* * * * * * * * * T E R R I E 'S T A K E * * * * * * *
A weekly roundup of news & information from Terrie Lloyd.
General Edition Sunday, August 02, 2009 Issue No. 528
- What's new
- Candidate roundup/Vacancies
- Upcoming events
- News credits
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+++ WHAT'S NEW
Rumors of Tokyo's domestic and foreign hotels having record
low occupancy rates have been doing the rounds for several
months now. Of course, rumors are inclined to exaggerate
the real situation, and while the bars and restaurants of
popular locations do seem to be a bit easier to get into on
Friday nights, no one in the industry is coming right out
and saying things are grim. Nonetheless, the rumors have
had occupancy rates at some leading Japanese and foreign
hotels, especially the pricier ones, at 50 percent or less --
which we had thought was a bit unlikely.
But it looks like the rumors could be correct.
Yesterday the Nikkei released data that it says it
collected from 22 major hotels in Tokyo. That data says
that in June the average occupancy rate for the surveyed
group was a low 63.5 percent, the 31st straight month of
decline. While the break-even for hotel occupancy in the
USA is roughly around 65 percent, the cost of land and
employee numbers/costs mean that the break-even for hotels
in Tokyo is probably more likely to be around 70 percent --
so there appear to be a number of operators in town who are
losing their shirts right now. Maybe the first closures
aren't far behind?
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It looks like most of the blame for the current situation
is the dramatic drop-off in the number of foreign tourists
coming to Japan. As we report in our news section below,
South Korean tourist numbers, the largest sub-group of
Japan's 8.3 million (2007) foreign visitors last year, are
down a shocking 49 percent, which puts a massive dent not
only in hotel stays, but in fact in any tourist-related
We think the South Koreans will probably stay away for at
least the rest of this year, until the won starts to regain
some of the 33 percent in value it has lost against the
Japanese yen in the last 12 months. Further, since the U.S.
dollar and other anglo-saxon currencies are also reflecting
the turmoil in their respective economies, this leaves the
Europeans, the Chinese, and domestic Japanese customers to
fill the gap -- not an easy task, given the cut-back in
consumer spending in this country.
Stalwart domestic hotel operator Imperial Hotel was
particularly badly hit in May, and the Nikkei reckons its
occupancy rate was just 59 percent, down from about 78 percent
a year earlier. As a result, the hotel is having to fight
back by cutting prices. It is doing this in ways that don't
impart a feeling of desperation but none-the-less incentivize
loyal customer spending. Amongst its efforts are family
plans with 30 percent-40 percent discounts, stepping up its
elite Imperial Club Grace business, doing CRM campaigns to
its 70,000 other club members, and sprucing up its
wedding services business.
The Imperial apparently does more than 1,000 wedding
ceremonies a year at its Tokyo and Osaka facilities, and
says it plans to increase both the volume and the average
spend (upwards of the current 5 million yen per wedding).
It has been doing about 1,000 weddings annually for many
years and as a result has an impressive contact database.
In 2006, the Imperial decided to capitalize on the data by
creating its elite Imperial Club Grace, which is only open
to couples who previously were married at the Imperial. The
hotel contacted those people marrying within the previous
15 years and surprisingly managed to get 20,000 to sign up
as members. The Club Grace members get special promotional
deals for anniversaries and childbirths, and according to
the Nikkei this club alone generated an increase of
350 million yen in revenues over the year before -- obviously a
hopeful sign, and a portent of more similar marketing to come.
How about a club for foreign patrons who sign business
contracts in an Imperial bar (sort of like getting married!) and
who are in need of healthy discounts, then? :-)
The recent success by the Imperial in appealing directly
to its customer base, and "working" those customers with
promotions and CRM marketing is spawning action by other
hospitality companies that are eager to improve their
numbers. Looking at the all-important foreign marketing
efforts, the Hoshino Resort which operates a hotel in
Karuizawa and soon another in Kyoto (late this year),
joined the Elite International Hotel Club to become a
member of the Small Luxury Hotels of the World network.
Seems like an obvious move, but as can be seen from the
Rakuten numbers below, less than 15 percent of Japan's
hospitality operators are apparently ready/able to receive
On to Rakuten Travel, then, the nation's largest online
travel agency. Rakuten currently represents about 23,000
operators of different hotels, ryokan, inns, pensions,
and other operators. Rakuten says that it has recently
tied up with 22 online and physical travel agencies in
HK, Taiwan, and South Korea, to sell stays at almost
4,000 of its partner hotels. Rakuten says that next it
will expand its marketing to China directly later this
year -- targeting wealthy travelers who no longer need
special visas to visit Japan.
Of course, another valid approach is to just sell those
puppies (the hotels), while they are still worth the land
they stand on! This is what Morgan Stanley appears to be
doing, seeing as it is reportedly selling its Shin-Kobe
located Crowne Plaza hotel property to the Thai Charoen
Corporation Group real estate fund. No word on what MS
will get for the property, although it's on record as
having paid 12.5 billion yen for it 5 years ago.
Oh, and as an aside, about the only hotel sector which is
NOT losing money right now is love hotels. Apparently some
players have an occupancy rate of 250 percent -- which,
given the low cost of operations, this represents turn-over
of about 2.5 couples a day... Maybe the big city hotels
need to figure out how to adopt the business model?
Last week's Japan Inc./LINC Media Cost-saving seminar went
well and our sincere thanks to those who took time out of
their busy days to attend. The presentations (including one
by yours truly) covered ideas in the personnel, real
estate, and IT, about how to get costs down. The Big Idea
"award" (if there had been one) would have gone to PBXL CEO
and Founder, Mr. Jim Weisser, who shared a program he
implemented for a major foreign company and that went on to
save around $900,000 in the first year. Thanks for making
the presentation Jim.
