Skift Take

The 2020 Tokyo Games will be a big financial hit for Japan's tourism sector, but vaccines now under way plus pent-up demand and infrastructure boosts could make it come out of this tough stretch a winner — sooner than one might think.

The postponement by Japan of the 2020 Tokyo Olympic Games to this summer came as a hard blow for its pandemic-hit tourism industry. Since that announcement, Covid outbreaks and inconsistent global travel rules, not to mention a surprisingly low vaccination rate for the country, at 21 percent, cast doubts that the Games would even be held.

Still, the Games will go on. As the Tokyo prepares to kick off on Friday with the opening ceremonies, amid the country’s fourth state of emergency, the ban on tourist and local crowds at the mega event could result in the biggest hit yet to Japan’s travel economy.

Yet, the government remains steadfast, keeping its target of 60 million visitors and $136 billion in tourism revenue by 2030, while staying hopeful for an international audience this year, even if nowhere near pre-Covid levels that saw record tourism for seven straight years. Still, the long-term economic boost from hosting well-attended Olympics has been elusive over the years. That could create a hiccup to Japan’s tourism progress that may takes years to regain.

“With or without the Olympics, already the tourism sector is depressed from April last year,” said Sayuri Shirai, professor of economics at Keio University and former Bank of Japan policy board member.

Accommodations, attractions, and commercial centers, among others, had embarked on a frenzy of investments and loans as early as 2013 in anticipation of the Games and international visitors.

“Now we have zero audience and they still counted on this small audience but all those are gone, so we might start to see an increasing number of bankruptcies,” said Shirai.

Despite the financial loss from the Games, will the infrastructure investments made in preparation boost Japan’s tourism industry post-pandemic?

It may only see $1 billion, or maybe $2 billion, of general infrastructure investment facilitating not only tourism but other elements of its economy, according to Andrew Zimbalist, professor of economics at Smith College and a leading global expert in the business of sports.

“But if you spend $35 billion, and you get infrastructural improvements that are valuable that amount to $1 billion or $2 billion, that’s not a very good economic calculus, right?”

For Japan’s tourism leaders, the infrastructure gains still outweigh the negatives.

“Compared to before, Japan now offers more extensive free Wi-Fi, more infrastructure supported with multilingual signage, and increased deployment of universal designs for those with disabilities,” said Michiaki Yamada, executive director of the Japan National Tourism Organization’s New York office since May.

“We are confident that these many investments will enable inbound tourists to enjoy visiting Japan more than ever, and will also draw them back again and again for many years to come.”

For Kei Shibata, co-founder of online travel company TRAVEL jp, the aforementioned investment geared towards “foreigner friendliness” is more powerful and will make Japan more competitive post-pandemic, particularly for international meetings and events on the scale of those hosted in Singapore.

Beyond the Olympics’ losses, there’s a bigger picture when it comes to the promise of travel rebounding in Japan, Shibata said — and that’s the government’s steadfast commitment to make tourism a major economic driver on par with exports.

“Japan has a structural problem as a country, which is a decreasing, aging population — that’s one of the biggest reasons why this country’s actually pushing inbound tourism, because it’s one of the very few growing industries. If Japan can reach the 2030 target, tourism will exceed the automobile export industry.”

An Oversupply Problem

Prior to Covid, Japan’s tourism sector enjoyed a seven-year success streak, with the number of tourists increasing steadily, reaching 31.8 million visitors in 2019. According to the World Tourism and Travel Council, that resulted in $49 billion in visitor spend and tourism made up 8.5 percent of Japan’s total employment.

Shira said this success was in some part attributable to the naming of Tokyo in 2012 as a host for the 2020 Games.

“It’s a combination of the Tokyo Olympics story, and because the Bank of Japan started to do monetary policy easing, so the interest declined significantly and that also contributed to the construction and real estate boom.”

That monetary easing policy led to a significant depreciation of the yen against the U.S. dollar, making it much cheaper for tourists to visit Japan. “It became a very big discount for many tourists. That’s why they started to come to Tokyo.”

Last summer’s “Go To Travel” incentive campaign from the Japan Tourism Agency created demand for the domestic tourism sector to the tune of $9 billion in revenue, but it was short-lived because of the subsequent surge in variant cases.

Shirai said that Japan’s government has supported the tourism sector through Covid with cash and subsidies for wages and rent, as well as discounted loans.

The concern now was the over-supply in hotels and real estate created as a result of the Tokyo Games.

