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Japan must get a better grip on tourism

Manage the industry actively, instead of just reacting passively to surging inflows

| Japan

Japan's tourist boom is the source of great joy to hoteliers, restaurateurs and the renters of kimonos -- yours for the day for as little as 3,000 yen ($26).

But the country as a whole is in two minds about the huge surge of visitors, that has taken even government planners by surprise. While the income is welcome, the overcrowding in tourist hot spots, especially in the ancient capital of Kyoto, is not.

According to Japan Natural Tourism Organization, the total number of inbound tourists more than tripled over 4 years from 8.4 million in 2013 to 28.7 million in 2017. The government has announced a target of 40 million annual inbound tourists by 2020, the equivalent of around 30% of the Japanese population.

This is still well short of the potential if France, a well-established tourist destination is any guide. It received 82.6 million inbound tourists in 2016, the equivalent of 120% of its inhabitants. Japan clearly has both long-term opportunities and challenges in tourism.

Exponential growth is not guaranteed. Growth in inbound tourist numbers has already slowed year-over-year from 21.8% in 2016, and 19.3% in 2017 and year-to-date 9.7% in 2018.

Overreliance on a single source of tourist is one potential problem, with Chinese visitors, including people from Hong Kong and Taiwan, accounting for 49% of 2017. That makes Japanese tourism dangerously dependent on the Chinese economy and Chinese political decisions, which have included restrictions on travel to certain countries, for example South Korea.

Also, with the exception of an increase in popularity in the northern island of Hokkaido, visitors tend to be over-concentrated in big cities with Tokyo, Osaka and Kyoto accounting for 46% of overseas tourist stays in 2017. It seems that the newly-affluent Chinese visitors choose Japan for its convenient close location, and a tried-and-tested combination of entertainment, shopping, and dining -- with a bit of skiing thrown in for the more adventurous.

It is high time to think strategically about becoming a true "tourism-oriented country." Just reacting to growing numbers, as we have done so far, is not enough. What does it take to grow into a universally-acclaimed gracious hostess of a country, open to all but proud as ever of her uniqueness? A bit like France, perhaps?

Firstly, we need to diversify our visitor sources. Asian tourists made up 86% of total visitors in 2017, more than half of them from China, Taiwan and Hong Kong. As the middle class grows in other Asian economies, Japan will become, for them, a natural destination. But If Japan wants to diversify beyond Asia and tap into wealthier tourists, it should target other developed countries, namely Europe, which accounted for a mere 5% of total visitors in 2017, or North Americas, on just 6%.

To compensate for the handicap of long flight times for Westerners, a simple marketing message is needed. While Japan has a myriad of welcome initiatives in place, it should refocus on its number-one selling point, which is "exotic yet safe."

In an era when a strong sense of safety and security seems to be a scarce commodity even in developed countries, Japan is a rare sanctuary. At the same time, the land of the rising sun remains as exotic as ever, despite its high level of technological development. It has something to offer for all -- from the strangest electronic gadgets for nerds to weird-looking fashion in Harajuku for the seriously trendy and serene ryokans with hot spring baths for the stressed.

While Japan's big cities guarantee modern amenities, the off-the-beaten-still has much to offer even to people who think they have seen the world.

For leisurely cyclists, there is the Shimanami Kaido, a picturesque 60 km island-hopping in the Inland Sea, the Japanese Mediterranean, lying between the main island of Honshu and Shikoku. The Kumano Kodo Buddhist trail offers a pilgrimage in the woods that could stretch over a month. For history buffs, visiting hidden Christian sites in Nagasaki will be a revelation. Looking for modern art? How about Yayoi Kusama and magical sunsets on the island of Naoshima?

It may help poll existing visitors to find what they like. Some experiences are already more popular with foreigners than Japanese, for example the Super Mario go-cart rides around Tokyo.

These selling points must be communicated better, especially via digital marketing. With digital platforms, it is now possible, for example, to reach directly that global niche of railway buffs who might travel around the world just to ride the Akita Jukan-tetsudo, a quaint old-school train which runs in the heart of rural Akita. Why not go through an enthusiasts' site such as, reach out to influencers and amplify the message over SNS?

Such low-cost marketing has given a leg up to many startup brands with minuscule budgets. Why not apply it more in Japanese tourism?

Some cities are more successful than others. Fukuoka, for example, attracts Korean visitors arriving via overnight high-speed ferries and cruise boats. Despite the diplomatic sourness between Japan and South Korea, Korean young people interested in Japanese modern music and literature are powering the growth of Koreans to Kyushu, the southernmost of Japan's four principal islands, and its biggest city, Fukuoka. Foreign tourist visitors to Kyushu increased to 2.2 million by 58% year-over-year in 2017, beating national growth of 40%.

To exceed expectations beyond "exotic yet safe," however, tourist infrastructure both hard and soft must be in place. While the national transport network is famously efficient, affordable hotels or home rentals can be hard to find. Meanwhile, English-language signs and assistance are often scarce, especially outside major cities. Time is short in the light of the increases in visitors expected for the 2019 Rugby World Cup, which Japan is hosting, and the 2020 Tokyo Olympic and Paralympic Games.

Inbound tourism has long-term strategic importance for Japan. It is not just a matter of making money and diversifying a stagnant economy. Tourism contributes to opening people's minds to the outside world, whether are the travelers or the hosts. In an era when trust has deteriorated in world affairs, such firsthand endorsements of the value of international contacts can be precious.

Nobuko Kobayashi is a partner with EY-Parthenon, a strategic consulting group within E&Y Transaction Advisory Services. Based in Tokyo, she specializes in the consumer sector with a special focus on multinational corporations operating in Japan.

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