Japan Travel


* * * * * * * * 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, Feb 19, 2017, Issue No. 884

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+++ Moving Beyond Rice Cookers and Hotels for Value in the Travel Sector

Now that we’re half way through the first quarter of 2017, the trend for
inbound tourism to Japan for this year is becoming much clearer. The
good news is that the sector continues to grow due to increased flows
from our east Asian neighbors. Although it was the earlier-than-usual
timing of Chinese New Year this year that drove explosive growth for
January (2,295,700 people – 24% up on 2016), apparently growth for
February won’t be so bad either, although not the blockbuster January
was. Our guess is that if traveler numbers hold at this level, then
Japan will see about 27-28m people visiting the country in 2017, up from
about 24m who came in 2016.

This is very significant, as inbound travelers continue to outstrip
outbound Japanese ones by a factor of 3:2, this will force traditional
Japanese travel agencies to finally pay attention to the inbound market.
Once these domestic players (there are around 10,000 of them) get their
game up to speed, the market will become far more competitive and thus
create a virtuous (and for vendors, vicious) circle that will bring in
even more visitors wanting to enjoy the bargains.

Spending by tourists also rebounded in January, thanks to visiting
ethnic Chinese flying in from many countries in the region, not just
China, and combining a trip with family gift-buying. This spending
recovery is a welcome respite from the downward spiral of last year,
where we saw the frenzied “bakugai” buying phenomenon die out and
tourists started to become more conservative with their cash.

A lot of retailers, especially ambitious younger store chains selling
souvenirs and luxury consumer goods, over-estimated what the inbound
spending growth would be. Essentially they took spending-per-person
numbers in 2015 and simply extrapolated them to expansion of visitor
numbers. What they failed to understand is that although the number of
inbound visitors is indeed growing dramatically, people these days come
from a much broader cross-section of society than they did 2-3 years
ago. We have transitioned from high-spending luxury travelers, and
“once-in-a-lifetime” tourists, to a larger group of lower-value repeat
visitors with naturally less money to spend on each trip.

[Continued below…]

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————— Great Bread From Tengu Foods ————–

It’s always been a problem to get good healthful bread in Japan. Now
Tengu Foods, the online store arm of Alishan Organics, offers a great
selection of healthy breads and tortillas. Fresh-baked Country loaves,
Rye, and home-style white bread, as well as frozen sprouted wheat
multigrain loaves, bagels, hotdog and hamburger buns, pita bread, and of
course tortillas. We take your orders and payments online and dispatch
the next business day from our warehouse in the “wilds” of Hanno,
Saitama. If you want to try us out first, then come on up to our organic
cafe and see what we can do with bread…

Webstore: http://bit.ly/2kMRsuD
Facebook: http://bit.ly/2mbHF2m
Our Cafe: http://bit.ly/2m0r8z7
———————————————————–

Further compounding the contraction in per-person spending is the fact
that the rich are already bored with Japan and are looking for new
places to play, and mid-level spenders, mostly well-paid professionals,
have evolved from being curious first-timers to now becoming savvy
repeat FIT guests. These people are starting to understand how Japan
works, and are accessing the same services and prices that local
Japanese do.

This of course has been bad news for the big-ticket sales chains:
electrical retailers like Laox, and second-hand luxury goods outlets
like Nagoya’s Komehyo. In fact, Komehyo has just announced that it will
close 9 stores over the next 6 months, bringing their total down to 32.
Komehyo’s sales to foreign tourists plummeted 40% in the Q1-Q3 period
last year, meaning that group net profit will also plunge 91% from that
of last fiscal year. Komehyo blames the falling sales on increased
customs duties in China and the stronger yen. But as we pointed out
above, visitor demographics are probably a much bigger factor.

But even as sales are falling for Komehyo, Laox, and others, cosmetics
and “small luxuries” are doing well. As a result, cosmetic firms and the
department stores selling their products are still enjoying reasonably
good results.

So where will market spending go from here?

I think the repeater FIT trend will continue to pick up pace, and soon
more than 60% of inbound travelers will be people who come to Japan 1-3
times a year. Their trips will shorten, and they will pack more into
those fewer days. This isn’t a bad thing, because it means that anyone
within 3-4 hours flying time of Japan will seriously consider popping
over to Japan for an event or a special interest that they can’t get
back home. This offers tremendous opportunities for regional players to
set up events and invite large numbers of tourists to attend them.
Readers will know that I have my eye on those 6.4m Chinese cycling
holiday makers who would love our roads and clean air.

Events and activities are indeed a huge trend overseas and many big
travel brands are combining activities with hotel bookings and their
other primary offerings. For example, TripAdvisor’s non-hotel segment,
which includes attractions and activities, grew 35%, even as its much
larger hotels business slumped 6%. Likewise, Airbnb announced last year
it would be starting its Magical Trips service globally, and now you can
get Tokyo-specific experiences on the company’s smartphone app. Expedia
has also launched its activities service and it has more than 100
activities listed for Tokyo.

I’m not sure that any of these companies will make much money selling
these activities, in that the going rate is 10-15% commission for the
Online Travel Agency (OTA), much less than they get for hotels, and the
amount of money changing hands with the end-customer is often small,
usually being less than JPY10,000. But, while the activities may not be
a cash-cow, these big guys understand that by adding inspiring value (we
predict that later they’ll add transportation, guides, and other
services) they help to prime the sales funnel for all the other stuff
the user will want.

My, how times have changed. I can remember just two years ago visiting
Booking.com and trying to persuade them to let Japan Travel offer
activities on their site. They politely but slightly disdainfully turned
down my offer, saying that they are a hotel specialist. But now, even
Booking.com is getting into the added-value activities business.

I think the end game will be in 2-3 years time, when FIT repeater
travelers to Japan will be able to largely plan their travel around
their interests rather than which location or hotel they’ll stay at.
This will drive people out of just the big cities, and so long as Airbnb
and its competitors are given the green light, infrastructure will no
longer be a major deciding factor for travelers from nearby countries.
Instead, it will be, “Hey, honey, let’s go hiking in Nagasaki this weekend.”

Put another way, we are quickly moving from a slow “hardware” travel
economy to a very dynamic “software” one.

…The information janitors/
———————————————————–

———- ICA Event – Thursday 23rd March —————-

Speaker: Thomas Nevins – Founder and Chief Consultant. TMT Inc
Title: “Doing Hard Labor in Japan”

Details: Complete event details at http://www.icajapan.jp/
Date: Thursday 23rd March, 2017
Time: 6:30pm Doors open
Cost: 1,000 yen (members), 2,000 yen (non-members). Open to all. No sign
ups at the door!!!!!!!
RSVP: By 5pm on Monday 20th March 2017
Venue: Room F, 9F, Sumitomo Fudosan Roppongi Grand Tower, 3-2-1
Roppongi, Minato-ku, Tokyo, 106-0032
——————————————————-

***********************************************************
END

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+++ ABOUT US

STAFF
Written by: Terrie Lloyd (terrie.lloyd@japaninc.com)

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