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Getting the wheels back on Japan’s travel industry

The area surrounding Yasaka Tower, a major sightseeing spot in Kyoto, was largely deserted in April or May amid the coronavirus pandemic. | KYODO

Unprecedented travel restrictions have crippled tourism, forcing businesses in the sector to rethink strategies and explore new opportunities



As COVID-19 brought travel to a standstill in April, a traditional Japanese inn in Fukui Prefecture began selling takeout for those hunkered down at home, offering customers the opportunity to replicate a night at the upscale ryokan under their own roof.

The ¥29,000 package deal for four people offered by Grandia Housen comes with a bottle of locally produced sake, 10 liters of water from the inn’s hot spring that is to be mixed with bathwater to emulate a spa and, for each of the four bathers, a traditional kaiseki boxed dinner and a light cotton yukata kimono.

And that’s not all. Instead of being pampered by the ryokan’s staff, “guests” have access to online videos simulating check-ins and check-outs, as well as short clips explaining the menu, sake and the qualities of the onsen water.

Is it worth the price tag? “Including other takeout options, we’re happy to say we’ve been receiving more than 100 orders every weekend,” says Takazumi Yamaguchi, managing director of the ryokan.

Grandia Housen is among approximately 50,000 hotels and traditional inns in Japan that have been facing one of the most wrenching consequences of the novel coronavirus pandemic: the restriction of movement. Beyond the canceled vacations and business trips, travel restrictions have crippled tourism like never before, forcing the industry to rethink strategies and explore new commercial opportunities.

“Things were stable back in February, but sales began falling in March and we’ve been mostly closed since April,” says Yamaguchi, whose family has been running the inn since 1963. “Under these circumstances, we have to diversify our business and find new ways to promote our ryokan.”

While Japan’s state of emergency has since been lifted and guests are gradually returning, Yamaguchi says the hospitality sector should be prepared for a second and even third wave of the pandemic.

“We’re in this for the long haul,” he says.

Reassessing tourism

2020 was supposed to be a stellar year for tourism in Japan.

Tokyo was hosting the Olympic and Paralympic Games. The government was aiming to attract a record-high 40 million visitors, riding on a rising wave of inbound travelers. Hotels and ryokan were preparing for an influx of guests and domestic airlines rolled out promotional campaigns. Even a slick new bullet train was developed to make its debut in July, when the sporting extravaganza was scheduled to kick off.

However, the pandemic forced organizers to postpone the games to 2021. International flights were suspended and stay-at-home requests saw domestic tourism come to a screeching halt.

Perhaps symbolic of the new stigma that would be associated with travel was the Diamond Princess, the cruise ship that was put under quarantine in the port of Yokohama in February after passengers tested positive for COVID-19. The high-profile outbreak eventually claimed 14 lives and highlighted the risk of the infection’s spread in confined spaces.

Rebuilding a sustainable tourism industry in the aftermath of such an unparalleled crisis will take years and involve multiple phases, experts say. More jobs will be lost and bankruptcies will ensue. Recovery will only come step by step, starting with domestic travel while maintaining social distancing measures. It will be some time before foreign tourists begin trickling back into Japan and, when they do, the nation’s omotenashi, or the Japanese spirit of selfless hospitality, may be put to the test.

In a report released in April, Mitsubishi UFJ Research & Consulting estimated that ¥2.4 trillion of inbound tourism consumption would be lost in the six months to September if the number of travelers to Japan remained at the levels of March, when the nation saw a 93 percent year-on-year drop. That, in turn, would push down Japan’s nominal GDP by 0.6 percent and could cost 557,000 jobs, it said. Tourism figures worsened in April, with the number of inbound travelers falling 99.9 percent against the same period last year.

Meanwhile, Tokyo Shoko Research counted 219 bankruptcies due to the pandemic as of June 5. Thirty-four were from the lodging industry, which employs around 700,000 workers nationwide.

“Japan’s tourism industry has weathered the global financial crisis (in 2008) and the Great East Japan Earthquake (in 2011), but nothing compares to this,” says Yoshihiro Sataki, a professor at Josai International University and an expert on tourism.

