Lotte Duty Free to take measures facing China tourism crisis

Lotte Duty Free is implementing a number of measures to combat the crisis situation caused by China’s ban on tourists visiting South Korea.

Over 40 executives will return 10% of their salary in a bid to alleviate some of the pressure on the company as a result of the lost business. The senior executives have more than 15 years of experience on average, Lotte said, and are all tax-exempt veterans.

Lotte Duty Free CEO Jang Seon-wook: “The decline in sales is a shock that has been unprecedented since the founding of Lotte Duty Free in 2003, except for the SARS crisis.”

As reported, South Korea’s decision to deploy the US defence system infuriated the Chinese government and led to a massive backlash against Korean companies. The tourism and travel retail sectors, heavily dependent on Chinese visitors, have been among the worst-affected.

Lotte Duty Free discussed various methods of encouraging individual Chinese travellers and tourists from other countries in Southeast Asia to visit South Korea at a recent management strategy meeting.

The meeting focused on how to revitalise sales and reduce costs, the retailer said, as it feared the Chinese ban could be a prolonged one. The company also noted the impact of fierce competition among duty free retailers in South Korea, which it said was “overheating”.

“The THAAD situation is likely to be prolonged,” wrote CEO Jang Seon-wook in a letter to employees. “The decline in sales is a shock that has been unprecedented since the founding of Lotte Duty Free in 2003, except for the SARS crisis.”

He said the company’s experience would see it through the crisis, and that it should focus on internal matters that it had control over. Zhang cited the loss and re-acquisition of the World Tower duty free licence as an example of overcoming a difficult situation.

“If we can trust each other and cope with each other, we will become the cornerstone of growing Lotte Duty Free as a global number one company,” he told staff. “Everyone in the company will gather wisdom and enthusiasm.”

Lotte Duty Free noted a survey conducted by the Korea Tourism Organization (KTO) in 2016 which showed that foreign tourists decided to visit South Korea 2.7 months before they travel on average. The retailer said this means that even if the THAAD dispute was solved immediately, there would still be a long delay in returning to ‘normal’ and that “long-term difficulties seem inevitable”.