The Journal The Authority on Global Business in Japan

Arguably the hardest hit of all Japan’s business sectors, the tourism industry is using the lull in trade forced upon it by the coronavirus pandemic to take stock. Nevertheless, for some hotels, ryokan, airlines, travel agencies, and others that make up the interconnected travel industry in this country, a virus that emerged with little warning and has killed at least 400,000 people globally in a span of six months may also have sounded the death knell for their business.

The Japanese government has effectively banned tourist arrivals from virtually every country in the world, meaning just 2,900 foreign nationals arrived in the month of April, down 99.9 percent from the same month a year ago. It is the first time since 1964 that the monthly arrivals figure had slumped below 10,000.

HARD FALL
To add insult to injury, 2020 was meant to be the year that Japan broke through the 40-million-foreign-visitors barrier, with the growing number of leisure tourists boosted by people flocking to attend the Tokyo 2020 Olympic and Paralympic Games. Instead, the Games have been post­poned until July 2021, and there have been ominous warnings that they may be scaled down or canceled if a coronavirus vaccine has not been developed by then.

The growth in the number of leisure arrivals to Japan in recent years has indeed been impressive. As recently as 2012, just eight million tourists came into the country, but that figure had soared to more than 32.5 million in 2019. This growth encouraged the administration of Japanese Prime Minister Shinzo Abe to boldly target 40 million for 2020. Even 60 million arrivals in 2030—a number unthinkable to many not long ago—did not appear impossible.

But the Covid-19 pandemic has brought about the biggest collapse in air travel demand in the history of commercial aviation, said Shane Hodges, vice president of Asia–Pacific sales at American Airlines.

Despite the news to date for the travel industry being deeply worrying, companies are developing strategies to survive the downturn. Some hotels are reporting that they have started to take reservations for weddings and corporate events for the latter part of this year, and many bookings by travel agencies have been postponed rather than canceled outright.

But everyone in the travel industry interviewed for this story agreed that the biggest plus in Japan’s favor is the destination.

People want to come to Japan. There are individuals in Portland, Paris, and Perth who have dreamed of a visit to the Land of the Rising Sun, of climbing Mount Fuji, seeing geisha, sitting under the cherry blossoms, and reveling in robot cafés. They want to take part in all the travel clichés that residents may take for granted, but that are the exotic embodiment of this country for millions abroad.

WAITING GAME
The trick is going to be surviving until the travelers return.

“Having been in Asia for 30-odd years, I have lived through different crises in the past,” said Tim Soper, vice president of operations for Japan, South Korea, and Micronesia at Hilton Hotels & Resorts. “We had the triple disaster here in Japan back in 2011, we had 9/11, we had SARS in the early years of this century, more recently we had MERS, and I can recall the Asian financial crisis of 1997. But we have never before experienced something so truly global and so devastating in its impact on our business.

“Because it is global, because there is talk of second waves—and who knows how long this is going to last—companies have to simply prepare for the worst and hope for the best.”

In the present crisis, with the number of guests plummeting to near zero over a matter of weeks, if not days, Soper said companies need to recognize that “cash is king” and that conserving liquidity needs to be the top priority.

Hilton operates 22 properties across Japan and has 5,500 employees. In a normal year, the company would anticipate revenues of $1 billion. They had expected even more in 2020, Soper said.

“From a tourism perspective, if you look at what has happened in Japan over the past six or seven years, there has been an absolute transformation in the inbound leisure business into Japan that every hotel has benefited from. It has been a golden age of travel,” he added.

Hilton Tokyo Odaiba

NEW WORLD, NEW PLAN
In the post-pandemic world, however, companies need to pivot to a new model and a new way of doing business if they want to remain viable.

For Hilton, the priority must be assuring future guests that they will be safe when visiting a property.

Under the Hilton CleanStay plan, which is being rolled out with support from the Mayo Clinic Infection Prevention and Control team, existing methods of keeping rooms and shared facilities virus-free are being dramatically enhanced. Components include a seal on rooms after they have been thoroughly cleaned with medical-grade products, extra disinfection of the most frequently touched parts of rooms, such as light switches, door handles, and television remote controls, and improved guidelines for disinfecting hotels’ fitness facilities. In addition, CleanStay covers food and beverage outlets and other parts of the company’s properties.

Soper said the company is bringing forward the deployment of the digital key program that has already been introduced in about 2,000 properties—mainly in the United States—and permits guests to skip the front desk entirely and enter their room using their mobile phone.

HELPFUL RESOURCES
In early June, the American Chamber of Commerce in Japan (ACCJ) Tourism Industry Committee unveiled a new website (accj.or.jp/tourism) that gives hotel operators an opportunity to share best-practice advice and tips on how they are going about ensuring the security of their guests.

“No-one knows how long it is going to take for the travel industry to bounce back in Japan, as we are, to a large degree, dependent on the government lifting its restrictions on foreign travelers and then airlines ramping up their flights to meet demand,” said Cynthia Usui, co-chair of the committee.