Perhaps the stand-out cost-saving suggestion at the
seminar, though, was the office building used to host the
event in the first place. Nomura Real Estate introduced us
to their new concept PMO (premium mid-sized office)
building, where high-spec buildings are placed in less
fashionable areas, resulting in dramatic reductions in
rent. NRE's Hachobori building is a great-looking office
with full floor to ceiling windows, a 2.8-metre ceiling,
full downstairs and per-floor security, and of course all
the usual zoned a/c, extra power, raised flooring, and other
We were not the only people surprised to hear that Nomura
is letting the building out at just 23,000 yen per tsubo --
a steal for a new building right in front of the station.
You can check out the building and others like it at
http://www.pmo-web.com. Looks like building developers in
Tokyo are finally starting to adjust to the times...
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- Nissan's 'Leaf' EV shown to public
- Consumer prices sink further, unemployment up
- Tourist numbers plunge 29%
- 4-hour takkyubin turn-around
- Consumer points pass JPY1trn
-> Nissan's 'Leaf' EV shown to public
Nissan's Carlos Ghosn unveiled to the public today his
firm's new all-electric vehicle, the Leaf, with a promise
that buyers can buy one in late 2010 in Japan, the USA,
and Europe. The Leaf is capable of speeds of up to 140km/hr
and can travel more than 160km on a single charge -- making
it ideal for use around town and for commuters. Nissan says
that the price of the vehicles will be affordable and that
the battery can be charged to within 80% capacity in 30
minutes -- with the onboard car navi showing the nearest
electric charging station if the battery is low. Other cool
features include being able to operate the a/c by phone,
and to set the energy consumption pattern for each driver.
(Source: TT commentary from google.com, Aug 2, 2009)
-> Consumer prices sink further, unemployment up
Ben Bernanke's "green shoots of recovery" enabled by the
bail out of the banks and a consequent recovery of stock
prices, is coming at a significant cost to Joe Public. Here
in Japan, deflation continues to pick up speed and
companies are slashing payrolls to cope with the massive
fall in profits. Data from the Ministry of Internal Affairs
and Communication shows that consumer prices fell 1.8%
y-o-y, the largest monthly decline on record. The biggest
drop was in transport and communications. Unemployed
workers also hit a 6-year high in June, with 3.48m
registered with Hello Work, a 31.3% increase over the
previous year. There are now 63m workers in Japan. (Source:
TT commentary from rttnews.com, Jul 30, 2009)
-> Tourist numbers plunge 29%
It is not a happy time for the tourist industry right now.
According to the Japan National Tourist Association (JNTA),
the number of inbound tourists fell by 29% in the first 6
months of the year through to June, led by a large 49%
drop in South Korean tourists. In actual numbers, just 3.1m
people made it in to Japan, and the JNTA reckons that the
appreciation of the yen versus the Korean won, as well as
initial fears at booking time of swine flu, led to mass
cancellations of group travel. ***Ed: We know that the
fears of swine flu also significantly impacted the outflow
of Japanese tour groups as well -- especially of school
groups who account for 10%-20% of some Western countries'
Japanese tour volumes.** (Source: TT commentary from
bloomberg.com, Jul 28, 2009)
-> 4-hour takkyubin turn-around
The new face of Japan Inc's efficiency is not Toyota, it's
transport company Yamato, or Kuroneko it is better known.
Yamato has just announced that from mid-month is will start
providing delivery of TV shopping orders in as little as
four hours after the orders are placed. Normally home
delivery takes a minimum 8 hours, but after a major TV
shopping customer requested the rapid service inside Tokyo,
Kuroneko decided to invest in the infrastructure needed to
get the rapid turn-around. If the service is well received,
the company will roll out similar delivery times to
consumers in Osaka and Fukuoka. ***Ed: We notice that
Yamato is also being very aggressive on its pricing for
mail order goods to Japanese by West Coast U.S. firms, with
prices of US$8-US$15 per parcel, up to 1kg.** (Source: TT
commentary from nikkei.co.jp, Aug 2, 2009)
-> Consumer points pass JPY1trn
The consumer points market, i.e., retailer customers with
point cards that result in future discounts and other
rewards, has become serious business in Japan. According to
the Nomura Research Institute (NRI), the value of such
points issued in FY2009 (ending March 2010) will be around
JPY1trn (US$10.5bn) -- thereby ensuring that the overall
points accumulated will probably be around JPY2trn
(US$21bn) ***Ed: Note that that last number is our
estimate. Now that various companies are forming groups to
provide points holders with redemption capabilities with
other group stores, the points business is likely to expand
even more quickly. We wonder how the government feels about
seeing private companies become issuers of a fiat
currency? Probably they will move when it gets too big --
via new tax rules.** (Source: TT commentary from
Nikkei.co.jp, Jul 30, 2009)
NOTE: Broken links
Many online news sources remove their articles after just a
few days of posting them, thus breaking our links -- we
apologize for the inconvenience.
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+++ CANDIDATE ROUND UP/VACANCIES
=> BiOS, a Division of the LINC Media group, is actively
marketing the following positions for customers setting up
or expanding in Japan, as well as other employers of
** HIGHLIGHTED POSITION(S)
BiOS is now accepting applications for the role of
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Remuneration is JPY4.5m – JPY5.5m, based on experience.
** POSITIONS VACANT
- Country Manager, telecoms provider – JPY15m + incentives
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** BiOS Job Mail
Every 2 weeks BiOS sends out a regular communication to its
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+++ ABOUT US
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