Terrie's Take 953 (Tourism Edition) - Cruise Ships - How to Tap the Tourist Mother Lode?

Terrie's Take terrie at mailman.japaninc.com
Mon Jul 16 01:49:43 JST 2018

* * * * * * * * 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, Jun 17, 2018, Issue No. 953

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+++ Cruise Ships - How to Tap the Tourist Mother Lode?

The great Heisei inbound travel boom in Japan continues and is unlikely 
to peak until 2020 when the global promotion of the Olympic Games, 
rather than actual attendance, will put Japan on everyone's lips as a 
destination. While the most famous locations around the country are now 
being swamped with tourists, to the point where there is talk of 
limiting the numbers, other parts of Japan are still struggling to 
attract international visitors. And among those struggling are the many 
coastal ports that have historically serviced trade around this 
mountainous island country, where no place is more than 115km from the sea.

(FYI, Minamisaku in Nagano is farthest from the sea... at 114.86km.)

Thus, in a bid to attract more international visitors, these ports are 
making themselves more attractive to visiting cruise ships - upgrading 
their dock areas, making buses available for day tours, and generally 
lowering fees. As a result, some cities, such as Kochi in Shikoku, have 
had a veritable bounty of tourist ships show up at their waterfronts, 
each one holding around 3,000 or so passengers, and which in a single 
one-day visit deliver more international tourists to the city than would 
otherwise visit in a whole week by rail and air.

Kochi is not the only city experiencing this amazing surge. In fact, 
foreign cruise passengers visiting Japan hit a record high in 2017. The 
Ministry of Land, Infrastructure, Transport, and Tourism issued 
statistics recently saying that 2,529,000 passengers, a 27% increase 
over 2016, visited Japanese ports on 2,764 cruises. About three quarters 
(2,013) of the visits were by foreign ships, with the remaining 751 
visits by Japanese ships. This volume is no surprise, given that you can 
now spend 3-4 days traveling from China to Japan return on an ocean 
liner, all board and food covered, for just US$500 per passenger. (Of 
course, many people pay a lot more than this, in return for longer 
visits and more luxury.)

Actually, Kochi is a good case study. This city of 600,000 people has 
famously been considered a remote destination for many urban-area 
Japanese, and for foreigners it's even more remote. There are no direct 
flights into Kochi from any overseas airport, other than an occasional 
charter flight. More important still, there are no LCC flights 
domestically - meaning that unless you're a dedicated Ohenro pilgrim, 
you're probably not going to consider going there. For those who are 
pilgrims, it's a 2 1/2-hour train ride from either Takamatsu or 
Matsuyama and the LCC airports there.

Why no cheap regular flights? The reason is not because of the airport - 
which in fact is the same length and quality as the rather busy one in 
Matsuyama, Ehime. No, rather, the reason is that in order to keep even 
regular commuter flights for locals going to Tokyo and Osaka, the Kochi 
government was forced to do an exclusive deal with Japan's major 
airlines, keeping the LCCs and others out. That's the reality of being 
somewhere remote.

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So, without decent means of transport, it's no wonder that Kochi has 
been struggling to attract tourists. To their credit, the Kochi 
government was quick to cotton on to the fact that a foreign inbound 
travel boom was building, and in 2014 through 2016 completed dock 
upgrades to allow it to accommodate deep-drafted 160,000 ton-class 
passenger ships, each disgorging as many as 4,000 passengers. They also 
put effort into making cruise operators welcome, with incentives and 
upgraded local onshore facilities and services. As a result, the port 
received 30 cruise ships in 2016, and 32 in 2017.

Unfortunately for Kochi, although they got the boats and the visitors, 
in reality it hasn't resulted in the economic boom that they expected. 
The tourists are certainly getting off the ship for a day and are taking 
the bus tours and even visiting the shops. But once in those shops, they 
are looking but not buying. The local authorities are perplexed - what 
else can they do?

The reality is that unless Kochi is the last port of call, there is 
really no reason for foreign tourists, Chinese or otherwise, to load up 
with goods from local shops. Most passengers would rather wait until 
they get to Fukuoka or Yokohama, with their larger stores and better 
selections, and where those ports may be the last before returning to 
Shanghai or somewhere else in Asia. There is very little that Kochi's 
merchant associations can do about this, and so rather than focusing on 
goods I think they should instead be looking at making money by offering 
those 3,000~4,000 passengers local experiences instead.

Ah, but therein lies another catch. The cruise ship operators are 
operating at fairly slim margins, the market reality when you're trying 
to fill a boat with thousands of customers. So to make up the margins, 
they control the guests' experiences, and receive commissions in the 
process. No, they don't force their customers to take the tours that 
have been shortlisted, but they certainly do restrict any access that 
outside operators might have to individual customers, and thus 
passengers are oblivious to their on-shore options.

I know of several ground operators who have bumped up against this 
ring-fencing of customers, and the best they can do is to rent an 
exorbitantly priced shop or standing position in designated areas of the 
landing dock, from the local port authorities. Unfortunately these 
rental locations are usually away from the main traffic of passengers 
getting off the ship, and so very few flyers get handed out. Then, even 
with the flyers that do get delivered, for every 100 perhaps only 5% 
will respond and become actual paying customers. In other words, it's a 
big waste of time.

This habit of ring-fencing the spending customer is of course nothing 
new, and has been practiced for many years by Chinese mainland tour 
companies who also want to control their customers' spending and 
options. Greed (commissions, kickbacks) is the main motivation, and was 
a big reason why earlier this year the Japanese government forced 
(mostly Chinese) land operators who were running day tours for Chinese 
travel agencies, to get licensed and to modify their behavior. In 
particular they have been told to stop taking customers to duty free 
stores known for scalping on prices and quality of goods, and which in 
the past earned the land operators and travel agencies millions of yen 
per store per month.

So is there a fix for bringing more choice to passengers and better 
revenue opportunities to local merchants? My feeling is that it's 
difficult. The local port authorities are not really in a position to 
impose onshore rules about passenger handling, for fear that the cruise 
operators would simply bypass them for one of the many other ports vying 
for business. Instead, it would fall to the central government to 
develop new rules spelling out that ground operations should be divorced 
financially from the cruise operations. But given the many other 
challenges the central authorities are facing, it's hard to see them 
finding time to take care of this small cohort of operators.

Instead, the moral of this story is that if you have a business plan 
targeting cruise ship passengers, you might want to rethink your target 
audience... Either that or get a business patent on that great idea to 
subvert the system..!

...The information janitors/


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

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