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.

Tourism Sector Edition Sunday, Oct 28, 2018, Issue No. 967

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+++ Ideas for New Startup Businesses Serving Japan’s Hotel Industry

No one seems to really know how many hotels there are in Japan. With
the constant building, rebuilding, myriad smaller players, and the
places that marginally could be called hotels, such as capsules,
minshuku, etc., everyone appears to have a different definition.
According to Statista.com, in 2015 there were about 78,500 properties,
a fall of 10,000 locations from 10 years earlier – reflecting the
ongoing drop in domestic tourism in the regions. The health ministry
says that there are currently about 850,000 hotel and inn rooms across
the country, so you can see from the average of 10 rooms per hotel,
that the term “hotel” is pretty broad and vague.

But one thing we do know is that most of those hotels are not
receptive to doing business with foreigners – which is amazing when
you consider we’re already 5 years into the biggest travel boom Japan
has seen in the last 30 years. Booking.com, which accounts for about
50% of all inbound traveler hotel bookings in Japan (our estimate
after talking to many hoteliers), has 11,998 properties listed on its
site today. That means they have another 67,000 properties to sign up

But despite Statista’s numbers, in reality the number of “real hotels”
in Japan is more likely to be around 40,000. Of these, 20,000 are
listed online by the two biggest local Online Travel Agents (OTAs)
serving mostly Japanese customers, being: Rakuten Travel and Jalan
(owned by Recruit). Although Booking.com has only half this number,
the big difference is that for the two local OTAs, about half of their
inventory is available only in Japanese (or is machine translated in
Rakuten’s case), which usually means the hotels want Japanese
customers only. If you compare Booking.com’s multilingual listings
(all their listings are suitable for inbound travelers) in fact they
have similar if not more foreigner-friendly inventory than Rakuten and
Jalan. This has been possible because Booking.com has been very
diligently soliciting hotel property reseller rights for 10 years in
Japan, and have invested millions of dollars in staff, photography and
content, and of course, marketing.

It’s amazing that Booking.com has made such progress, because they
offer users a far better deal than their Japanese competitors do –
which means they make hoteliers pay for those benefits – and this
obviously isn’t popular with those hoteliers. But popular or not, the
company is forcing some significant changes on to the hotel/OTA sector
in Japan and it’s interesting to see the Japanese competitors ratchet
up their rates, even as they struggle to bring the same value to

Just what is that “value”. Well, for the longest time, Jalan and JTB
set the rules for reselling hotels in Japan, working on an
overly-friendly basis with the hotels. They took low commissions on
web sales, just 8%, which meant they did very little to market the
property or improve their web systems. On the other hand, the guests
got very little value in return, other than the convenience of buying
on the web versus not picking up the phone. They had to prepay,
couldn’t cancel if they had trip delays or changes, got very little
independent information about the quality of the hotel, could not
expect many/any foreign-language speaking staff, and had to forget
about special diets and meals… yup, everything was hunky dory and
consumers didn’t know any better. But then in the late 1990’s the
customer pie started shrinking, ten years later Booking.com showed up
and demonstrated what customers really want, then the inbound boom

So my point here is that Booking.com has engendered a strong
attitudinal change in the hospitality industry, moving us away from
rules made by the hoteliers to rules made by the customers. And I
believe this to be a good thing. Providing great service and
information demystifies Japan and makes it more accessible – which is
exactly what will cause the visitor numbers to keep rising.

Of course Booking.com setting the high bar is no doubt going to sow
the seeds of future challenges as local companies start to wake up to
the need to compete and the pendulum swings the other way. Already we
are seeing Booking.com’s average commissions fall from 20%+ two years
ago, to a more acceptable 15% today. At the same time, Rakuten and
others have pushed their rates up to the same 15% – giving them more
funds to start marketing and improving systems.

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[…Article continues]

Why this long introduction to the situation with Japanese hotels?
Well, I’ve been out on the road serving a foreign luxury cycling tour
group, firstly in Noto, Ishikawa-ken, then in Onomichi in the Setouchi
area, and in visiting hotels in these rural areas I’m seeing
depressingly little progress in accommodation suitable for foreign
tourists, but on the other hand there are some exciting business
development opportunities.

