TT-867 (Tourism Edition) -- Real Estate Honeypots in the Countryside

* * * * * * * * 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 03, 2016, Issue No. 867

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+++ Real Estate Honeypots in the Countryside

Running a travel agency looking after custom requests is really an
interesting business. Ever since we started our Type II agency within earlier this year, we have had requests from guests
from all over the world asking us to arrange accommodation, transfers,
and activities. From Hokkaido to the southern islands of Okinawa, each
destination has something special that fascinates the customer and which
they want to experience. Such is the power of the internet.

Broadly speaking our customers fall into four categories:

1. Asia-based people who are repeat travelers to Japan and who pursue a
particular activity (cycling, skiing, self-driving, etc.) but who don't
speak enough Japanese to match their aspirations. These are our best
customers because they know what they want, and they value Japan's
up-market options. In fact, this is also the fastest growing segment of
travelers to Japan and is the one that will drive tourism out to the

2. First-time US/European customers, who are looking for a smorgasbord
of Japan experiences for their one and only trip to Japan. These people
generally know very little about Japan and simply want to enjoy the food
and some stimulating local scenes. They are adventurous to a certain
degree, but need lots of hand-holding and want to come back to familiar
surroundings and food every couple of days. Luckily they are easy to
please and when they return home they generally rave about their travels
and cause their friends to seek out the same experiences. Our biggest
challenge with first-timers is to find them accommodation at
destinations featured in magazines or the internet - which of course
usually means fighting for rooms at a highly popular 1-3 day event that
thousands of Japanese want to attend as well!

3. Wealthy customers who have particular accommodation, transfer, and
dietary expectation, and who, while they want to explore Japan, also
want to do so from within their own comfort zone. Some parts of Japan
are really well serviced by high-grade accommodation, while other parts
have almost none. For example, the Seto Inland Sea area has plenty of
international-grade resorts - defined as views, room size, food,
language ability, things to do, etc. On the other hand, while Kyushu has
plenty of onsens, these are typically confining, language-challenged,
and inflexible and therefore don't necessarily meet the needs of
international travelers. Of course there are exceptions, but they are
almost always booked out months ahead.

4. Largish groups of 20-40 people, who want to stay together as a group
and therefore have trouble trying to find hotels and transport that
allows them to do this. Surprisingly, Japan is not well matched for ad
hoc large group travel, as both hotels and bus/train companies operate
with as little spare inventory as they can. There are about 111 travel
agents registered with the Japan Association of Travel Agents (JATA) who
specialize in Inbound travel, and most of them focus on group travel.
Despite this, we are getting plenty of leads because our Japanese
competitors need much longer lead times and offer far less flexibility
to international group planners who always want to make special requests.

The one thing with all of these groups is the problem which I call
"nexus point real estate", meaning the availability of accommodation in
key tourist locations around the country. As a travel agency we get to
identify these nexus points, because they are the locations where we
repeatedly have trouble finding rooms for our guests to stay.

[Continued below...]

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Reservation Deadline: Saturday, October 8th
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Venue: Bunkyo Civic Hall, 1-16-21 Kasuga, Bunkyo-ku, Tokyo
Price: ¥5,000 (A-rank seats)

Tickets & Reservations:

Some tourism nexus points in Japan with a shortage of places to stay are
well known:
* Kyoto at any time
* Karuizawa and other highland areas in August and September
* Aizu and other points north during October when the leaves turn
* Nebuta lantern festival in Aomori between August 2nd and 7th
* Sapporo during the snow festival in February
* Shirakawago Lightup Festival between mid-January and mid-February (but
which has been canceled for 2017 because of the overwhelming surge of
* Mt. Fuji climbs in July-August
* Shiretoko world heritage area in Hokkaido
* Yakushima island, another world heritage site in Kyushu
* And many others

With the exception of Kyoto, what all these places have in common that
lowers the availability of accommodation is that they are seasonal. So
if you were to develop real estate there, you'd unfortunately have
vacant premises for most of the year. This is the problem that Japan's
ski resort areas have and it's why you can get great deals during the
summer months in Niseko, for example.

Kyoto is a bit of a unique case, in that it is essentially a "historic
Disneyland" for foreign guests and of course is on the must-see list of
every first-time visitor. As such the city offers huge opportunity for
real estate development and it always surprises me that there is not
more building activity going on there. Yes, it is difficult and
expensive to secure land in the city itself, but given that tourist
crowds are growing so impressively and with the availability of good
local ground transport, it is now viable to build outside the main city
limits. If I was a real estate investor, Kyoto's surrounding towns would
be my number one pick of places to build in.

Actually, Kyoto offers a lesson in what a tourist nexus point should
look like. It should be underdeveloped and thus offer growth potential,
it should of course receive plenty of tourists, and most importantly the
tourist flow should be almost (but not entirely) year-round. What other
locations fit this description? Here are several that keep popping up
for us as a travel agent:

* Shimanami Kaido - this famous cycling course between Onomichi near
Hiroshima and Imabari in Ehime. Although in the middle of winter
(end-Dec until end-Feb) this area gets a lot less traffic, at other
times of the year, it is hugely popular - to the point that the 14 or so
Minshuku and onsen along the trail are almost continuously booked out. I
think there is great potential to buy old homes on the islands and
refurbish them as tourist accommodation. Particularly needed is a luxury
location on at least one of the islands.

* Mt. Fuji western side (Fujinomiya). While we have Hakone to the south
and Fujigoko to the north, surprisingly there is very little luxury or
high-grade accommodation to the west of Mt. Fuji. The views, traffic,
and environment here are notably better than other areas, and currently
you have a choice of some 1980's resorts and not much else. Someone
could do a nice trade running a shuttle from the Shin-Fuji station on
the Shinkansen up to a decent facility in this area.

* Okutama or Chiba. Here in Tokyo itself, there is no international
grade luxury accommodation within the city limits that could be
considered tranquil countryside. Of course you might ask yourself why
bother with a natural setting when the attraction of Tokyo is its
frenetic buzz of humanity. This may be so, but many foreign
businesspeople in particular want to take a short trip outside of Tokyo
to get a feeling of traditional Japan after doing business in the city,
and at the moment their choices are Nikko or Kamakura - which, btw, are
also two places that lack decent high-end accommodation other than some
tired old ryokans.

There are of course many other nexus points around the country, and
indeed, even right here in Tokyo itself. One company that seems to
understand the opportunities is Hoshino Resorts, which has picked up and
renovated properties near popular tourist locations all over the
country. Their Kai resorts, for example, are outstanding, and match the
Ryokan lifestyle to international expectations. Of course Hoshino
properties are expensive, and there is ample room for players servicing
the mid- and low-end markets around the country. We'll pick up on some
of these in future Takes.

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