Japan Wants Its Tourism Revenues to Match Increasing Visitor Numbers

Much has been heard about Japan’s goal of hitting 40 million international arrivals by 2020, the year it hosts the Olympics Games in Tokyo. Yet little has been said of the country’s aim to increase visitor expenditure by 80 percent to $74 billion (eight trillion yen) in 2020, from $41 billion (4.5 trillion yen) last year spent by 31.2 million visitors.

The government wants to address an “imbalance” of Japan welcoming more foreign arrivals but not necessarily more spending, according to Daisuke Kobayashi, deputy manager Global Projects, Japan National Tourism Organization (JNTO), interviewed at ILTM Asia Pacific in Singapore last week.

A case in point: arrivals from Taiwan rose from 4.2 million in 2016 to 4.8 million in 2018, but spending remained flat at $1,181 (128,000 yen) last year, in fact lower than the overall average spend per person of $1,412 (153,000 yen).

In general the same pattern of higher arrivals but fairly flat per capita expenditure resonates through key Asian markets for Japan such as China, Hong Kong, Singapore, and Indonesia.

Asia accounts for 75 percent of Japan’s arrivals, and many are repeat visitors. “They know how to get around in Japan and how to save costs,” said Kobayashi.

More than 60 percent of total arrivals to Japan are repeat visits. Asian markets such as Hong Kong, Taiwan, South Korea, and Singapore in particular have high repeaters although repeat travelers are increasing in every market, he said.

Intensive Campaign

To enlarge the tourism coffers, Japan National Tourism is stepping up promotions in markets such as the U.S. and Australia, which stay longer and spend more, said Kobayashi. It is also starting to woo new-to-Japan luxury markets, including the Middle East and South America, and the high-end segment of markets such as China.

The destination marketer has been very busy indeed. Before ILTM Asia Pacific in May, it was at Arabian Travel Market in April. Airlines such as Emirates and Etihad offer direct flights to Japan, but JNTO market research found that while Middle East luxury travelers are interested in visiting Japan, they don’t have enough knowledge of what they can do in the country, said Kobayashi, adding there’s also a lack of travel agencies handling Middle East clients.

In March JNTO hobnobbed with luxury travel advisors of Traveller Made at a show organized by the network in Marbella, Spain. According to JNTO, both Traveller Made and Virtuoso have picked Japan as their most desired destination this year.

JNTO is also showcasing products such as cruises, which are higher-priced but an excellent way to introduce Japan’s luxury attractions beyond Tokyo and Kyoto. In May it partnered Princess Cruises to host 140 Ensemble Travel Group’s top agents, suppliers, and guests on a cruise exploring Japan’s lesser-known ports and shore excursions in Kobe, Kochi, Hiroshima, Matsuyama, and Miyazaki.

It welcomes Azamara Club Cruises efforts to include ports such as Kitakyushu, Kanagawa, and Amami in its 2021/2022 Japan sailings, “an invitation to many wealthy tourists from Europe to visit and experience Japan,” said Kobayashi.

A dedicated website, Luxury Japan, and a glossy brochure, Premium Japan, have also been launched by JNTO to illustrate “the most exclusive experiences” the country can offer, covering the realms of art and architecture, culture and cuisine, and nature across the entire Japanese archipelago.

Increasing Demand

These overtures will be warmly received. Demand for Japan among the well-heeled is on the rise, as seen in Abercrombie & Kent opening a Japan office in collaboration with JTB Boutique in January, citing “explosive growth” to Japan over the past two years, particularly from the U.S. and Australia.

Thomas Cook China, which focuses on premium independent Chinese travelers, opened a Japan office in March in partnership with Hanatour Japan after enjoying soaring sales last year.

For both companies, local presence in Japan is critical to gaining insider access to immersive experiences, high-quality hotels, products and services, and, yes, the best pricing.

“Japan is expensive,” said Gerald Hatherly, a director at Abercrombie & Kent Hong Kong who was involved in establishing the company’s Japan office in Tokyo. “We try to provide a reasonable cost, which is still expensive.

“Through JTB we can better understand how to work the ground quickly — build rapport with key suppliers, gain access to the best vehicles, build our own team of guides, and such. All guides in Japan are freelancers, unlike in China, where we have our own full-time guides.”

Abercrombie & Kent operates 12-day Japan journeys for small groups costing up to $12,000 per person. It also runs private custom tours that typically cost up to $1,500 per person per day.

Hatherly said business to Japan doubled year-over-year for the past five years for Abercrombie & Kent. In 2018 sales were $5 million to $6 million, compared with around $1 million three to four years ago. He’s “baffled” to see the upsurge of interest in Japan from the American market and why travelers are willing to pay a premium to visit Japan.

“It’s such a sea change,” said Hatherly. “Twenty-five years ago we hardly sent anyone to Japan. I honestly think the reason for the sea change is that our clients have become wealthier and have traveled everywhere, and Japan is now a novelty.”

Shift in Behavior: Experiential

But with the sea change comes a swell of new customers. Abercrombie & Kent customers typically were older, retired, with money and time on their hands. “The U.S. economy has grown considerably over the last five years, and we’re seeing a downward age trend. The travel request has changed, from standard before to more active and experiential requirements,” he said.

This presents new luxury market challenges for Japan. For instance customers demand authenticity and perceive Japan as un-fake. Yet in, say, a ryokan located in a smaller area, they are likely to be served by Chinese, Filipino, or Vietnamese service staff. “The traditional style of service was given by those ryokan employees who are now in their 60s or 70s. No young Japanese wants to work in a ryokan,” said Hatherly.

“Similarly, the best guides are in their late 40s to 60s. The young people have other options and probably see tour guiding as arduous. Getting the right kind of guide is a challenge.”

Paul Christie, CEO of Walk Japan, a pioneer of walking tours of Japan, agrees it’s a challenge to find good guides, although he said he has been able to retain his 60 tour leaders with the company over the years. Christie started as a tour leader himself and understands what keeps guides motivated. Moreover the market for walking tours keeps growing so there are enough businesses to keep his guides occupied, he said.

A third of his tour leaders are Japanese, and the rest are of various nationalities, including British, American, New Zealanders, and Singaporean. Top markets for Walk Japan are Australia (30 percent), U.S. (25 percent) and Singapore (15 percent), all of which are growing, said Christie.

Japan has a lot to offer luxury tourists, he said, and it’s up to operators to look deep into the destination and within themselves to offer the sort of immersive destinations travelers demand today. Walk Japan’s latest tour, Onsen Gastronomy, visits central Gifu and western Nagano prefectures, taking guests on a guided stroll into secluded districts, making their way to healing hot springs, savoring local delicacies, and staying in ryokan inns.

With the right effort, Japan may well be enriched by tourism.