“There have been suggestions from the International Air Transport Association that it might take until 2024 for us to get back to 2019 levels in terms of travelers,” she added. “So, the priority for the industry now has to be switching focus to cater for the needs of domestic travelers, who still account for 75 percent of all spending and are, therefore, a valuable resource that can be tapped.”

That is precisely the tactic that Lauren Scharf, co-owner of the Okuni: Japan Unbound boutique travel agency, is employing. The company had a full roster between March and May, and more business coming in later in the year. But clients have been forced to either postpone or cancel their trips.

“We are trying hard to attract domestic travelers, primarily the Tokyo-based expat market who would normally go to their home countries for the summer,” she said. “As they are unable to do that this year, we think they will be interested in visiting some of the off-the-beaten-track destinations in which we specialize.

“We have e-mailed newsletters to international travel agents with whom we work, updating them on Japan’s Covid-19 policies and telling them about post-Covid-friendly options for their clients,” she explained. “We’ve also sent notes to the clients who came to us directly, and we sent out small gifts to cheer everyone up during the peak of the lockdowns.”

Existing clients check in from time to time, she said, although no new business has been forthcoming.

“We don’t expect our clients to travel here or anywhere until there’s either a vaccine or cases have diminished to negligible levels,” she said. “It just seems very unlikely that most people will take the risk of traveling until they’re confident there’s little to no risk involved.

“However, should people want to come before that point, we’ll encourage them to steer clear of the major cities and spend their time in rural regions, staying in private villas and small ryokan, and meeting local people we’re sure are ‘safe.’”

Tsumago Nakasendo, Nagano Prefecture

OPTIMISM
Sean Brecht, managing director of bespoke travel company Discover Shikoku!, says the impact has been “significant” and the company has suspended promotional campaigns. The best they can do, he said, is to “simply work to keep everyone informed and updated as best we can.”

Yet he remains optimistic that the company can adapt to the new situation and that Japan, as a destination, will bounce back.

“Our business is one of exclusivity and personally tailored experiences. As such, a certain degree of privacy and sepa­ration is our normal method of operation. While there are no guarantees in a global pandemic, adjusting to the realities of travel in a post-corona world is not a significant leap for us, and we remain confident in our ability to provide the safest, healthiest, and most enjoyable of travel experiences possible,” he said.

“But I think the notion that there will be a ‘return to normal’ is naïve at best,” he added. “It seems pretty safe to assume that there will be a ‘new normal.’ Even if we find a magic bullet for Covid-19, all the evidence seems to indicate that the potential for pandemic outbreaks is increasing in an ever more con­nected world with an ever more degraded environment.

“So, whatever the new normal is, I think Japan will remain an attractive destination if it adjusts to the new normal in an effective and efficient manner.”

Carl Kay, president of bespoke travel agent Tokyo Way, concurs that the crisis has been “very challenging” for the industry, both in Japan and globally.

“We periodically speak with the luxury travel agents we work with, mostly in North America and Europe,” he said. “In our segment, custom-designed luxury travel, where we work closely with guests and their agents to plan trips, there is not much value in doing heavy promotions now, not until guests are ready to invest their time and emotional energy in planning a trip with us.”

He added that they are starting to discuss best practices with each of their suppliers. “Already, when we design elaborate custom trips, we do various mental rehearsals running through each moment to visualize what will happen with luggage or how the balance of scheduled activities and free time feel.

“Now we are adding another layer to that process: a virus safety check. When will guests be able to wash their hands, where might masks be advisable or required, where can we route around crowds, and so on.”

YEAR OF WAITING
Kay believes it will not be until spring 2021 that significant numbers of foreign tourists return to Japan. But he knows they will come back.

“Japan remains an appealing destination for travel, which will revive here in line with global developments—or maybe even a little stronger than some other places because, so far, Japan has shown relatively good resilience to the coronavirus.”

Hodges said American Airlines is providing customers addi­tional flexibility as they navigate air travel amid concerns around the coronavirus. “From July, we plan to increase service between Tokyo’s Haneda and Narita airports and our key hubs of Dallas–Fort Worth and Los Angeles, and we have extended our offer to waive change fees for customers who purchase tickets by June 30 for summer travel through September 30.”

Hilton’s Soper agrees that things will recover.

“Right now, it is sensible to refocus on domestic demand, and we are lucky in that there is strong domestic demand in Japan as people are getting fed up with being in lockdown,” he said. “With the end of the state of emergency and an easing of government restrictions, we are seeing the first green shoots of a long, slow recovery. And when the restrictions on foreign tourists are lifted—and we are able to reassure travelers that they will be safe—I’m sure people will come back to Japan.”

Discover Shikoku! is optimistic about bringing visitors back.
Photo: Sean Brecht

Julian Ryall is Japan correspondent for The Daily Telegraph.
Right now, it is sensible to refocus on domestic demand.