Tourism/Leisure: May Data Review for Travel Agencies and Foreigner-only Casinos


The author is an analyst of Shinhan Investment Corp. She can be reached at — Ed.


Travel agencies: Steep upturn seen in package tour bookings

Hana Tour Service and Modetour Network both reported over-1,000% YoY growth in outbound travelers for May. Package tour customers, their main source of revenue, soared by more than 4,000% YoY, hitting a new high since the outbreak of COVID-19. Package tour bookings for the next three months have skyrocketed by more than 30,000% YoY, with monthly average growth nearing 5,000% YoY levels.

In absolute terms, however, the total number of package tour customers stands at just 10,000-30,000 people, far lower than the monthly average in 2019. We project tourism earnings to improve at a slower-than-expected pace, with costs (airfare, landing fees) remaining high and airline capacity still at half the level recorded before the pandemic.

Foreigner-only casinos: Visible improvement noted in monthly data

Foreigner-only casinos reported significant improvement in monthly earnings for May. Grand Korea Leisure and Paradise reported a combined table drop of KRW293.1bn (+19% YoY) and sales of KRW35.3bn (+49% YoY), nearing the upper end of the monthly earnings range seen over the past 27 months following the outbreak of COVID-19.

We also note continuing improvement in key indicators (increase in visitor numbers → rise in table drop → recovery in hold percentage → growth in sales). At Grand Korea Leisure, VIP and mass visitors visibly increased from previous stagnant levels, leading to an increase in table drop and steadier hold percentage, and resulting in sales growth.

Improvement in all key indicators was driven mainly by: 1) resumed marketing campaigns in overseas markets; and 2) removal of domestic restrictions on business hours. Paradise and Grand Korea Leisure have been dispatching marketers overseas since late April and early May, as part of efforts to attract existing customers and new visitors ahead of the resumption of airline operations and complete removal of social-distancing rules. We believe these efforts are now starting to drive gradual improvement in monthly data. From 2H22, we expect to see faster recovery in the inflow of Japanese visitors, the main customer base for foreigner-only casinos.

Paradise and Grand Korea Leisure operated 24 hours a day even during the pandemic, but really started to see an increase in visitors spending longer hours at their casinos after business hour restrictions on multi-use facilities were fully lifted in April. Casinos are now starting to see visitors staying through dawn.

Foreigner-only casinos to post faster improvement in earnings

We maintain our OVERWEIGHT view on the leisure sector and favor casino operators over travel agencies on expectations for faster recovery in earnings. Despite expectations for rapid recovery and resumption of dividend payments, casino stocks have yet to see their market caps return to 2019 levels. We believe overseas marketing campaigns will help to drive further improvement in earnings for foreigner-only casinos going forward. Kangwon Land, which is open to locals, is likely seeing an uptrend in daily sales since the restriction on side bets and cap on visitors were removed on May 16.

Despite the surge in package tour bookings, travel agencies are likely to see macroeconomic risks weigh on earnings recovery. However, we believe expectations for a rebound are already priced in with the combined market cap of travel agencies exceeding 2019 levels. Nevertheless, Hana Tour Service still looks attractive as it stands to benefit from the market reshuffle caused by the pandemic.


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