TT-963 (Tourism Edition) -- After Floods and Earthquakes, a Flood of Government Handouts for Tourism, e-biz news from Japan

* * * * * * * * 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, Sep 30, 2018, Issue No. 963

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+++ After Floods and Earthquakes, a Flood of Government Handouts for
Tourism

It wasn't all that many years ago (2012) that I was commenting in
Terrie's Take 677 about how stingy the Japanese government was with its
tourism promotion budget, and no wonder people didn't know what a great
destination Japan was. At that time I compared Japan's PR spend on
inbound tourism with that of Switzerland. The Swiss spent about JPY7.2bn
a year, while the JTA and JNTO together probably spent less than JPY2bn
(my guesstimate).

http://bit.ly/1P6NxSg [Link to TT-677]

My, how times have changed. Just this week, the government announced that
it would be allocating JPY11.2bn in funds, five times the 2012 number,
to help Hokkaido tourism recover from the September earthquake. A good
chunk of these funds will be applied as a subsidy for travelers to
Hokkaido, covering 50%~70% of lodging costs for up to 3 nights, for up
to a total of JPY20,000 - for Japanese tourists. And 70% of the cost of
5 nights for foreigners. In addition there will be the usual subsidies
for road and other infrastructure repair, PLUS an extra 10% to 20%
funding, because, well we don't know why.

In other words, a veritable flood of money.

This latest effort follows on from a similar program that was tried out
for Kumamoto after the 2016 earthquake there, and which turned out to be
a hit, according to the Nikkei newspaper. Apparently the Japan Tourism
Agency (JTA) allocated JPY18bn in recovery funds to the area in the form
(among other things) of discounted tours, which subsequently sold out.
The earthquake prompted 750,000 people to cancel accommodation, but the
recovery discount program reversed those losses and came close to
attracting 1.5m domestic and foreign tourists in the following 6 months.
Perhaps more importantly, the discounts completely erased the projected
post-quake deficit, which was originally estimated to be around JPY170bn.

Hokkaido now faces a similar situation to Kumamoto, although it is more
dependent on foreign tourists (10% of foreign tourists travel to
Hokkaido) than its southern brothers. The estimated hit on the tourist
industry over the last 3 weeks has already reached JPY10bn, and the
authorities say that about 500,000 travelers have canceled their stays
in Hokkaido. Thus, if the same discount approach works, and we imagine
the east Asian LCCs will be pushing this among their customer base,
Hokkaido should be able to look forward to a big recovery of visitors
over the next few months, or at least until the funds run out.

[Continued below...]

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[...Article continues]

In my opinion, this direct approach of funding traveler costs is a good
thing and certainly beats other ways the government has traditionally
handled recovery funding - such as the controversial application of
JPY330m of the Tohoku recovery funds for repairs to a sports stadium in
central Tokyo!

http://bit.ly/2OY6vl7 [Mis-use of Tohoko recovery funds]

What this program tells us, though, is that although the government is
probably no less stingy than it has always been, it is applying the
money post-disaster because it is finally recognizing that tourist
spending is an easy economic shot in the arm, increasing local revenues
with almost no added cost of services (other than the clean up from the
disaster of course, but this is not a cost associated with tourists). I
expect that this trend of strategically parachuting funds in to regional
areas will pick up momentum because it's easy to decide (publicly
popular) and because it bypasses deep public scrutiny, which is
attractive to some insiders...

The idea of pinning local disaster recovery funds to foreign inbound
tourism started back in 2012, when the newly elected Abe government
allowed Chinese tourists to get multiple re-entry visas if they agreed
to spend at least one night in Fukushima prefecture on their first trip.
That program wasn't particularly successful, because after all,
radiation is still radiation, but it did get enough takers going to more
remote (safer) parts of Fukushima prefecture that the idea stuck.

But Fukushima has shown us that pushing out large flows of money is a
huge temptation for those near that flow to grab some of the cash. The
sports stadium in Tokyo was only the tip of the iceberg of Tohoku
recovery money going where it shouldn't. Even now there are large flows
of money into dubious projects up North and elsewhere which under normal
budgeting processes would never be allowed. For example, I heard (so
it's a rumor) of a business owner who set up a paper company in
Fukushima in order to score a JPY70m loan that was subsequently diverted
abroad. If true, and this is probably not an isolated case, it shows how
weak the checking process is by the government.

Now that the idea has gone mainstream, what I think comes next is an
expansion of the tourism-funds-for-sympathy initiatives to more general
causes, such as helping to kickstart regions which are stuck in an
economic black hole because of declining population and taxes. If I'm
right, this diversification of fundings will start flowing from next
year and be yet another uncontrolled flow of public money. Perhaps the
Olympics training host towns is a good example of how loose the recovery
connection will need to be.

This funding trend also tells us a second thing, which is that the
government has lost its fear of applying money to "soft" activities in
the tourism sector. I suspect this is because travel-related bureaucrats
are already counting with glee the windfall that they will achieve
through the new departure tax. You'll recall in TT-943, that I covered
the the fact that Japan would be receiving JPY1,000 per person leaving
the country. That means in 2019, when the tax starts, roughly JPY35bn
for foreign tourists and JPY17bn for Japanese ones - i.e., over JPY52bn,
will be looking for a home. The money is supposed to be spent on
improving tourism, and my guess is that the application of it will be
tenuous. Tons of paper brochures, websites no one can find, parties, new
museums, road beautification, FAM tours, market research that is
ignored, WiFi in tiny towns, road signs in English in the wilderness,
consulting fees for old boys, more parties... the list will be endless.

Not a penny for actual small businesses looking after tourists, though -
because that would be a possible mis-use of public funds.

...The information janitors/

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