From digital collaboration to new desires of travellers, travel brands seize new growth in Japan
The first thing you notice when you land at Haneda airport is how busy it is – from immigration to customs to the taxi rank – despite it being almost 10pm. I think I waited almost an hour for a taxi, and I wasn’t complaining – I was just so grateful to be able to travel to Japan again without any restrictions.
At WiT Japan & North Asia, that similar feeling of gratitude and happiness that travel is back was palpable. As Eijiro Yamakita, president of Japan Travel Bureau, acknowledged, “It is so good to see tourists again in Japan.”
Moving around Tokyo, it’d be easy to believe that everything is the same – there are still long queues outside pachinko parlours, ramen shops are packed and full of slurping noises – but clearly, some things have changed. You just have to look deeper.
As Aya Aso, co-founder of WiT Japan & North Asia, noted in her opening, “… during this pandemic, travelers disappeared before our eyes and it seemed as if the travel industry had stopped, but in the shadows, there were wonderful people who never stopped and were building the future …”
Here are the key takeaways from WiT Japan & North Asia 2023.
Japan – soft power, new middle class, red ocean
Economist Jesper Koll opened our eyes to the soft power of Japan – of the 25 highest grossing media franchises of all time, Japan owns 10, including Pokemon and Hello Kitty which are the top two. And unlike many Western countries, it’s not a “winner takes all” when it comes to household wealth – of the total wealth of $26.9T, 49.5% are in the top 10% and 18.2% are in the top 1%. Compare that with US where total wealth is $126.3T, 75.6% are in the top 10% and 35.3% in the top 1%. (Credit Suisse Global Wealth Report 2020)
Jesper Koll: “Of the 25 highest grossing media franchises of all time, Japan owns 10, including Pokemon and Hello Kitty.”
And despite an ageing and declining population, he said a new middle class is emerging in Japan for the first time in 20 years – from 32.78m in June 2014 to 36.64m in April 2023.
What’s also unusual about Japan is “there are no superstars” when it comes to companies. Unlike the US, where the top four firms dominate revenue share, Japan is a “red ocean of many companies” which is why foreign companies find it so challenging to enter and penetrate the market. In Japan, the salaryman rules versus the superstar CEO.
In conclusion, he said that the new Japan was one that is a first class power, with rich companies and rich consumers, a new middle class, a lifestyle superpower and a bastion of policy stability.
Trust is needed to build the digital consumer journey and North Asia has the edge
During the “New Tech Changing Travel” panel, Timothy O’Neil-Dunne, principal, T2Impact said, no matter how sophisticated the tech, the biggest challenge was “honesty – assigning trust in an era of none”. This is why the travel journey is so broken and travellers have to keep handing over their data at each and every point. The only solution is for silos, including airports, airlines and hotels, to collaborate and build a digital chain that governments can trust and here, he believes, North Asian societies may have the edge. (See related article).
Jongyoon Kim, CEO, Yanolja Cloud, said there’s been good progress made in South Korea in this regard and the continued decentralization with the cloud will lead to “digital transformation including self-serving operations like kiosks and IoT (Internet of Things) across the overall travel journey”. He believes South Korea, with its high level of trust in institutions, could well lead the way in stitching together the digital customer journey.
Timothy O’Neil-Dunne: No matter how sophisticated the tech, the biggest challenge was “honesty – assigning trust in an era of none”
Sarah Samuel, senior vice president, airport and airline operations, APAC, Amadeus, said, “With the coming digital transformation of airlines and airports, we see far more scope for collaboration. A simple example is the list of services provided by an airport – how could we digitally enable those services to be available within the digital booking channels for all airports that operated from the airport – and therefore – for all travel agents that book travel packages for passengers.
“Where will this collaboration start? Based on our conversations with Airports and Airlines, we think the collaboration will start with the sharing of data and services as part of disruption management/service recovery.”
For global OTAs, Japan & North Asia are the sweet spot
A believer in demographics, Michael Dykes, vice president, market management, APAC, Expedia Group, called out the fact that “by 2030, it’s expected that 2 in 3 members of the middle class will be Asian” and that “by 2050, roughly 40% of the populations of Hong Kong, South Korea and Japan are expected to be 65 and older.”
“Therein lies the opportunities,” he said. “It’s not about just more people but these are travellers that value experience over price.”
Hiroto Ooka, associate vice president, North Asia, Partner Services, Agoda said it was worth noting that the OTA market, which now represents 43% of Japan’s accommodation TTV, will overtake offline for the first time in 2023. “While the offline market in Japan remains strong at 44% with Covid driving more consumers online, the OTA market is projected to become the largest channel in 2023.”
Michael Dykes: “By 2030, it’s expected that 2 in 3 members of the middle class will be Asian.”
