Ryokans, road trips and retreats tipped to do well in first wave of rebound
In the past few weeks, domestic travel has begun to rebound in Japan, as evidenced by an increase in rail, hotel and attractions bookings. Restrictions on inter-prefecture travel have been lifted. The government has also encouraged work-style reforms, advising people to take ‘workations’ – working remotely from holiday destinations.
The government’s Go To campaign (worth 1.1t Japanese yen) – a travel subsidy and coupon scheme – will also be launched to help to stimulate demand for domestic travel and accelerate recovery.
However, ensuring that numbers increase gradually and safely will be paramount to stimulating the economy without causing a sharp rise in coronavirus cases at the same time.
For example, the superapp LINE has employed a ‘micro-marketing’ strategy – targeting local destinations with promotions about attractions nearby. By identifying a specific target audience, the campaign could boost bookings without risk of over-crowding the destination. In Hakone, for instance, one ryokan managed to sell 780 room nights within 48 hours, explained Kei Shibata, CEO and co-founder, LINE TRAVEL.jp & Trip101.
With these strategies in mind, Japan looks well positioned to survive on domestic tourism, at least until inbound tourism resumes. Japan’s travel market volume last year was estimated to be worth US$258b, with US$204b being domestic. However, recovery will not be without its challenges. Different travel players must adapt to new methods or develop new products, if they are to survive.
“With no outlook for overcoming Covid-19, we need to consider the worst-case scenario. Hotels are taking many actions to survive… they are improving facilities and services for secure travel. This is going to be the key factor… to minimise the impact of a second wave,” said Yoshiyuki Takano, executive officer, head of travel and mobility business, Rakuten.
He explained that hotels listed on Rakuten Travel are able to publish what countermeasures they have taken to protect the property from Covid-19, to build consumer confidence when booking a property.
According to a Rakuten survey, over 25% of consumers stated they have different conditions when selecting hotels during Covid-19 – prioritising higher sanitation measures, sanitary equipment and social distancing. Few consumers actually focused on discounted rates.
Takano observed that there is a clear difference in year-on-year growth depending on how well accommodation providers could demonstrate the precautions they are taking. “The average of YoY growth showing these actions is two points better than others. The [greater the] hotel response, the higher their growth rate becomes.” Over 15,000 hotels have published some kind of safety information on the platform.
Aya Aso, founder and CEO, SAVVY Collective, corroborated the notion that consumers are willing to pay the same, if not more, for well-managed properties. Aso said her hotels have maintained the same ADR as 2019 and have not resorted to discounting rooms to incentivise bookings. “People are willing to pay 500-1000 JPY more to [have] security and sanitation measures.”
Covid offers ryokans an opportunity to get back to traditional roots, new hospitality models emerge
While the hospitality sector is still under a lot of pressure to drive bookings back up to pre-pandemic levels, the panel was generally bullish on ryokans’ strong survival.
“Ryokans have had a hard time keeping their traditional operations very personal… with Covid-19, this style is actually the only solution for us to survive. In recent years, people are looking for a different type of operation… It’s time to rethink how we welcome back domestic travellers to a traditional way of hospitality,” said Aso.
Events, which make up a major source of revenue for hotels, are also taking new form in Japan as organisers get creative about how to deliver an event experience either virtually or through a hybrid online-offline model.
“There’s a new trend of weddings happening in hotels – online weddings where they are sending catered meals to their guests’ houses. Then they can connect online to have the banquet wedding like they are all in the same room,” said Aso.
She shared how Savvy Collective plans to convert one of its properties into a hybrid space – “so we can send our event space out to the public [virtually].” Its facilities would also be able to cater well to the ‘workation’ market.
“The future of hotels isn’t just a place to sleep or eat good food… we have been thinking about using hotels as a part of [people’s] lifestyle, including work,” said Aso. “We’re opening up [our retreat] to emphasise that it’s not only for vacations but for work. I’m starting to implement a satellite office plan… so people can come to work for two weeks or a month, bringing their whole lifestyle. I’m talking about lifestyle portability.”
Veltra focuses on domestic, launches KITE, with aims to grow its media business
As for tours, activities and attractions, Kenichiro Sakamizu, CTO, Veltra explained that the strong recovery of domestic travel has meant that the sector has rebounded to almost 2019 levels. Veltra is taking quick steps to focus more on domestic, with Sakamizu saying, “We are not new to domestic… we’ve had domestic products since 2015 so now we’re working more aggressively to develop new products with partners.”
Sakamizu, who joined Veltra from Disney Corp, started his new role in May and in two weeks, he’s led the team to develop a real-time destination dashboard, KITE, a real-time destination dashboard to give travellers local information about attractions in as well as outside Japan.
“We looked at what we could contribute to our partners right now and there was a need of real-time local information – what’s happening in local areas. So we started compiling local facts about domestic as well as foreign destinations and we see this developing into a travel media business over time. It’s now in Japanese but we will be translating it into other languages in July.”
With regards to foreign travellers, Shibata predicted that the earliest inbound leisure travel numbers would recover would be by fourth quarter this year. While ‘travel bubbles’ and ‘green lanes’ may be established between select countries, it would still be some months before they become fully operational.
Nevertheless, while inbound numbers are low, Japan has an opportunity to improve upon how ‘foreigner-friendly’ its online planning tools can be – for example, with road trips – a sector expected to thrive as ‘slow travel’ gains momentum, post-Covid.
“There are so many global car rental brands in the world, but only a few are available in Japan… most of the current brands are local and owned by the car manufacturer. They’re not necessarily providing services that are friendly to inbound travellers,” said Shibata. “The highways are becoming better in terms of signage and Google Maps works in Japan very well. It’s better but there are more than a couple areas it can improve on.”
The virus and its wider implications on work culture, and breakout moments for domestic brands
Meanwhile, Japanese companies are also experimenting with remote work models with the government giving incentives to those who enable employees to work from remote places.
Takano said that 97% of Rakuten Travel staff are working remotely, five days a week “and it’s working well. But our management is concerned about corporate culture and how we can foster it through remote work, so now we have Huddles twice a day”.
Veltra’s Takamizu has not been to the office since he started with Veltra and said that initially it was challenging but still they have managed to be productive. Having said that, he said he was looking forward to spend his first day in the office soon.
Applying lessons from Disney where he was responsible for building theiron-demand system for Japan, Takamizu said travel brands had to look towards content to differentiate their business. “There are so many competitors in the content streaming business, but what differentiates is unique and attractive content. Netflix spends more on content production than traditional TV companies, so one lesson is, create attractive and unique content.”
And while he does admit that Japan’s hierarchial style of management can be a disadvantage in terms of IT innovation, with younger engineers unwilling to speak up and challenge status quo, he said, “I worked with Microsoft before and I can bring Western-style management practices to encourage people to challenge me – and I am used to being challenged. There are also more IT startups now in Japan, and things are changing.”
As for Rakuten Travel, Takano said Covid-19 had strengthened its parent company’s position. Said Takano, “Up to April, we had a +50.7% increase in customer base and this will give us an even much larger base on which to grow our travel business.”
He sees this as an opportunity for Rakuten Travel to come out stronger post-Covid against foreign OTAs which do not have such a strong domestic base. “It allows us to deepen and broaden our content and partnerships and we then have to offer that content in other languages as well, to come out stronger.”
Lead image courtesy of Getty Images