“The coronavirus is a direct threat to the sector since it is transmitted between people and restricts travel,” he says. “If the situation continues, I’m afraid most businesses in hospitality won’t be able to survive.”

Sataki says that while domestic tourism will likely pick up some momentum in the months ahead, it may take three or four years at the earliest before international travel regains its vigor. Meanwhile, he says, the pandemic is an opportunity for the government to review its inbound tourism policy, which has been overly reliant on big cities and a single source of tourists.

“When you look at the accommodations that are hardest hit, they are ones that have counted on visitors in group tours from countries such as China,” Sataki says.

Overseas visitors to Japan, especially from Asia, have been growing in recent years against the backdrop of the declining value of the yen and the easing of visa requirements. The figure hit a record high of 31.88 million in 2019, of which over half were from China, Taiwan and Hong Kong.

Sataki says the industry needs to reassess its tourism assets and devise new ways to shed light on the attractions Japan has to offer. Rather than arriving in large crowds, more people may come in small groups or seek personalized tours off the beaten track.

And if there’s a silver lining to the pandemic, it may be how the crisis is addressing overtourism, or the congestion of favorite tourist spots from excessive numbers of visitors. Sataki, who has published a book titled “Kanko Kogai,” or “Tourism Pollution,” says popular destinations such as Kyoto have been inundated with tourists over the years, leading to mounting complaints from locals. As things now stand, the pandemic has seen the ancient city temporarily restore its peace.

“This could be a chance to hash out new measures such as placing limits on the number of visitors at certain attractions as part of social distance measures,” Sataki says.

To stimulate domestic tourism, the government has allocated ¥1.7 trillion for what it calls the “Go To Campaign,” in which it plans to subsidize half of domestic travel costs up to ¥20,000 per night and issue coupons that can be used at local restaurants and souvenir shops.

It remains to be seen, however, whether the airlines and railways that tourists depend on for transportation can ride out the storm.

Airlines grounded

The aviation industry has been especially hard hit by COVID-19 as countries impose travel restrictions and carriers cut back on flights.

Before the pandemic, Japan’s domestic air market stood at No. 5 in the world in terms of passenger volume. It also boasted three of the top 10 domestic air routes in the world, according to the International Air Transport Association. But during the Golden Week holiday period from April 29 to May 6, the number of domestic flight passengers fell to around 123,500, down 95 percent year on year. Travelers on international flights sank by 98 percent to approximately 8,700.

Facing a plunge in bookings, the Scheduled Airlines Association of Japan sought ¥2 trillion in unsecured loans from the government in April, according to reports. The association, which includes All Nippon Airways, Japan Airlines, their budget affiliates and other smaller airlines, has said the decline in revenue for the four months through May will likely reach an estimated ¥500 billion. A worst-case scenario in which the pandemic’s impact stretches for more than a year could see the domestic industry’s revenue slashed by around ¥2 trillion.

Geoffrey Tudor, principal analyst at Japan Aviation Management Research, says the nation’s two main carriers, ANA and JAL, had already reached their peak in market terms prior to the current crisis. Further growth may come from low-cost carriers (LCCs), he says.

“However, can LCC’s survive after the coronavirus?” he asks. “LCCs depend on fast turnaround to make as many flights as possible. If the turnaround is delayed, they lose this advantage. So extra cabin cleaning tasks and other safety measures may take away this advantage.”

IATA has proposed temporary, layered measures for restarting passenger flights, including collecting passenger data in advance of travel and requiring in-flight face coverings. The Scheduled Airlines Association also released its own set of guidelines, advising operators to serve boxed meals on international flights, for example, to reduce interaction between passengers and crew.

Tudor, who previously served as director of public relations at JAL, says that under the circumstances recovery for the sector will be slow and L-shaped, rather than V-shaped.

“Will the Chinese return? Yes, but we don’t know when. That depends on when an acceptable vaccine has been proven safe — and safe and simple cross-border quarantine measures are in place,” he says. “That will happen, but nobody knows when. A year? Two years?”

