TT-969 (Tourism Edition) -- Is the Japanese Inbound Tourism Boom Coming to an End?

* * * * * * * * 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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