Terrie’s Take on Tourism to Japan 2006

Hi Blog. Fascinating article from Terrie’s Take on Tourism to (and within) Japan. Debito in Sapporo

* * * * * * * * * T E R R I E ‘S T A K E * * * * * * *
A weekly roundup of news & information from Terrie Lloyd.
(http://www.terrie.com)
General Edition Sunday, June 17, 2007 Issue No. 425

Tourism is important for any country, both in terms of foreign exchange
earned and the goodwill that a delighted visitor shares with friends and
family once they get back home. Japan is no exception, and in 2005 the
nation earned about JPY55trn (US$45bn) in tourist yen, in addition to
the sector employing about 4.6m people. That’s about 10% of the GDP and
8% of the work force respectively. So when the country saw its
desirability as a tourist destination sink to around 45th place by
pollees in the USA back in the early 2000’s, it was no wonder that
then-PM Junichi Koizumi, famously declared a national goal of increasing
the number of tourists visiting Japan from 5.21m to 10m by 2010.

The government department in charge of increasing tourism was the
Ministry of Land, Infrastructure, and Transport, which came up with the
Yokoso Japan campaign. We fired arrows in Terrie’s Take at the campaign
when it was first announced, not least of which because “Yokoso” means
nothing to anyone who doesn’t speak Japanese — i.e., 95% of tourists.
The bureaucrats had a field day telling the Japanese public how they had
this great plan, but then the reality was that they allocated a trifling
amount, we heard a budget of just JPY350m, for marketing and chose
Dentsu over a number of better qualified foreign firms to conduct the
campaign. As a result, most of the Yokoso campaign has been little more
than local ads, in Japanese! Compare the piffling JPY350m with Hawaii’s
tourism marketing budget of US$38m (JPY4.5bn) a year, and you start to
realize that the Japanese government has no idea how to go about the
task of increasing visitor numbers.

Despite the government’s cheapskate efforts to focus marketing on
countries they think tourists should come from: mainly the USA, UK, and
other western nations, the number of visitors has in fact surprisingly
been rising — but from countries receiving very little attention (with
the possible exception of Korea) — Japan’s nearest neighbors.

Of the 7.33m tourists who visited Japan in 2006, up about 600,000 over
2005, 71% came from Asia. More than 2.2m people, or 29%, flew or ferried
in from South Korea, up 21% over last year. In second slot were 1.3m
Taiwanese, comprising 17.8% of total visitors, followed by 810,000
Chinese nationals and 820,000 Americans, comprising around 11.1% each.
The number of Chinese has soared 25% in just the last 12 months thanks
to an easing in the issuance of tour group visas from that country.
South Koreans and Taiwanese have had relaxed visa rules since 2005 and
the Aichi Expo, and this has substantially increased their numbers as
well.

You could think of the government’s fixation on the West as racial bias,
or more likely an indication of its inability to change its thinking on
who globally has money to travel these days. Friends in Kyushu tell us
that the locals there have no such illusions, and restaurants, souvenir
shops, tour companies, and hotels are quickly putting up Korean and
Chinese menus to cater for the surge of new tourists entering Japan for
a few days of comfort and pampering. Maybe in a few years time, the
Transport Ministry will be filled in by someone from the Japan Hotel
Association as to just who is really booking the hotel rooms every
weekend.

This same fixation with where tourists should be coming from also
permeates Japan’s big travel and hotel companies. We find it laughable
that traditional Japanese tour and accommodation operators are cutting
costs and services, and lamenting that their massive losses are due to
poor tourist numbers. And yet, Asia luxury hotels opening in the last
few months are running at capacity. Most likely the real problem for the
Japanese operators is that they need to start learning Chinese and not
English.

Our impression is that most western visitors to Japan today are young
budget travellers and they are here to taste some adventure and
alternative entertainment as much as temples and green tea. The
well-heeled wealthy Westerners that the government seems to be trying to
attract are in fact not even interested in Japan and instead are heading
for more exotic locations in China and Vietnam, where world-class
resorts and warmer beaches and oceans are to be found.

Now there is nothing wrong with backpackers coming to Japan — you can
make some money catering to them. Take the Hotel New Koyo in Minowa,
Nagano, for example, which charges just JPY2,500 a night for a single
room. The 76-room hotel is apparently 90% occupied by foreign
backpackers. Then there are the JPY3,000 – JPY4,000 a night capsule
hotels in Shibuya and Shinjuku — which are coming back into their own
as foreign travelers brought up on manga find them cheap, convenient,
and a great cultural experience.

But the fact is that you have sell a lot of rooms at this rate to match
the income from a single JPY70,000+ a night room at the Mandarin hotel
in the new Midtown complex in Roppongi. And the Mandarin is having no
problem filling those rooms — with both upscale Japanese and visitors
from elsewhere in Asia. The fact is that as living standards rise in
China, Korea, and Taiwan, those interested in traveling want to venture
not too far from their own borders, go somewhere safe and not too
challenging culturally, and enjoy great scenery, creature comforts,
food, and shopping.

For most Asians, that place is Japan, so they are flocking here as a
result. Forget about Western tourists.

