TT-953 (Tourism Edition) -- Cruise Ships - How to Tap the Tourist Mother Lode?

* * * * * * * * 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, July 15, 2018, Issue No. 953

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+++ Cruise Ships - How to Tap the Tourist Mother Lode?

The great Heisei inbound travel boom in Japan continues and is unlikely
to peak until 2020 when the global promotion of the Olympic Games,
rather than actual attendance, will put Japan on everyone's lips as a
destination. While the most famous locations around the country are now
being swamped with tourists, to the point where there is talk of
limiting the numbers, other parts of Japan are still struggling to
attract international visitors. And among those struggling are the many
coastal ports that have historically serviced trade around this
mountainous island country, where no place is more than 115km from the sea.

(FYI, Minamisaku in Nagano is farthest from the sea... at 114.86km.)

Thus, in a bid to attract more international visitors, these ports are
making themselves more attractive to visiting cruise ships - upgrading
their dock areas, making buses available for day tours, and generally
lowering fees. As a result, some cities, such as Kochi in Shikoku, have
had a veritable bounty of tourist ships show up at their waterfronts,
each one holding around 3,000 or so passengers, and which in a single
one-day visit deliver more international tourists to the city than would
otherwise visit in a whole week by rail and air.

Kochi is not the only city experiencing this amazing surge. In fact,
foreign cruise passengers visiting Japan hit a record high in 2017. The
Ministry of Land, Infrastructure, Transport, and Tourism issued
statistics recently saying that 2,529,000 passengers, a 27% increase
over 2016, visited Japanese ports on 2,764 cruises. About three quarters
(2,013) of the visits were by foreign ships, with the remaining 751
visits by Japanese ships. This volume is no surprise, given that you can
now spend 3-4 days traveling from China to Japan return on an ocean
liner, all board and food covered, for just US$500 per passenger. (Of
course, many people pay a lot more than this, in return for longer
visits and more luxury.)

Actually, Kochi is a good case study. This city of 600,000 people has
famously been considered a remote destination for many urban-area
Japanese, and for foreigners it's even more remote. There are no direct
flights into Kochi from any overseas airport, other than an occasional
charter flight. More important still, there are no LCC flights
domestically - meaning that unless you're a dedicated Ohenro pilgrim,
you're probably not going to consider going there. For those who are
pilgrims, it's a 2 1/2-hour train ride from either Takamatsu or
Matsuyama and the LCC airports there.

Why no cheap regular flights? The reason is not because of the airport -
which in fact is the same length and quality as the rather busy one in
Matsuyama, Ehime. No, rather, the reason is that in order to keep even
regular commuter flights for locals going to Tokyo and Osaka, the Kochi
government was forced to do an exclusive deal with Japan's major
airlines, keeping the LCCs and others out. That's the reality of being
somewhere remote.

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So, without decent means of transport, it's no wonder that Kochi has
been struggling to attract tourists. To their credit, the Kochi
government was quick to cotton on to the fact that a foreign inbound
travel boom was building, and in 2014 through 2016 completed dock
upgrades to allow it to accommodate deep-drafted 160,000 ton-class
passenger ships, each disgorging as many as 4,000 passengers. They also
put effort into making cruise operators welcome, with incentives and
upgraded local onshore facilities and services. As a result, the port
received 30 cruise ships in 2016, and 32 in 2017.

Unfortunately for Kochi, although they got the boats and the visitors,
in reality it hasn't resulted in the economic boom that they expected.
The tourists are certainly getting off the ship for a day and are taking
the bus tours and even visiting the shops. But once in those shops, they
are looking but not buying. The local authorities are perplexed - what
else can they do?

The reality is that unless Kochi is the last port of call, there is
really no reason for foreign tourists, Chinese or otherwise, to load up
with goods from local shops. Most passengers would rather wait until
they get to Fukuoka or Yokohama, with their larger stores and better
selections, and where those ports may be the last before returning to
Shanghai or somewhere else in Asia. There is very little that Kochi's
merchant associations can do about this, and so rather than focusing on
goods I think they should instead be looking at making money by offering
those 3,000~4,000 passengers local experiences instead.

Ah, but therein lies another catch. The cruise ship operators are
operating at fairly slim margins, the market reality when you're trying
to fill a boat with thousands of customers. So to make up the margins,
they control the guests' experiences, and receive commissions in the
process. No, they don't force their customers to take the tours that
have been shortlisted, but they certainly do restrict any access that
outside operators might have to individual customers, and thus
passengers are oblivious to their on-shore options.

I know of several ground operators who have bumped up against this
ring-fencing of customers, and the best they can do is to rent an
exorbitantly priced shop or standing position in designated areas of the
landing dock, from the local port authorities. Unfortunately these
rental locations are usually away from the main traffic of passengers
getting off the ship, and so very few flyers get handed out. Then, even
with the flyers that do get delivered, for every 100 perhaps only 5%
will respond and become actual paying customers. In other words, it's a
big waste of time.

This habit of ring-fencing the spending customer is of course nothing
new, and has been practiced for many years by Chinese mainland tour
companies who also want to control their customers' spending and
options. Greed (commissions, kickbacks) is the main motivation, and was
a big reason why earlier this year the Japanese government forced
(mostly Chinese) land operators who were running day tours for Chinese
travel agencies, to get licensed and to modify their behavior. In
particular they have been told to stop taking customers to duty free
stores known for scalping on prices and quality of goods, and which in
the past earned the land operators and travel agencies millions of yen
per store per month.

So is there a fix for bringing more choice to passengers and better
revenue opportunities to local merchants? My feeling is that it's
difficult. The local port authorities are not really in a position to
impose onshore rules about passenger handling, for fear that the cruise
operators would simply bypass them for one of the many other ports vying
for business. Instead, it would fall to the central government to
develop new rules spelling out that ground operations should be divorced
financially from the cruise operations. But given the many other
challenges the central authorities are facing, it's hard to see them
finding time to take care of this small cohort of operators.

Instead, the moral of this story is that if you have a business plan
targeting cruise ship passengers, you might want to rethink your target
audience... Either that or get a business patent on that great idea to
subvert the system..!

...The information janitors/

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

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