By Tatsuo Kayama
As the coronavirus disease – officially named COVID-19 by the World Health Organisation – continues to spread around the world, the Japanese tourism industry is no exception in suffering from the impact of the global pandemic.
It is not an exaggeration to say the impact of COVID-19 has been one of the greatest hits to the Japanese economy since World War II. The impact of this pandemic on Japan would arguably exceed that of major crises from the past, such as SARS, MERS, the Great Hanshin-Awaji Earthquake of 1995, the Great East Japan Earthquake of 2011, and even the financial crisis of 2008.
In the fiscal years following the financial crisis, the real GDP growth rates were -3.4% in 2008 and -2.2% in 2009. As for 2020, negative growth rates of about 2% to 3% can be expected. These negative impacts can mean life or death to Japan’s tourism industry, and that is particularly true for small lodging, bus and tourism companies, which are at risk of going out of business by May or June this year.
Domestically, the travel industry has experienced the acute effect of COVID-19 in March, when over 90% of customers cancelled their recreational outbound trips from Japan, with few exceptions such as Disney Cruises to the Caribbeans. Other luxury cruise lines such as Holland America Line and Seabourn, however, are likely to suffer more financially, as elderly customers might fear for their lives due to COVID-19’s disproportionate threat to people 65 years and older.
Internationally, we are seeing a sharp decline in tourism as countries begin restricting movements of foreign nationals. Today, most tourists visiting Japan are independent travellers rather than people travelling as a group. As of February, visitors from China, Europe, the United States and the Oceania region are only allowed to travel to Japan independently, yet they are experiencing an “empty tourism” without crowds at their destinations. Meanwhile, tourist hotspots are seeing a sharp drop in occupancy rate in local hostels, putting them at risk of closing down.
Some Japanese tourist destinations are taking drastic actions to counter the decline in tourism. Arima Onsen – a historic hot spring located in southern Japan – recently started a cheap tourism package costing less than 20,000 yen (US$184) which has slightly improved the local business. Despite the risk of COVID-19, some daring Japanese travellers expressed satisfaction with the service as they now have the empty hot springs all to themselves. A few business owners also said they now find work more relaxing as the peaceful environment continues to attract customers.
Furthermore, business travellers who are flying for reasons of meetings, incentives, conferences and exhibitions (MICE) are equally affected by the global pandemic.
Key figures on COVID-19’s impact to the Japanese travel industry:
- Travel industry has lost around 327 billion yen (US$ 3 billion) in revenue as of March, 2020
- Airline industry has lost around 400 billion yen (US$ 3.7 billion) in revenue from January to April, 2020
- Shinkansen – Japan’s high-speed bullet train railway – has seen around 50% decrease in customers from February to March, 2020
- Bus industry has seen around 79% revenue loss since March, 2020
- Domestic sea-line industry has seen about 70% revenue loss since March, 2020
- Accommodation industry has seen around 30% to 90% drop in booking from March through April, 2020
In terms of the aviation industry, airlines are reducing both domestic and international flight services to stay afloat. Japan Airlines and All Nippon Airways are reducing their flights by approximately 65% for international flights, and 20% for domestic flights. Meanwhile, most Chinese and Korean airlines have reduced their flight services to almost 0%.
Japanese airlines in the Kansai region have currently reduced their services by around 59% to 90%, while Delta Air Lines – one of the largest aviation companies in the United States – has reduced their flights from Honolulu to Kansai from once per day to just three flights per week. Additionally, Delta Air Lines recently suspended a newly planned route from Kansai to Seattle.
In the meantime, Japan’s airlines and travel agencies are working together to pull through the global pandemic. Some airlines are aiming for a recovery starting from September 2020, and currently negotiating seat sales with travel agencies with the expectation that COVID-19 would be under control by that time.
About the author:
Tatsuo Kayama is an industry expert with at least 29 years of experience in Japan’s travel, leisure and tourism industry. Kayama has served in leadership roles in notable Japanese companies such as Chikyu-No-Arukikata T&E Co, Ltd, RAPS Study Abroad Center, and JTB.