Terrie's Take 967 (Toursim Edition) - Ideas for New Startup Businesses Serving Japan's Hotel Industry
terrie at mailman.japaninc.com
Sun Oct 28 16:57:54 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, 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 yet!
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 customers.
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 started.
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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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 miscommunication?
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 included.
* 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...!
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Written by: Terrie Lloyd (terrie.lloyd at japaninc.com)
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