Shoppers fill a street in Seoul, South Korea.

HONG KONGChinese tourists are losing enthusiasm for travel to Jeju Island, signaling a broader slowdown for South Korea, according to a report released by Nomura Friday.

Although the drop in October to the popular holiday destination was small — Chinese inbound tourists to Jeju Island in October were 267,745, translating into a 0.3 percent year on year decline and a 3.1 percent month on month decline, it could “signal a swift slowdown in nationwide Chinese inbound traffic, in our view,” Nomura analysts Cara Song and Jiun Im said. The firm also cut its forecast for Chinese traffic to South Korea in 2017 to 5 percent year on year growth down from 12 percent.

The island, located in the country’s southernmost tip, attracts 30 percent of total Chinese inbound tourists to South Korea thanks to its visa-free access for Chinese nationals. Chinese visitors to the rest of South Korea must apply for a visa in advance. The country has been a large draw among Chinese thanks to its geographical proximity as well as its dominance in pop culture and fashion.

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Additional Chinese airline traffic data showed a drop for the first half of November on routes to South Korea as a whole. Passenger numbers for the first 15 days of the month traveling from China to South Korea fell 3.2 percent year on year to 350,626.

What is behind the dip? Nomura points to the reform implemented at the end of October by Beijing to deter low-end shopping tour packages priced at less than 2,000 rmb (about $290). It’s a common practice in China for travel operators to offer low priced (and sometimes below cost) tours. However travel companies make their money on bringing the tour group to shop at designated points — often involving hard sales tactics — where they receive a commission on purchases.

Nomura said 20 percent of Chinese group tourists, equivalent to 10 percent of total Chinese tourists in South Korea are traveling to Korea on low-end tour packages. Most group-tour packages include a minimum of one shopping mall visit in South Korea.

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Korean cosmetics brands with high exposure to duty free shopping channels such as Amorepacific would be the most negatively impacted, Nomura said.

Last year,  5.98 million Chinese visited South Korea, a number that’s grown an average of 40.6 percent since 2012, according to the LG Economic Research Institute. Spending done by these travelers was estimated to be 12.58 trillion won ($10.6 billion), accounting for 0.8 percent of South Korea’s GDP, the Seoul-based think tank said.

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