Low prices and policies limit Korea industry growth

When pop star Taylor Swift opened the final performance of her 2024 Eras Tour in December, CNBC featured the CEO of a global hotel chain. He praised the tour’s enormous economic impact, noting that hotel room occupancy in Stockholm rose 24% and average room rates more than doubled. Local businesses likely benefited in a similar way. This phenomenon is referred to as “Swiftnomics,” describing how cities hosting Swift’s performances experience a measurable economic boost.

In South Korea, the situation unfolds differently. When BTS scheduled a world tour concert in Busan in June, surrounding hotels sharply increased their rates. Considering the global attention the performance would draw, temporary price hikes were expected.

However, the government intervened. At a national tourism strategy meeting on Feb. 25, officials announced that hotels must disclose peak-season rates in advance and would face a “one-strike-out” penalty, including temporary suspension of operations, if they charged more. Whether effective or not, the move raises the question of whether hotel pricing should fall under government regulation.

Even the Fair Trade Commission conducted an investigation but ultimately decided only to continue monitoring the market. No evidence of collusion or wrongdoing was found. Officials said they are aware of the market dynamics. A Ministry of Economy and Finance official recently told reporters, “Only a very small number of cases are being highlighted, and the shortages may simply reflect limited supply.”

If operators earn steadily, they gain the capacity to invest, expand supply, and enhance quality. The industry can develop. The real problem lies in persistently low rates. Saying “Korea has cheap accommodations” often implies that tourism offerings lack enough appeal for visitors to pay premium prices. Officials focused on the broader picture should consider how to use opportunities to grow local tourism rather than imposing penalties. Affordable lodging will naturally emerge as the market expands.

Similar approaches appear in other cultural and tourism policies, often framed as “lower costs to stimulate consumption.” The Ministry of Culture, Sports and Tourism recently launched a pilot program reimbursing half the travel expenses for trips to rural areas facing population decline. A travel industry source said, “The goal should be to make tourists want to visit, not just give them money back. Otherwise, the regions gain little in the long term.”

The film industry faces similar challenges. Last year’s government-issued movie discount vouchers yielded mixed results. Yet a new blockbuster, ‘Crime City 4’ (2024), became a million-ticket hit without such incentives after a two-year gap. While the ministry’s proposed subscription-based movie pass shows promise, it risks reinforcing the perception of films as cheap if it fails to cultivate a sense of cultural value and trendiness.

To grow K-culture and related industries as serious economic drivers, South Korea must move beyond outdated, cost-focused approaches. Support for vulnerable groups is important, but policy should prioritize fostering competition and building a foundation for industry growth. In a context where prices for meals and other goods rise due to increased money supply, it is unrealistic to freeze prices for cultural and tourism products. Focusing only on keeping costs low risks producing nothing more than substandard outcomes.