"Ruined Peak Season"... T-Mef Direct Hit Travel Agencies Struggle in Q3 as Well

Hana Tour and Modu Tour Lower Operating Profit Forecasts
Additional Losses Reflected Due to Unsettled Sales Payments
Demand Declines in Major Destination Japan Amid Earthquake and Other Adversities
Full Effort for Q4 Rebound During Short Holiday Period

At the departure hall of Incheon International Airport Terminal 1, travelers heading overseas are checking their departure flights. Photo by Jo Yongjun jun21@

The travel industry is believed to have struggled even in the third quarter, considered the peak season of the year, due to the fallout from the unsettled payments to sellers by TMON and WEMAKEPRICE (TMEP). Although the summer vacation, holidays, and Chuseok holiday typically lead to increased demand for overseas travel, sales of package products, which outbound travel agencies (domestic travelers going abroad) mainly focus on, fell short of expectations. With the transition to the COVID-19 endemic phase leading to a surge in revenge travel spending overseas, there is a growing possibility that the annual performance recovery trend will be hindered.

According to related industries and the securities sector on the 8th, Hana Tour's expected operating profit for the third quarter of this year is projected to decrease by 4% year-on-year to 12.7 billion KRW. During this period, the number of outbound package travelers is expected to reach 495,000, a 38% increase compared to the same period last year, and sales are anticipated to rise 17% to 148.4 billion KRW. However, due to the TMEP incident reflecting some losses in the performance and a decrease in sales revenue through online affiliates, operating profit is expected to fall more than 6 billion KRW short of the consensus (market average forecast) of 18.8 billion KRW.

Modetour is also expected to see its third-quarter operating profit drop 56% year-on-year to 1.3 billion KRW. The expected number of outbound travelers during this period is 220,000, a 7% increase from the same period last year, but the TMEP issue continued to affect the third quarter, resulting in a performance far below the consensus forecast of 4.5 billion KRW. Additionally, Norangpungseon and Kyowon Tour are reported to have had lower-than-expected outbound traveler numbers through package products in the third quarter.

A travel industry insider said, "After reflecting the unsettled payments from TMEP as losses, the demand for overseas travel to Japan was lower than expected due to the earthquake in Miyazaki Prefecture last month and the issuance of a Nankai Trough mega-earthquake advisory (temporary information) in August." They added, "Negative factors such as the rise in Western European airfares due to the Paris Olympics held in July and August overlapped in the package market, causing the third-quarter results this year to fall short of expectations."

Another insider stated, "As the travel market has been recovering since COVID-19, travel agencies have expanded their staff for product sales and consultations and reorganized infrastructure, increasing cost burdens. The TMEP incident caused a decrease in revenue through e-commerce channels, and it was not easy to compensate for this quickly through direct sales, which is also believed to have contributed to the poor performance."

Travel agencies plan to focus on strengthening profitability in the fourth quarter, starting with this month, when demand for bridge holidays due to the temporary holiday designation for Armed Forces Day and autumn foliage viewing peaks. In fact, Kyowon Tour Travel Easy analyzed package product reservation data as of early this month and found that overseas travel demand was at 88% compared to the same period last year. A representative from Travel Easy said, "Demand for Japan, which had declined in the third quarter, is increasing again, and reservation rates for long-distance products such as Western Europe, the Mediterranean, and Eastern Europe are also rising."

In addition, Modetour recently implemented an organizational restructuring to strengthen its core package products by introducing a two-headquarters system considering regional characteristics and expertise, and establishing a special product division specialized in developing and operating high value-added travel products. Kim Hyun-yong, a researcher at Hyundai Motor Securities, noted, "(Modetour) is continuously investing in the online sector to increase the online transaction ratio, which is currently in the low 30% range." He added, "They see resolving the slow recovery of package outbound travelers compared to the market as the top priority and have recently carried out a large-scale organizational restructuring. The effects are expected to materialize, at the earliest, in the first half of next year."

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