Chinese travel platform Trip.com seizes No. 1 spot in Korea, alarming domestic rivals

Chinese online travel agency Trip.com has mounted such an aggressive push into South Korea that domestic OTA players now fear being driven out of business. The threat became concrete this month after Trip.com surpassed local rivals in monthly active users for the first time.

Domestic OTAs are already struggling under what the industry describes as a double burden: fierce competition from a well-capitalized foreign rival and regulatory rules that weigh more heavily on Korean companies than on their overseas competitors in practice. Industry players warn that foreign capital is steadily taking over the domestic travel market.

According to IGAWorks' Mobile Index, Trip.com led all OTAs operating in South Korea last month with 5.54 million monthly active users, followed by Yanolja's Nol at 5.45 million and Yeogi Eottae at 4.41 million.

It marked the first time Trip.com had overtaken both of Korea's dominant domestic OTAs. The platform had about 1.88 million monthly active users in July last year, meaning it posted nearly 200 percent growth in a single year.

Trip.com recorded global sales of 62.4 billion yuan ($9.25 billion) and a net profit of 33.4 billion yuan last year, and has been flooding the South Korean travel market with spending.

Industry estimates suggest Trip.com poured about 35 billion won into marketing in South Korea this summer alone — more than the combined marketing spend of all major domestic travel companies over the same period.

The pressure is being felt across the board, from domestic OTAs such as Yanolja and Yeogi Eottae to traditional travel agencies. Hanatour Service posted second-quarter sales of 115.4 billion won, down 3.8 percent, and operating profit of 5.4 billion won, down 43.6 percent. Modetour Network swung to an operating loss of about 860 million won over the same period.

Even accounting for the fallout from the Middle East conflict, high exchange rates and fuel surcharges, the industry broadly agrees that Trip.com's influence has grown at an extraordinary pace.

"Distribution channels have shifted to overseas OTAs like Trip.com," an industry official said. "It will be difficult for the growing travel demand to translate into earnings for Korean companies."

A view of Myeong-dong in Seoul. [Yonhap]

Local governments and state-run enterprises have been signing MOUs with Trip.com and other foreign OTAs in quick succession, compounding the industry's frustration over what it sees as discriminatory regulation that favors overseas platforms over domestic ones.

Korea Airports Corporation signed an MOU with Trip.com in December last year to boost activity at regional airports. By May this year, Trip.com had climbed to the top of domestic airline ticket sales rankings for the first time — surpassing not only domestic OTAs but also Hanatour Service, which had held the No. 1 position for decades — recording about 66.8 billion won in airline passenger sales settlements.

Gyeonggi Province, the Gyeonggi Tourism Organization and the Korea Tourism Organization have also signed MOUs with Trip.com.

The regulatory imbalance adds another layer of concern. Most foreign OTAs operate in South Korea through local branches while keeping their headquarters and servers abroad, which limits how effectively current laws can be enforced against them.

Trip.com itself entered the Korean market in 2017 without registering as a mail-order business, and the Korea Fair Trade Commission only sanctioned it this year.

Domestic OTAs, by contrast, face strict rules on price display — they must show prices inclusive of taxes and service charges — and must staff up to comply with local requirements covering everything from refund policies to personal data protection systems, all of which add significant costs.

Foreign OTAs are also exempt from mandatory certification under the Information Security Management System framework. Authorities take the position that Trip.com's Korean branch does not exceed the 10 billion won threshold for information and communications service revenue, even though the branch's overall domestic sales surpass that figure and the company operates a business classified as an information and communications service.

"Even when illegal conduct by a foreign OTA is confirmed, it takes considerable time before any sanctions are actually imposed," an OTA industry official said.

ko@heraldcorp.com