Paradise lost

Entry bans are disproportionately hurting tourist magnets such as Okinawa, Japan’s southernmost island chain, which positions tourism as the leading industry of the prefecture’s economy.

Okinawa welcomes around 10 million visitors annually. Seventy percent are domestic travelers and 30 percent are overseas guests mostly coming from Taiwan, South Korea, China and Hong Kong.

“The number of tourists began falling in late March and, in April, the figure was down 90 percent year on year,” says Norihiro Mejima, executive director of the Okinawa Convention & Visitors Bureau. “So far we’ve only seen one related bankruptcy, but these few months have been backbreaking.”

According to the prefecture, the number of inbound travelers in April dropped to zero for the first time since 1972, when the United States agreed to the return of Okinawa to Japanese sovereignty.

“While we expect domestic tourists to start returning in June after the state of emergency is lifted, we can’t tell when demand will recover to pre-pandemic levels,” Mejima says. “July and August are peak tourism season for Okinawa, but schools are considering shortening summer vacations to make up for time lost during school closures.”

Roughly 400,000 students visit Okinawa annually on school trips, Mejima says. Many go on to become repeat visitors, drawn by their childhood memories.

“But with school events being canceled, we may not be able to rely on them in the years ahead,” he says.

Mejima says the prefecture is also working to dispel the new stigma associated with visitors by stressing the economic importance of the tourism sector. Many of the initial cases of the coronavirus reported in the prefecture were people returning from overseas travels and business trips to Tokyo.

“That created some hostility toward tourists as being potential hosts of the virus,” he says.

Ailing rural lines

That fear of spreading and catching the infection has led to self-quarantine and workplace reforms, including the shift to working remotely, measures that are paralyzing ground transportation.

East Japan Railway, Central Japan Railway and West Japan Railway, which cover metropolitan Tokyo, Nagoya and Osaka, respectively, all suffered badly in the January-to-March quarter.

Bullet trains, for example, account for 90 percent of Central Japan Railway’s revenue from rail services, but passenger volume in April plummeted 89 percent year on year.

“I think companies have realized that teleconferences can often substitute for face-to-face meetings,” says Junichi Sugiyama, a railway journalist. “Looking ahead, bullet train lines that rely on business trips should brace for decreasing demand.”

Meanwhile, major private rail lines operating in urban centers may tilt their investments toward development of their real estate as passenger numbers in this aging and shrinking population are set to decrease.

“Rail services only account for around a third of sales for large private railway companies,” Sugiyama says. “Their portfolio is heavily leaning on housing and office developments and the operation of entertainment facilities, department stores and other retail outlets near terminal stations.”

More of a concern are the rural rail lines connecting Japan’s countryside. With dwindling passengers and limited capital, the pandemic could be the death knell for many, Sugiyama says.

“That will be a pity, not only for residents relying on these routes, but also for trainspotters like myself who enjoy traveling on scenic railways,” he says.

It’s not only trains. In March, a rental car dealership in Okinawa filed for bankruptcy, while a taxi company in Osaka and a bus operator in Saitama Prefecture went out of business in May after customers evaporated.

That sea change in attitudes toward travel has prompted many accommodations to prepare for what may be the new normal for tourism in post-pandemic Japan.

Yubo Ichiraku, a hot-spring ryokan in the city of Tendo, Yamagata Prefecture, has decided to shift its focus from large parties to individual guests. Before the pandemic, roughly 20 percent of customers were inbound tourists, says Taichi Sato, executive director of the 67-year-old inn.

“But they disappeared in March, prompting us to change our direction,” Sato says. “We’ve been primarily catering to group guests, but have been using the temporary closure of the ryokan during the state of emergency to renew our service and infrastructure.”

Sato says the inn will be closing its buffet and will introduce a system to check in guests in their rooms to avoid queues forming at the entrance. Rooms with private open-air baths will offer all-inclusive deals where guests for a set price will be served all they can drink, including craft beer produced by the ryokan at an adjacent brewery.

“I think it’s fair to say that this is the worst crisis since World War II,” he says. “There’s a lot of uncertainty toward the future, but it’s also an opportunity to embrace new challenges.”


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