Japan inbound tourism of recent years has been booming since the implementation of the national government`s efforts to the industry since about 2003 and further program extensions from 2006 in the Visit Japan! (Yokoso Japan) program through JNTO. This culminated in year-on-year growth of over 1,000,000 persons last year to 8.3 million visitors.
In 2008, Japan inbound tourism has continued along the strong growth track to a record figure in July of over 825,000. However, the monthly inbound tourism stats report issued today by JNTO indicates that a slight decline, -2.2% below last year`s August number resulted (although the year-to-date figure is still up 7.5% yoy), mainly due to risen fuel charges and the declining strength of the Korean Won – the most visiting tourists are from South Korea.
A closer look shows us that in addition to the South Korean decline at -8.6%, China at -6.3%, Thailand at -12.4%, USA at -9.2%, UK at -10.7%, and to a lesser extent Canada at -2.2%. In absolute numbers, South Korea and China have a significant impact and the others not so much.
However, even in this expensive travel environment we still see that the holidaygoers of Hong Kong (+32.7%), Australia (+20.9%), Singapore (+11.8%), France (+10.7%) and Germany (+3.1%) continued to increasingly choose Japan as a place to enjoy the summer… a very positive indicator that the efforts put into the Visit Japan! program are really paying off.
We see long-term strength in the Japan prime tourism destinations both city and resort, with Tokyo and Kyoto predominating the city sector and destinations such as Hakone/Izu, Japan Alps (Nagano/Hakuba), Hokkaido and various onsen destinations faring strongly in the resort sector. The increasing cost to travel is a temporary setback for the mainstream market, especially group tours from Korea and China. In the mid to long-term we expect that the growing wave of outbound Asian travelers will only increasingly benefit Japan as it becomes the default cultural destination for Asians to visit within Asia similar to the role that France has taken in Europe. The absolute number of outbound travelers from China and India are expected to grow exponentially and they must visit Japan first before going on further to destinations outside the region.
While cap rates are up, especially regional city hotels, we would suggest that selective acquisition and development of quality assets in targeted Japan destinations is a strong strategy. Contact us if you would like our assistance in doing so.