If the obvious tourist demographic trend is towards more foreign
tourists, which any Japanese hotel operator can read about in the
national newspapers on a daily basis, you would think that those same
hoteliers would do something to change their services lineup to keep
this new source of funds flowing. Some are of course out in the
forefront, and so we now have a nice little boom in capsule rooms –
essentially capsule hotels but one grade up, where guests are
attracted by the price and novelty of small digs, but at the same time
get a nice interior and decent meals in a common room downstairs. Then
at the other end of the market we have local ship building companies
selling specialty floating hotel rooms for JPY400,000 a night.

But for every forward thinking firm building a new facility, there are
one hundred others who can’t or won’t change.

One of the best examples I use when I’m consulting to a hotel that
wants to explore serving foreign customers is my “bircher muesli”
test. If the hotel is targeting western (not Chinese) upmarket
customers, they need to replicate some of the menu options of large
global chains, and particularly focusing on breakfast. There are few
times that a foreign guest wants their own diet than in the morning,
when their taste buds are most sensitive and when they are still
relaxing in their accommodation, versus later in the day when they are
looking for curiosity or entertainment. So, unless you only want
Chinese nationals or people from some SE Asian countries, why would
you only serve fish, rice, and pickles as your breakfast menu choice?
Look at TripAdvisor and similar sites – people talk about breakfast
when evaluating a hotel.

Or if your staff can’t speak English or some other foreign language
and you can’t afford to hire a bilingual, then why wouldn’t you use
fingerpointing charts and on-demand third-party interpreters at call
centers, rather than refuse foreigner bookings because you fear a

If your foreign guests are willing to pay more, why wouldn’t you be
willing to serve them a late breakfast, a late checkout, provide them
with a proper bed or at least a sponge mattress (instead of a single
layer on the floor)? Indeed, the idea of charging customers different
prices for different value-added services is such a novelty, that it
seems like proprietors feel they are somehow cheating the customer by
charging more. Better, in their minds, to not deviate from the norm,
and thereby avoid being questioned about their prices. They’ve been in
a down-market so long, they’ve lost sight of the fact that some people
will willingly pay more to get what they want.

I’ve found myself pondering numerous business ideas that a young
entrepreneur (not me, too busy with www.japantravel.com) could
implement with the “missing” 30,000 hotels that are not serving
foreigners through Booking.com. Here are some in a brief list:

* Food packs. Make up a breakfast/dinner food pack that the hotel
kitchen staff can just tear open, and which they simply put their
sales commission on. Packs containing proper bread, condiments,
cereal, yoghurt, and organic vegetarian dinners, breakfast curries and
halal dinners in retort packages.

* A collapsible tatami-friendly western bed rental service, where the
hotel keeps 2-4 units on premises and if they get pre-bookings, the
vendor shows up with a bunch more. Sheets and laundry could be

* A remote and local online concierge service, for guests to ask
questions about the area, deal with issues in the hotel itself, and to
arrange local guides and tours. I’m often surprised there isn’t a
national network already doing this type of service.

* Integrated facilities-services-marketing investors who work with a
hotel as a co-owner, to rebuild and revitalize the hotel, create
content and activities to attract customers, then market and sell the
hotel to the big bad world.

* A more modest but also integrated financial consulting service that
helps smaller/older hotel operators understand that they can recover
their investments by offering customers more purchasing options – such
as using credit cards, upgrades, real-time web bookings in English,
WIFI in every room, and foreign broadcasting channels on the TVs. The
service would provide the credit card and online services.

* A local “not-quite-licenced” bus service that is attached to the
hotel (taking advantage of the legal vehicle operating exemptions
hotels have) but as part of the pickup/drop-off service also provide
an upsold local tour package. Having hotel staff do this would be a
great way of justify the hiring of a bilingual and having them
directly earn revenue to cover costs and make some extra.

* A local performances arrangement service, structured much like
tourist activities/experiences are sold, which provides access to
music and entertainment in conjunction with the hotels in the
evenings. I once stayed at a hotel where the owner (a lady) sang to
the guests. It was wonderful and memorable. Her performances are
repeated across guests’ social media, which makes for great marketing.

* Lunch bento service, reusing the breakfast foods the foreigners didn’t eat…!

…The information janitors/



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

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