TT-929 (Tourism Edition) -- End of Easy Gains in Japan Inbound Travel Sector?

* * * * * * * * TERRIE'S (TOURISM) TAKE - BY TERRIE LLOYD * * * * * *
A bi-weekly focused look at the tourism sector in Japan, by Terrie
Lloyd, a long-term technology and media entrepreneur living in Japan.
(http://www.terrielloyd.com)

Tourism Sector Edition Sunday, Jan 28, 2018, Issue No. 929

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+++ End of Easy Gains in Japan Inbound Travel Sector?

The Japan Tourism Agency (JTA) had more good news to share last week,
when they announced that Japan had attracted 28,961,000 foreign
travelers in calendar year 2017, up 19.3% on 2016. They spent a record
JPY4.416trn (US$40bn), up 17.8% over the previous year, although per
capita, the spend was down at JPY152,000. At this rate, it looks like
the government will hit its ambitious 40m travelers goal by 2020, but my
take is that this will be the peak unless the nation's tourism
authorities change their approach (more below). What is important,
though, is that inbound tourism has become the largest growth business
sector in the land (still slightly less than 1% of GDP, though) and thus
even the government is taking the sector more seriously than it has in
the past.

Providing there are no international missteps between Japan and China
(in particular), we should see about 33m inbound travelers in calendar
2018 and 40m~42m by 2020. I arrived at this figure by following the
growth trend of foreign visitor numbers each year (now in a negative
trend). In 2012 the year-on-year growth was 34.4%, 2013 it was 24%, 2014
29.4%, 2015 an amazing jump of 47.1%, then in 2016 it fell back to
21.8%, and now 2017 just 19.3%. Regressing this negative trend by about
2.5% a year, we get a growth rate of just 12% in 2020. BTW, 2015 was the
year that the Chinese discovered Japan's cheap stores and "bakugai"
spending was all the rage. Chinese per capita spending numbers have
sagged since then.

The Olympics will of course pull Japan a lot of global attention and we
may get an additional spike that year. However, if I'm a regular visitor
to Japan (55% of all tourists now), then probably I'll want to avoid
Japan in the run-up and during the Olympics themselves - which will
counterbalance the Olympics surge. So my estimate is that a flow of
35m-45m people annually after 2020 is sustainable, but shooting for 60m
(as the government announced 18 months ago) by 2030, will require a very
different set of government incentives and behaviors to now.

It isn't surprising that the government want to keep the growth going.
All of these free-spending tourists cost local authorities almost
nothing in extra social services to look after. No old age homes,
schools, even little increase in sewerage and other utilities - thanks
to the fact that the falling population provides an infrastructure
already designed for a lot more people than actually use it. I have
mentioned before that 8 tourists do as much discretionary spending in
their average 6.5 days in Japan as 1 Japanese resident does in a whole
year... So the 28m incomers last year were equivalent to a new city of
3.5m people, but with no investment costs - pretty compelling when you
think about it!

But how will the government keep this sort of growth going?

[Continued below...]

--------- Australia/NZ Japan Travel Seminars --------------

Title: "Latest Trends in Japan's Inbound Travel Boom"
A series of free travel seminars in Australia and New Zealand, by Terrie
Lloyd

Japan is in the midst of the world's largest inbound travel boom in the
last 20 years. From 2011 until 2017, the number of inbound travelers has
increased 450%, from 6.2m to 28m (estimated) by March 31st this year.
What is exciting about this US$40bn+ travel boom is that more than 50%
of the market is held by non-Japanese firms, and that means great
opportunities for Australian and Kiwi firms as the growth continues.

As founder and CEO of one of Japan's top inbound travel sites,
www.japantravel.com, Terrie Lloyd is at the forefront of the market,
helping to make and shape trends as the market evolves. His particular
focus is on repeat travelers, who now account for more than 55% of the
flow, and who are demanding more specialist experiences that typically
define a maturing market. His presentation will share the latest news on
what trends are emerging, and where the opportunities lie for Australian
and Kiwi firms.

Terrie will give some specific examples of new travel products and
services now under development, particularly highlighting hiking and
trekking trails in Kyushu, a still-underdeveloped part of Japan (read,
low cost, great food, and no hordes of tourists)

Speaking Locations
* Seminars 1 & 2: Sydney, Australia, February 9/10 - location to be
confirmed
* Seminar 3: Auckland, New Zealand, February 14 - Crowne Plaza Hotel,
Auckland

The seminars are free of charge. Other details will be confirmed as they
come to hand. Interested attendees can reserve a space, by emailing us
at jerome.lee@japantravel.com.
-----------------------------------------------------------

One way is to continue doing what they have been doing so far - keeping
the yen cheap compared to other Asian currencies, relaxing travel visa
requirements for those countries that are still semi-blocked from coming
(Vietnam, Philippines, India to some degree, and others), and making it
as easy as possible for Low-cost Carrier airliners to get licences and
access to low-cost regional airports (those suitable for medium-haul
jets). There are still many regions in Japan with local airports who
still cannot get LCC traffic, either for political reasons, like Kochi
which seems to have done a deal with ANA and JAL in order to maintain
regular services outside the tourist season, or because they need to
upgrade their facilities (runway strength and customs/immigration
capability). If these points were to be fixed, I reckon Japan could get
another 5m people a year quite easily.

