will flood into the rental car market. Kim Jae-young, IR Manager at Redcap Tour, said, "Out of about 20,000 vehicles currently owned, around 4,000 are eco-friendly vehicles, and we plan to increase this number through discussions with manufacturers."

◆Approaching 1,000 Corporate Clients= In the travel business, the number of corporate clients has significantly increased compared to before COVID-19. As many small business trip-specialized travel agencies closed, Redcap Tour actively absorbed corporate clients who found it difficult to prepare for business trips. The number of corporate clients rose from 720 at the end of 2019, before COVID-19, to 870 as of the end of April 2021.

A Redcap Tour official said, "At this pace, we will soon surpass 1,000 corporate clients," adding, "As vaccine distribution expands, we expect large-scale performance improvements and renewed job creation." Business trip travel agencies require know-how in risk management and customer information maintenance, making entry barriers relatively high.

Redcap Tour is gaining attention for its one-stop service that covers everything from business trip applications to schedule management, expense settlement, and reporting. The company plans to expand customer services by promoting its proprietary universal business trip management solution (BTMS 4.0) and real-time flight and hotel reservation system (OBT). A Redcap Tour representative said, "From trip approval to expense settlement, everything can be managed within one system, and after the trip, managers can view reports at a glance, which has received very positive feedback."

Additionally, while overseas events remain difficult in the MICE sector, domestic events and web symposiums are active. The subsidiary Redcap MICE, specializing in M&E (Meeting & Event) business, turned a profit in the first quarter, and inquiries for offline events in the second half of the year continue.

Last year, Redcap Tour paid a cash dividend of 600 KRW per common share. The dividend yield was 3.2%, with total dividends amounting to approximately 4.8 billion KRW. The debt ratio was recorded at 162% at the end of 2018, 154% at the end of 2019, and 170% at the end of 2020. During the same period, the current ratio was 36%, 28%, and 23%, respectively.

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