Indeed, this contrast between western backpackers and Asian couples
touring Japan so as to enjoy a taste of a better life makes for a
telling contrast. The Mandarin, Conrad, and Peninsular (from September)
are just a few examples of swanky new Asian hotels that have been built
on faith and a vision of a better level of customer, and which are now
being rewarded for the investment risks taken.

Ironically, at the same time as this upscale market has been forming,
Japan’s largest hotel operator, ANA, last year entrusted its operations
to the Intercontinental group, then this year sold off many of its
properties to Morgan Stanley. It seems that the Japanese operators are
just not willing to re-invest in their own infrastructure to meet
international standards, nor to market properly to the overseas markets.
Now they’re paying the price for this timidity and lack of vision.

But is not too late to start upgrading. Jones Lang LaSalle said last
year that there were only 2,148 luxury hotel rooms, i.e., those with
average nightly rates of at least JPY30,000, in Tokyo. Even after an
additional 2,667 new rooms come on stream through to 2010, Tokyo will
still lag behind London which has 5,196 such rooms, Paris with 4,336
rooms, and New York with 3,754 rooms.

Not just hotels, domestic tour operators also suffer from the same
myopic vision of what their client base should look like and being slow
to invest to upgrade. Thus some of Japan’s most interesting and
attractive destinations have languished simply because foreign clients
can’t “access” (language, transport, and quality of accommodation) them
properly. Take Yakushima Island, Nagano-area skiing, Okinawa scuba
diving, and even shopping for arts and crafts outside Tokyo, for
example. All have potential. Temples in Kyoto are good fodder for
first-time visitors, but for the more sophisticated and repeat visitors,
they are clearly losing their pulling power.

Perhaps the biggest contribution that Japan could make to developing its
tourist industry would be to start appointing some bilingual foreign
nationals who represent the audiences of countries being targeted
(nationals of USA, China, Korea, Taiwan, UK, etc.) and to increase
incentives for local operators to upgrade their facilities and
offerings. There needs to be an understanding across the board that
Japan is unlikely to be successful selling itself as a low-cost
destination in Asia, and instead should rise to the challenge of
building a tourism support system that meets global standards for
comfort, convenience, and cultural interest. No more lame bureaucratic
visions of “what should be”, just realistic interpretation of the global
trends with the most valuable of Japanese traits — simplicity, quality,
and style.

There are plenty of good examples of foreigners already helping to
increase tourism flows into Japan, and doing it at a suitably
value-added level. Look no further than the 14,000 Australian skiers
visiting Nisseko each year, thanks to the efforts of two Australian
skiing pioneers, Ross Findlay and Glenn Goulding.

Lastly, we’d note that outweighing any foreign tourism segment is that
of the Japanese visiting their own nation. Over the lost decade of the
1990’s, domestic travel volumes plummeted dramatically as people
tightened their purse strings and it has really only been since 2004
that the numbers have started recovering. This year an estimated 21.5m
people traveled during Golden Week. As a result, and to help things
along, the government has said that it is planning to create in 2008 or
2009 a second “Golden Week” for Japanese workers.

Expected to occur in early November, the idea is to group Sports Day,
Labor Day, and Culture Day into a single week. The plan is that
salarymen will be able to take in two weekends, and get out of Tokyo
just as they did this year during Golden Week. The Dai-ichi Life
Research Institute reckons that the financial impact of a second string
of holidays would be high, with the average household spending an
additional JPY1.64trn (US$13bn), or about 0.7% of the current total
annual household budget…

EXCERPT ENDS

3 comments on “Terrie’s Take on Tourism to Japan 2006

  • I don’t mean to nit-pick, but is it just me or do many foreign journalists seem to have it out for Dentsu for some unknown reason?

    “for marketing and chose Dentsu over a number of better qualified foreign firms to conduct the campaign.”

    At least in terms of revenues, there are only 4 agencies in the world that produce more than Dentsu. I understand that revenues =/= qualified, but there aren’t that many firms above Dentsu in either respect.

    And besides, why should the government give a contract to a foreign firm? Can you imagine if someone complained to all the government agencies in America because they will only purchase American cars for official use when there are many other better Japanese cars that could be used? It seems silly to think that a government would give a contract to a foreign firm.

  • At the risk of sounding simplistic, if Japanese want more “North American” tourists(most of which would hardly dream of vacationing in Japan), why not start a TV commercial campaign IN AMERICA/CANADA?

    No American will ever wander into Japan exclaiming “I came for the Yokoso Japan campaign!”

    It seems like it’s been a huge waste of money. Maybe they should invest that money in foreign TV/radio spots.

  • This article makes the unfair claim that the Yokoso! Japan campaign is targeted at westerners.

    I am interested why Terrie is making such an unsubstantiated claim: “efforts to focus marketing on countries they think tourists should come from: mainly the USA, UK, and other western nations”

    The fact of the matter is that the campaign is focused on numbers, not nationalities. Quite to the contrary of Terrie’s statements, JNTO in 2005 closed its San Francisco office in order to open a new office in Bangkok.

    Korea has seen television ads funded by the Visit Japan Campaign whereas the western markets have not.

    Not only is Terrie Lloyd’s claim unfounded, it’s downright irresponsible.

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