But probably a better approach would be to create experience-based
destinations. Until now most of Japan's inbound travel growth has come
from using existing resources and activities, with very little need for
understanding of what the visitor audience actually wants. Many of this
current new wave of visitors are first-timers who have been fascinated
with Japan through its pop culture and food appeal - so they are fans
who would have come here anyway - and they have been easy to attract.

But from the slowing growth rates I think it's safe to say that we're
about done with the "low hanging" fruit among the nearby uncritical
starry-eyed first-timer population. To keep the engine going, we need
new visitors who will travel longer distances and of course those nearby
to come over even more frequently. To do this, the Japanese tourism
authorities are going to have to get more sophisticated and start
focusing not only marketing on segmented audiences, but also building
travel infrastructure that matches the audience's needs. Sports,
regional luxury resorts, remote areas accommodation, summer schools,
authentic/iconic locations representing nature and tradition, etc.

This means deregulating, creating public investment funds for larger
destination travel projects, creating a favorable tax environment for
private investors to get involved in projects, and basically all that
other good stuff that governments in other strong tourism destinations
have come to learn.

Take New Zealand, for example, which is an exemplary example of a
remotely located country that has created a powerful, compelling image
that causes foreign tourists to travel insanely long distances (to the
opposite end of the earth in many cases) to experience the dream. What's
more, once there they also spend about almost double what visitors to
Japan do (NZ average spending per person is NZ$3,180 - JPY255,000
approx.). To get to this enviable position, the NZ government has shown
clear vision and leadership. For me, the kick-off was when they invested
US$1m in 2003 to buy the domain name www.newzealand.com - which it uses
to promote not only government initiatives but also private businesses
and their offers, tax and investment incentives for movies to be set in
NZ that will reinforce the national image, a laser focus on messaging
and legislation to protect NZ's pristine outdoors and activities, and
gutsy investments such as NZ$80m in the national cycle-way project.

In contrast, apart from making visas, shopping, and home stays easier,
we have seen almost nothing from the Japanese government that shows an
understanding of how to keep people engaged and interested.

The proof of NZ's magnetic appeal, despite being the most remote country
in the world for many Americans and Europeans, can be found in the
numbers. Here are NZ's traveler source countries for 2017 through to
October last year:

1. Australia (incl. Norfolk Island), 40% of inbound total, approx.
1,464,000 persons
* Australia is the equivalent of S. Korea or Taiwan for Japan. They're
so close, they will come anyway.

2. China 11% 411,000
* China is a phenomena unto itself, and both NZ and Japan benefit from
the rise in living standards there, but we always need to remember that
totalitarian governments can disrupt everything if they feel threatened.

3. USA 9% 320,000
* Now things get interesting. Americans travel up to 20 hours to get to
NZ. Why? Because of the iconic clean/green images and of course priming
from the Lord of the Rings.

4. UK 7% 246,000
* You can't get much further away from NZ than the UK - typically 23
hours travel!

5. Germany 3% 105,000
* And Germany is even further, in terms of air flight times.

There are of course people traveling from Europe and North America to
visit Japan, but they are a much smaller percentage compared to Japan's
neighbors. This tells me that Japan is not yet mature in terms of being
a compelling destination at a global level. Instead, it's seen more as a
shopping and food escape for the local region - every country of which
Japan has a potential political or territory fight simmering away in the
background and which thus represent high risk tourism sources.

Japan as a comparison (November 2017 only):
* USA 4.8% 114,900
* UK 1.05% 25,000
* Germany 0.66% 15,900

If there was a message for the JTA here, it's that the government should
stop patting itself on the back and start to realize that the hard work
is about to start. To address this challenge, the JTA needs to:
* Collaborate more with the foreign private sector (not just JTB) to
understand audience needs and segmentation
* Establish a 5-year plan that focuses on national destination travel
investment
* Establish a data analytics team that is capable of detailed, accurate
(read, scientific) market segmentation
* Moving the inbound marketing role away from the bureaucrats at JNTO
and create a new public/private team (working with foreign PR and ad
pro's) - leaving the JNTO with the international liaison role that it's
much better at anyway
* Working closely with METI and other government agencies to submit
legislation that unleashes regional private and public investment
targeted at foreign tourists

...The information janitors/

***********************************************************

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-----------------------------------------------------------

END

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