“If we can recover 70-80% of the domestic market, we can survive for the next 18 months”, says the fourth generation hotelier as he reports green shoots in domestic bookings
Covid-19 presents an opportunity for Japan to rethink its domestic tourism strategy, said Yoshiharu Hoshino, the fourth generation hotelier behind Hoshino Resorts. Not that he wished for the pandemic to prompt such a reset – “if I have a choice, I’d have wanted to avoid this”, he said, laughing – but given that it’s happened, “it’s a good time to think of a better way to promote tourism in Japan to make it more stable, risk-free and sustainable.”
For several years, Hoshino has been saying that Japan should not neglect its domestic tourism in favour of inbound travellers which the country had been aggressively pursuing the last few years. It had set a 2020 target of 40m visitors with major events such as the Olympics and Rugby World Cup to provide the push.
All these plans have been blown up for the moment and the industry is fighting to survive with the only light at the end of the tunnel coming from domestic.
Citing 2018 figures, Hoshino said the total value of travel and tourism was 26.1 trillion yen (approx. US$241 billion), of which inbound travel formed 17% market share (4.5 trillion yen). The lion’s share was domestic at 20.5 trillion yen.
Given that Covid-19 has decimated inbound tourism and Japan has to fall back on domestic business, he believes that if Japan can recover 70-80% of its domestic market, it would more than negate the loss of inbound tourism and companies like his would be able to survive for the next 18 months.
“If we can successfully do that, that size is enough to save jobs and for companies to survive. I say, survive, not return on investment which is impossible at this moment,” said Hoshino, speaking to WiT from his Tokyo office.
Domestic market has been stagnating due to ageing population; young more likely to travel first at this time
But Hoshino is thinking beyond just survival for the short-term but also sustainability of the Japanese travel market. He said Japan’s domestic travel market had been stagnating for years because of an ageing population and the youth market (20s-30s) had been declining.
“A major part of the 20.5 trillion yen spending is done by the age group of 65-75. This age group will probably disappear in the next 10-15 years, or their participation rate in travel will likely decrease. So we have to develop an alternative, which is young people in their 20s and 30s. In the next 10 years, they have to travel more but the participation rate of youths has been declining for the last 10 years. And that is a major concern.”
He said this was probably due to several factors – lack of discretionary income, time (busy with career and families) – plus “our industry has tended to focus on those people who have money and time to travel but we should be thinking about the future”.
He acknowledges it would be a challenge to encourage the young to travel more given the economic hit of Covid-19 but he said targeting youths was also a good way to restart domestic travel. “They are less fearful of the virus and more resilient. The older generation are probably more fearful of travelling at this time,” he said. “So this is a good chance for us to look at the needs of the young.”
Hoshino Resorts, for example, has introduced a new brand called BEB, which is targeting travellers in their 20s. “Their needs are very different and we, as an industry, haven’t looked at their needs for a long time. Their price sensitivity is very different.”
Saving Hoshino Resorts with an 18-month manifesto, bookings picking up
To save Hoshino Resorts, in March, he unveiled an 18-month “manifesto” to staff detailing the measures the company would take to survive. “People were very afraid of the situation. We announced that it was going to last for 18 months – of course we hope it will recover sooner – but as the CEO, we tend to see the worst scenario and we have to come up with a plan to survive the worst scenario. After we announced the plan, the staff felt much more comfortable and confident about surviving through this very difficult period.”
There’s hope though of recovery. “We are getting more reservations now, it’s very different from April and May. Customers are booking for July and August. That’s very good news,” he said, as he excitedly showed me charts of squiggly blue, red and pink lines showing cancellations, reservations and net-net business, with bookings on the uptrend.
Properties seeing bookings are those within easy drive of Tokyo, for instance Karuizawa where his signature Hoshino Resort is located. But for properties in Hokkaido and Okinawa, where people need to fly to, demand is still flat. “People are not that comfortable taking flights. People feel more comfortable driving to places nearby and they are seeking private resorts and smaller facilities.”
Obviously, properties that were strong on domestic markets are faring better than those that relied on foreign inbound guests. “In Kyoto, more than half of the customers were foreigners; in Tokyo, maybe 70% and Hokkaido, 80% were foreigners during winter, and 80% were Japanese during the green season. Karuizawa was around 15-20%,” said Hoshino of his properties in those places.
It is ironic that a lot of hotels in Japan, particularly in Tokyo, switched strategies to focus more on foreign inbound the past few years and now will have to refocus on domestic. But with borders still closed and the appetite for outbound travel perhaps dampened, Hoshino believes Tokyo residents will switch to travelling within Japan.
His group, which has 39 hotels in Japan, is making operational changes to ensure the comfort of guests. For example, it’s stopped buffet lunches and dinners. It offers private rooms for meals, and it’s introduced more private activities. Its actions, aimed at avoiding the 3 Cs (close contact, confined spaces and crowded spaces), are listed here.
Hoshino, who’s made it his mission to take the ryokan hospitality experience globally, also believes the ryokan onsen experience is inherently Covid-19 proof, so to speak. “Ryokans are naturally contactless places – your meals are pre-set so you don’t have to order from anyone, often you get a private room for meals, and you have your outdoor hot spring onsen. The purpose of coming to these places is to relax instead of wanting to be actively involved in activities.”
He’s seeing a similar trend in Taiwan where Hoshinoya Guguan opened in Taichung last June. “It was doing very well in April and May, it’s a small facility, only 50 rooms, and people in Taipei couldn’t travel overseas, so they are also travel domestically.”
After the Great Depression, this is the second big crisis for the fourth generation family business
Unfortunately, the same is not true of his property in Hawaii which is struggling with about 10-20% occupancy. It has also closed its Hoshinoya Bali in Ubud, and it is no longer managing the Kia Ora Resort & Spa in Tahiti.
Said Hoshino, “Covid-19 virus is not only damaging travel in Japan, but all other industries equally, including the automobile industry, which is much larger and more important for Japan. All the restaurant owners and small family businesses, they’re all damaged. The Japanese government’s strategy right now is to contain the spread of the virus, and that was very successful in April and May. They are also giving a lot of support to corporations to maintain their labour, they don’t want the unemployment rate to increase.”
Asked if this was the biggest crisis that has hit his family business, which was started in 1904 by his great grandfather, Hoshino said, “We had the big depression in the 1930s. My great grandfather experienced it. I wasn’t alive then so there’s no way I can compare that with this crisis.
“I recall being told that was a very difficult time. They were losing money and there was no way to make a profit from the hotel business so they started selling second homes in Karuizawa. My grandmother was a doctor and her business was more profitable – that’s the family story.”
For now, Hoshino hopes the green shoots for July and August hold and that there’s no second or third wave of infections. “If we can regain 70-80% of the domestic travel market, that’s enough for us to survive the next 18 months.”
If not, he quipped, “we will all have to become farmers.”
As for what this crisis has taught him, he said it’s too early to tell. “One year from now, maybe I will know but we are still in the middle of the fight.”
Read this for information on how Hoshino Resorts is supporting the local community.
• All images credit: Hoshino Resorts
