Terrie's Take 969 (Tourism Edition) - Is the Japanese Inbound Tourism Boom Coming to an End?

Mon Nov 12 07:16:46 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.
(http://www.terrielloyd.com)

Tourism Sector Edition Sunday, Nov 11, 2018, Issue No. 969

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+++ Is the Japanese Inbound Tourism Boom Coming to an End?

Recently I did an analysis of the top 15 tourism countries in the world, 
as recorded by the United Nations World Travel Organization (UNWTO), and 
to no one's surprise found that over the last five years, Japan has 
outperformed every other major market in the world. Actually, it's the 
amount of growth that is most eye-popping - Japan has soared around 270% 
since 2013, while the next best performing market, Mexico, clocked in 
with 160% growth. On average the remaining economies, including the No. 
1 destination, France, have achieved a 100% rate of growth over the same 
5-year period.

Another interesting trend is that based on the last five years, Japan 
should become one of the Top 10 most-visited countries either next year 
or in 2020, displacing Turkey from that position.

At the same time, there are some murmurs in the travel industry that the 
significant slow down of tourist traffic in July and August, where 
growth was in the single digits year-on-year for the first time in years 
(usually it's 20%+ yoy), presage a tiring of Japan as a destination. Of 
course the government is saying that the much lower numbers for those 
two months were simply because of the series of typhoons and other 
natural disasters that hit Japan then. I suspect that both views are 
true. In other words, the first massive wave of first-time travelers to 
Japan are now "done" with the country, and they are now looking for 
newer experiences to fill their photo albums and social media feeds. At 
the same time, if the weather is enough to keep people away, then 
clearly we are also dealing with a fickle market in the first place, and 
given the trends surrounding global warming, we should expect the 
unreliable weather to be another reason to be concerned.

So is the boom over?

[Continued below...]

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[...Article continues]

My take is that the levels of growth experienced over the last five 
years are indeed coming to an end. Even if the turn down over the last 
few months really is caused by bad weather, you can see from the data 
that the general rate of annual growth is slowing, and is trending below 
20% already. Indeed, my guess is that overall growth for 2019 will be 
less than 15% and below 10% in 2020. This doesn't mean we are facing a 
looming disaster. Rather, the market is maturing and our repeat visitors 
will continue coming and spending more strategically. Unfortunately the 
government is still in "rah rah" mode, and is setting itself up for 
embarrassment and disappointment. Instead, it should be preparing for 
the slow down and be looking for ways to compensate for it. For example, 
they could free up visitor visas for more countries (Vietnam and 
Philippines come to mind), make it cheaper for LCCs to land here, and 
perhaps delay the new departure tax until much later, among many other 
fine tuning moves.

I do think that we will get to at least 35m visitors by 2020, if not the 
rather optimistic level of 40m that the government has been predicting. 
I do not think that we will reach 60m visitors by 2030. At that number, 
Japan would need a much better supply of hotels and airlines, and would 
need to make itself significantly more competitive for low-income 
visitors - something it is not likely to want to do. Japan is not 
Thailand, and should not be tempted to become an alternative (even if it 
could).

But my pessimism on growth doesn't mean that the inbound travel boom is 
over. Instead, I think that what is going to happen is the market will 
stabilize and mature, and the people continuing to make up the bulk of 
the travelers will also be more sophisticated and more aware of what 
they want when they come here. In the future, the ratio of repeaters 
will continue to rise, and while they may be more frugal per visit, over 
time they are also likely to start investing in property in their 
favorite haunts, so that they can visit a couple of times a year without 
running up large hotel bills. This evolution will bring investment 
capital into Japan, and work very similarly to how British people keep 
retirement or holiday homes in France and Spain.

What is my basis for making a prediction of a peak of 35m~40m inbound 
travelers to Japan?

To my mind, the destination most similar to Japan is the UK. It's also 
an island nation surrounded by a large population of continental 
travelers fascinated with its rich history, frenetic and cosmopolitan 
cities, the shopping, and recently even the food. Many of these 
continental visitors "pop over" on Low-cost Airlines (LCCs) for the 
weekend, and they have numerous low-cost alternatives for accommodation 
and activities. All these factors have made the UK the 7th most visited 
country in the world, with about 39.2m tourists making the trip in 2017.

I feel there are sufficient similarities between the UK and Europe, and 
Japan and its proximity to China and S. Korea/Taiwan, that we will see 
very similar long-term tourist traffic patterns here as well. If I'm 
right, then this would provide a basis for predicting visitor numbers to 
Japan of up to 40m visitors a year by 2020.

"But!" You might interject, "Asia's population is so much greater than 
that of Europe!" Yes, that's true, but the middle class are the social 
group most likely to travel, and while we could say that most of 
Europe's 740m people make enough income to travel to the UK, in Asia the 
middle class population is still less than this (probably around 600m 
currently - 400m in China alone). Yes, there are estimates that across 
all of Asia the middle class population will swell to around 1bn by 
2020, but this includes India, which is sufficiently far from Japan that 
people there might  well just decide to head in the opposite direction 
instead, and spend their money in the UK or France.

...The information janitors/

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