Despite Revenge Spending... Cards Were Used Less at Travel and Restaurants

Reduced Spending on Entertainment and Travel
Sales Decline Due to Business and Movement Restrictions
Cosmetics Also Down 13% Year-on-Year

Department Stores and Car Sales Enjoy Special Demand
Significant Regional Differences Observed

[Asia Economy Reporter Ki Ha-young] Sunwoo Young (66 years old, pseudonym), who runs a Korean restaurant in Jung-gu, Seoul, has let go of five employees during the past year and a half since the outbreak of COVID-19. Even the business maintained by regular customers saw reservations canceled one after another and sales halved every time the social distancing level was raised. After group gatherings were limited to four people and a 10 p.m. curfew was imposed, the impact was even more severe. Mr. Sunwoo sighed, “Nearby department stores are packed with customers due to revenge spending, but our restaurant cannot feel any of that,” adding, “With the social distancing level 4, dinner service is basically over.”

Although consumer sentiment suppressed by COVID-19 has revived this year, the travel and restaurant industries still show significant damage. Consumption in areas such as Daejeon and Incheon, where cluster infections occurred one after another in the first half of this year, also fell sharply compared to other regions, confirming a large difference in recovery rates by industry and region.

On the 12th, Asia Economy analyzed big data on consumption in the first half of this year commissioned by Shinhan Card, revealing that the top five industries with the largest decrease in card spending compared to the previous year were entertainment, travel, cosmetics, other dining (general public restaurants), and Korean food.

The industries with the largest decrease in card spending were entertainment sectors such as karaoke rooms, clubs, and pubs (-55%) and travel sectors including travel agencies and duty-free shops (-30%). These two industries were directly hit by sales restrictions and movement limitations due to the spread of COVID-19 infections.

With mask-wearing becoming mandatory and outings sharply reduced, consumers using cards to purchase cosmetics also decreased by 13% compared to the same period last year. General public restaurants and Korean food also saw double-digit decreases of 13% and 11%, respectively, confirming ongoing difficulties in business operations. In particular, since most workers in the food service industry are self-employed, it is interpreted that their livelihoods have been directly impacted.

During the same period, the lodging industry (hotels, motels, inns, etc.) and academies increased by 20% and 13%, respectively, compared to the previous year, but have not recovered to pre-COVID-19 levels. Compared to the first half of 2019, spending on lodging decreased by 17%, and academies by 1%.

On the other hand, department stores (26%) and automobile sales (18%) enjoyed a revenge spending boom. With the activation of remote work increasing time spent at home, card spending in the interior decoration sector (10%) also increased.

Regional consumption differences were also significant. The area with the largest decrease in consumption in the first half of this year was Daejeon, shrinking by 8% compared to the same period last year. This was followed by ▲Incheon (-6%) ▲Ulsan (-4%) ▲Gwangju (-3%) ▲Sejong (-3%) ▲Jeonbuk (-1%). Conversely, Jeju recorded an overwhelming increase in consumption by rising 19% compared to the previous year, which is analyzed to be due to overseas travel demand shifting to Jeju. Card spending in Seoul (3%), Gyeonggi (4%), and Busan (1%) also increased slightly.

Card spending shows a clear recovery trend in numbers this year. According to the Korea Federation of Credit Card Associations, card approval amounts have risen for four consecutive months since February. The Consumer Confidence Index (CCSI) has also improved for six consecutive months. According to the Bank of Korea, the CCSI in June was 110.3, the highest level since the spread of COVID-19 began.

However, there are concerns that card spending may shrink again due to signs of a fourth wave of COVID-19. The government applied the highest level 4 of the new social distancing system to the three metropolitan areas of Seoul, Gyeonggi, and Incheon for two weeks from today until the 25th.

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