Cultural Retail
Established in 1993, Hana Tour is the largest travel company in Korea. In the last couple of years, on average, the company has recorded approximately 380 billion won (US$335 million) in sales and 40 billion won (US$35 million) in profits annually. Recently, the company has received a lot of publicity thanks to its successful bid for duty-free businesses in Incheon International airport and in downtown Seoul. The duty-free business is known as a cash cow, and annually generates approximately 300 billion won (US$264.9 million) in sales and 12 billion won (US$10.6 million) in profits. It is likely that Hana Tour will see significant synergy effects from combining tourism and the duty-free businesses, which will also impact the company’s overall business performance.
It turns out that the company has set itself up for global tourism and cultural enterprises for some time. Following the goal of becoming the number one multinational cultural tourism group by 2020, the company has branched out into the retail, hotel, culture and performance enterprises. In the process, it has also secured significant overseas opportunities.
Along with launching into the duty-free business, Hana Tour has been expanding into a variety of businesses that create synergy effects combined with the existing tourism business. Locally, drawing on culture and performance businesses, Hana Tour offers accommodation packages featuring art and performance events. Moreover, in cooperation with 8,000 local travel agencies and logistics channels, Hana Tour has also launched into e-commerce featuring ticketing businesses for art and performance enterprises. Titled “Hana Free Ticket,” the company’s retail site handles ticketing for musicals, concerts, and cultural events. Also by getting into the hotel business, Hana Tour can provide travel packages with competitive prices, as the company can cut down accommodation costs. Beginning in 2012, Hana Tour opened the Center Mark Hotel in Insa-dong, followed by the T Mark Hotel in Chungmu-ro in 2013. A 560 room hotel is scheduled to be opened in the Namdaemun area in 2016. It also opened T Mark City Sapporo in Sapporo. With management expertise under its belt, Hana Tour has been commissioned to run the Pattaya Hotel in Thailand since last April.
Hana Tour has started focusing on foreign opportunities and selling travel packages to foreign travelers in overseas markets. Hana Tour currently has 33 outpost offices worldwide. Using its overseas network, outpost offices in foreign countries developed travel packages in third countries, targeting local travelers in the foreign country. This is quite an innovation internally, given that in the past, 90 percent of the company’s travel business has been done with local outbound travelers.
Given this, the Korean government’s recent decision to delegate the Chinese visa handling task to Hana Tour is a big overseas business breakthrough. In March this year, in the face of an increasing amount of Chinese tourists and laborers seeking Korean visas and handling the overwhelming administrative work, the government decided to delegate the task to Hana Tour. Although the delegation is currently in trials limited to the Guangzhou and Qingdao areas and the final decision to extend to other Chinese cities has not been made, many consider that the opportunity would bring many Chinese travelers to use Hana Tour travel products and Hana Tour–run Duty Free Stores in Korea.
Although a majority of industry insiders consider a company’s venture into the duty-free business a terrific opportunity for the company, some raise concerns.
The Hana Tour-led consortium SM Duty Free is formed by 10 small and medium enterprises, while Hana Tour represents a 76.8 percent stake. The SM Duty Free store has to stock 50 percent of its stores’ shelves with products produced by local SMEs.
Although this feature is viewed positively by society, provided this gives SMEs a critical marketing venue, however, many questions whether focusing on SMEs’ products will give SM Duty Free competitive edges compared to its competitors in the duty-free business. Access to high-end products with relatively lower prices is a traditional appeal of duty-free stores for many consumers. Also, the fact that the combined shares of the company’s largest shareholders are mere 17 percent means that in the future, the company can’t make big investments into large-scale projects.
Nevertheless, positive views about the future of Hana Tour dominate these days. Following the opening of the SM duty-free shops in Incheon Airport in November, Hana Tour will open a duty-free shop in Insa-dong in January next year. In fact, Hana Tour plans to turn its headquarters in Insa-dong into a duty-free store. Insa-dong SM Duty Free store will sell products featuring Korean Hallyu celebrities in partnership with SM Entertainment. An insider in the company said that shoppers will have unique cultural experiences apart from shopping. Hana Tour is also trying to make the best out of commercial and tourist trends in Insa-dong associated with big tourist attractions like Gyeongbokgung Palace.