“Before the Olympics, the total number of hotels and small inns within Tokyo was about 1,800. Now it’s double that. It means over the 7 years, there are lots of new hotels, lots of new commercial shopping centers, many facilities created and of course those were created by having debt. That is a problem.”

Shibata said that the main infrastructure benefit to have out of the Tokyo Games is the expansion of the international terminal at Haneda, which will open the door to more market share, and allow future tourists to land in the heart of Tokyo.

All others are inconsequential, experts agreed, given Japan is a mature destination.

Masashi Imai, director of marketing at Tokyo Convention & Visitors Bureau, said that the “soft power” resulting from the mega event was equally important.

“In order to welcome people from all over the world on the occasion of the Olympics, many people, including young people, elderly people, students, and volunteers, are involved in the preparations. This will be an asset to the city in the future.”

Proving the overall benefits of hosting the Olympics for tourism is difficult, said Smith College’s Zimbalist.

“The argument’s often that by hosting the Olympics you put yourself on the world stage, and that promotes your city, and makes people want to travel there, people want to trade with you more — there’s simply no evidence that that happens,” said Zimbalist.

For now, Japan’s tourism board is focused on maximizing the three-week broadcast and online coverage of the Tokyo Games.

“We plan to seize this opportunity to showcase Japan and its many attractions, and thereby encourage people to start dreaming about future trips to Japan once the travel restrictions are lifted and it becomes safe to enjoy traveling to Japan again,” said Yamada.

A Ray of Hope: Vaccines and Japan’s Brand

In spite of the disappointing outcome of a visitor-free Olympic Games, there’s good news for Japan’s tourism industry: vaccinations are advancing rapidly, after an earlier botched plan.

“Every day I hear 1.2 to 1.4 million jabs are executed now,” said Travel Japan’s Shibata. “Many experts are saying that by Q4, Japan will get through to the mark with 60-70 percent of fully vaccinated population, so we think that towards the end of the year domestic tourism will be recovered to some degree.”

Data analytics and consulting firm Global Data predicts pre-pandemic domestic tourism levels will return in 2022 and inbound visitors will reach pre-pandemic levels by 2024.

Japan National Tourism Organization’s Yamada said the government still believes its 2030 inbound tourism targets are reachable and that the organization was currently developing both worldwide and market-specific strategies to achieve those goals.

“In the U.S. market, we will promote unique Japan experiences that are worth the wait. We will continue to promote Japan as an ideal travel destination once travel restrictions are lifted.”

Cultural differences, however, may also dictate locals’ sentiment on domestic or international travel, according to Keio University’s Shirai.

“Japanese worry about this, getting infected from foreigners,” said Shirai. “You know, when I look at TV and what’s happening in Europe, U.S. many people are trying to go on vacation and they’re more optimistic. But Japanese are more cautious people.”

The pent-up interest in Japan as a tourist destination signals another potential bright spot.

“Long-term, fundamentally I’m quite optimistic about Japan as a destination,” Shibata said, adding the government’s target of 60 million inbound tourists can be met, given Japan’s unique natural and cultural assets.

“Inside Asia and also outside Asia, a lot of people tell me if the borders are open, I want to actually go to Japan first, or I want to actually work there. There is great interest about Japan.”

In the shorter run, Shibata said, there are a lot of uncertainties — including when China would reopen, one of Japan’s former primary source markets, and the issue of lower efficiency of China’s Covid vaccines.

But the work continues for Tokyo’s tourism board.

“In order to recover the number of tourists that dropped significantly during Covid-19, we will continue to conduct PR activities for overseas markets such as Europe, the United States, Australia, and Asia,” said Imai. “We will also work to create business opportunities for the tourism industry in Tokyo.”

The focus going forward, Imai added, would be not just on quantity but also quality.

“In this moment, many people perceive to learn or do something good by even travel. Tokyo, where tradition and technology are well harmonized and generate new things every day, will offer and provide vivid information by introducing a variety of experiences to fulfill their demand.”

As far as the concept of the Olympic Games benefiting tourism long-term, Japan’s current scenario has proven the risk that lies for mature destinations, Zimbalist said, adding that more countries in recent years have been avoiding bidding to become a host.

“I think that we’ve hit a turning point and Tokyo just emphasizes or accentuates that turning point.”


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Tags: asia, coronavirus, coronavirus recovery, japan, tokyo olympics

Photo credit: Spectator stands will be empty at the 2020 Tokyo Games and leave tourism reeling, but Tokyo's long-term commitment to the industry will eventually pay off. Courtesy of Japan Online Media Center / Japan National Tourism Organization

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