He pointed to the “new dawn of younger travellers that will help push app usage and redefine the online booking experience” and as such, “OTAs need to be in a good place to marry the best in tech, in line with local rules, at a fast pace, adaptive, agile.”
Mobile will drive most of the growth, said Reno Wang, general manager, Asia for Hopper. “Besides China, Japan and the other countries in Northeast Asia have seen mobile booking share increased versus pre-Covid. Even in Japan, a country with more than 30% elderly population, the mobile shift is expected to continue through 2025 achieving 52% of online gross bookings made on mobile.”
He also called out flexibility. “Flexibility is key to getting the lowest prices on flights and hotels, and the majority of Hopper users have some level of flexibility when starting the travel planning process. 60% of Hopper users are flexible on destination, travel dates or both when they start the travel planning process.”
Akimi Takemura, regional director, North Asia, Booking.com, highlighted two opportunities in the Japanese market – 56% of Japanese travellers desire to travel more sustainably in the next 12 months and 80% of Japanese travellers want to go back to simpler times with nostalgic getaways.
So heed these key words: Experience over price, mobile, flexibility, sustainability and nostalgia.
Let’s get creative and give consumers “new purpose of travel”
Given the current sluggish sentiment around outbound with almost every speaker saying that Japanese outbound had yet to return to its full force, there was one clear call – that the industry needed to get creative to encourage Japanese travellers to go abroad again.
Disagreeing with the notion that “the golden days of Japanese outbound are over”, JTB’s Yamakita said, “It’s not just about selling and telling people what to do in places and destinations, but it’s about giving people a purpose, a reason to travel – for example, sustainability has become a key factor. How do we combine human creativity with the tools of automation to give people a new purpose of travel?”
He said the ability of AI to generate itineraries was a good first step and could improve back end productivity and give staff more time to focus on creativity and packaging possibilities.
Meanwhile, new startups are changing the status quo. KabuK Style, a startup founded in 2019, is offering a subscription model based on fixed prices for hotel stays as well as for mystery flights and has seen good adoption by consumers hungry for new ways to buy travel.
CEO Kenji Sunada spoke of how he wanted to spread the message of “diversity is cool” and that his first foray into South Korea had gone “beyond expectations”.
Eijiro Yamakita: “It’s not just about selling and telling people what to do in places and destinations, but it’s about giving people a purpose, a reason to travel.
Diversity is not only cool, it’s profitable – the brassiere story
During the panel on diversity and inclusion, Michael Dykes of Expedia Group asked his panellists, “Many people might agree that building inclusive and diverse environments in the workplace is the right thing to do – but we’re all businesspeople, so what is the business need or business value that is fulfilled through inclusion and diversity?”
Aya Aso, CEO of SAVVY Collective and founder of the Ladies in Hospitality group, said, “The shrinking labour population across Japan, South Korea, Hong Kong, China, simply makes it a necessity to take advantage of as many of the under-represented and under-utilized segments of population. Embracing individuality and inclusivity can contribute to the growth of the company and it raises other employees as well.”
Ruth Marie Jarman, CEO of Jarman International, said that as customer base diversifies and demographics change, “you need that diversity reflected in the upper echelons of the company to create products and services that will appeal to the diversity of your customer market”.
She cited an example of a company that made brassieres. “This was 10 years ago and they were wondering how to sell a cool bra for summer. The executives were all older gentlemen and they had no idea how to sell them. Then when they brought in women executives, sales went through the roof.”
Pasona Group, a leading HR firm in Japan, took the bold step of moving core functions of its Tokyo headquarters to Awaji Island in Hyogo Prefecture, near Kobe, during the pandemic and relocated roughly 1,200 employees.
Riho Kato, general manager, CPU Department, said the move was both to expand the business by bringing more people to rural areas as well as to diversify its workforce. “We have 100 people from 30-40 countries working with us – from young to old, disabled, from different cultures and backgrounds – artists, athletes.”
Asked if it faced challenges recruiting people in Awaji, Kato said, “Japan is Japan – it doesn’t matter if it’s a rural area. In fact, they prefer it sometimes. We want to gather diverse talent – there are many professionals who, after retirement, have a lot to contribute and can bring different views to hospitality, for example.”
From left, Riho Kato, Pasano Group; Ruth Jarman and Aya Aso: “We have 100 people from 30-40 countries working with us – from young to old, disabled, from different cultures and backgrounds – artists, athletes.”
A trickier topic is that of the LGBTQ segment. According to a Dentsu 2018 study, shared by Dykes, 8.9% of Japanese people between 20 and 59 identify as LGBT and the recent passing of a controversial LGBT anti-discrimination law, which created significant societal and political debate, has made the topic even more contentious.
JTB’s Yamakita, when asked about diversity and inclusion and if JTB would ever consider moving its headquarters to a rural area to radically change its workforce demographics, said the idea was not an impossibility and that Japan had to find a way to address issues such as the LGBTQ segment.
