Japan: the eastern surge

Stakes are high for the Japanese Travel & Tourism industry (T&T).

Ahead of the Tokyo Olympic and Paralympic games of 2020, the government and industry stakeholders are accelerating their efforts to welcome and ease international visitors’ stays in the country. The target of 40 million visitors has been set for 2020 and 60 million for 2030. A series of favourable events are paving the way to meet these targets. Recently, Japan came fourth in the World Economic Forum’s 2017 Travel & Tourism Competitiveness Index, advancing by five positions since 2015. The past few years have also seen Japan benefit from external factors, helping it to attract more international visitors; the depreciation of the Japanese yen, China’s economic growth, airport deregulation and relaxed visa policies with certain local countries.

Japan saw record +22% growth of foreign visitor numbers in 2016, reaching 24 million. In terms of spending, international tourists posted a record high of JPY3.75 trillion (USD33 billion), a +7.8% increase compared to the previous year. For the same year, the T&T industry’s contribution to Japan’s GDP amounted to JPY37.3 billion (USD343.2 billion), a 7.4% share. In 2017, the World Travel & Tourism Council predicts T&T’s contribution to Japanese GDP will grow by +2.5% and rise by +1.6% per year between 2017 and 2027.

Cultural melting pot

Global real estate expert Savills’ study on the Japanese retail landscape recognised the rapid change of inbound tourists’ spending habits and confirms “a new phase”.

Far away from buzzing Tokyo and Osaka, the more rural parts of Japan are welcoming a growing number of tourists in search of traditional Japan. Experiential tourism is on the rise, notes Taiken Japan, as authentic and immersive tourism activities blossom around the country. Travellers can now pick Shiitake mushrooms in Atami, witness the making of a samurai blade in Bizen Osafune Token Village (next to Okayame), take part in making traditional fermented foods (miso, kimchi etc.) in Yamada and even rent Kimonos.

The government welcomes this trend and is encouraging the T&T industry to become less reliant on Japan’s biggest cities. In order to diversify tourism spend across the country, new airlines have been opened. Low cost carriers are scheduling flights from China’s second and third tier cities, Hong Kong (China) and South Korea to Osaka and Western parts of Japan. As a result, the number of seats has increased by +25% since the beginning of 2017. In September, Japan Airlines, the leading international airline in Japan, announced an order of four Boeing 787-8 Dreamliners. This is “a key part of our strategy as we look to bolster our existing route network and strengthen our position ahead of the 2020 Summer Olympic Games in Tokyo,” said Yoshiharu Ueki, President of Japan Airlines. 

The government is also introducing new retail areas in more rural towns to reach a JPY8 trillion milestone of tourist spend by 2020. A GS1 Japan Institute survey, conducted on visitors to Japan, showed that “shopping” is still one of the biggest reasons to visit the country. Since the beginning of the year, tourist spend has been on the rise in Japan. In fact, travel-related spending hit a quarterly record high between April and June, reaching JPY1.08 trillion. At JPY414.6 billion, spending on shopping grew by +15% from the year before.

Much like other regional countries, Japan is witnessing a change in inbound traveller demographics, with consequences for travel expenditure. Over the January to September 2017 period, the number of sales-in-store grew by a staggering +34% compared to the previous year. Chinese Globe Shoppers accounted for 46% sales-in-store during this period, followed by Koreans (31%) and Americans (12%).

Beauty contest

While the popularity of Korea’s K-beauty sector has increased around the globe, Japanese branded cosmetics still hold on to their reputation as high-quality products. APAC tourists flock to Japan to purchase products designed for Asian skins, UV-blocking or skin-lightening creams in particular. Shinji Yamada, spokesperson for cosmetic Japanese giant Kanebo speaks of a better perception of Japanese cosmetics compared to Chinese-made ones. The Nikkei credits the cosmetic sector for the rebound in Tax Free sales of goods in department stores in 2017. Cosmetic drugstore sales are growing rapidly as the number of drugstore locations blossom around the country. In addition to Chinese-speaking beauty consultants at their counters, international cosmetic brands are engaging better with their customers, thanks to Chinese language leaflets and displays, and trial cosmetic kits for passing Globe Shoppers. 

Growth opportunity for leisure

60% of overseas visitors to Japan are repeat travellers reports Savills. As much as 80% of Hong Kong (China) inbound travellers have been to Japan before. Chinese famously flock to Japan to enjoy the country’s Winter and Summer sales during their “explosive buying” spree, Bakugai. According to Japan Tourism Agency, foreign tourists leisure expenditure amounted to JPY 34.3 billion over the April-June period, a +24% increase compared to the previous year, but still a small 3% share of total travel-related expenditure. There is room for further leisure spending growth predicts the government. There has been a growing number of multilingual websites and apps designed to help foreign visitors overcome language barriers and locate local tourism activities. For example, free web magazine Matcha is available in 10 languages and informs visitors on food, festivals and events from Hokkaido to Okinawa.