Thursday, October 7, 2010

Tourism in Japan: A New Frontier for Australian Business

(Published in the Australian New Zealand Chamber of Commerce in Japan Newsletter, October, 2010
http://www.anzccj.jp/static.php?menuid=13&artid=84)

Niseko is now synonymous with commercial success for Australians in Japan, but are there other opportunities for Australian tourism and service industry ventures around the country?
Since 2000, Australian tourism and investment in the Niseko region of Hokkaido has continued to grow. The recent ‘endaka’ may see something of a reduction in the numbers of Australian skiers who can afford to travel to the Niseko this season, but any reduction would likely be a small aberration and have little noticeable impact on the region these days, as while Australians alone account for 55% of all visitors to Niseko, since 2006, the percentage of non-Australian foreign tourists to the region grew from 9% to 45%. This growth in foreign tourists continues to help the region prosper in the face of a continued decline in the number of Japanese tourists to the region who still make up 75% of all tourists, but whose numbers continue to decline steadily.

Visitors from Hong Kong booked 15,802 nights of accommodation in the region last year, compared with 5,330 nights of accommodation booked by Australians. The ‘bolter from behind’ in the race for beds in the Niseko region has been the mainland Chinese who at 3,604 nights of accommodation have overtaken the number of Korean, Singaporean and American tourists and have almost caught up to the Taiwanese (whose numbers have dropped from a high in 2007).

Despite some pressure on real estate investments in the Niseko region attributed to the Global Financial Crisis or ‘Lehman Shock’, in the recently released statistics for Japanese real estate values, Kutchan Town (a part of the greater Niseko region) has experienced the highest growth in real estate values in Japan for the second year in a row and is only one of 330 or so survey points amongst the 22,000 in Japan surveyed to have experienced growth, or at least held the their value.

Earlier this year YTL Group, one of Malaysia’s leading infrastructure conglomerates relieved Citi Group of the Niseko Village development, which includes the Niseko Hilton, Higashi Yama and Green Leaf Hotel properties. This is the Malaysian company’s first foray into Japan and in anticipation of the continued growth in tourism from Asia, they are starting with a US$10 million refurbishment of the 200 room Green Leaf Hotel and are continuing on a program of sales to foreign tourists. In a continuing trend towards Asian investment in the area, which commenced with the sale of the Australian owned Nihon Harmony ski resort to PCCW of Hong Kong in 2007, the Yamada Onsen Hotel was sold to Chinese interests last Spring and in September this year GHM of Singapore and Club Med have just announced a major high end investment in Rusutsu town. The Capella resort group from the US is on target with a greenfields development scheduled to commence in 2012.
Whilst it’s interesting to see the impact that Australian tourism and capital has had on regional Japan, how can Australian businesses learn from this example, can this be replicated in other parts of Japan and what opportunities are flowing from the wider growth in foreign tourism numbers in Japan?

These days Australian officials meeting government and industry representatives in other regions of Japan are often asked if we can get Australians to replicate the Niseko phenomenon in their corner of the country. And while there is no denying that the insight, nous and perseverance of a succession of our countrymen and women was critical, the ingredients for the successful growth of Niseko also included the facts that:
•business practices are probably relatively less restrictive in Hokkaido compared to other parts of Japan
•guaranteed excellent powder skiing in the same time zone as Australia during our long holidays is probably a safer investment than what our own ski fields have to offer, and once the commitment is made to Japan,
•air transfers to Sapporo via Narita or Kansai are probably easier for travelling Australians than having to transfer to trains. Also,
•the investment in Japanese language options in schools in Australia has probably also paid off as now many Australians are comfortable with travelling to Japan and
•the working holiday visa also meant that Australians could provide a ready and willing workforce during the ski season, thus fuelling the demand.

No doubt dealing with the local authorities over the years has had its challenges, as is probably the case for businesses in Australia as well, but from the perspective of the Australian Consulate and Austrade Sapporo, the regional government organisations of Niseko appear highly committed to building the infrastructure needed to attract and retain foreign nationals. They are working on solving international education options for foreign and mixed-race children and multi-language capable medical facilities. This month the towns of Niseko and Kutchan have announced the amalgamation of their tourism promotion efforts and are expanding the use of social media marketing devices such as Twitter and Facebook to improve their exposure. One of Niseko’s biggest assets is Paul Haggart, a long-term Japan resident Kiwi with fluent Japanese and excellent cultural awareness, who is their Tourism Strategy and Promotion Section Manager. Niseko also employs a Chinese national to help build that business.

As several key figures in Niseko point out, the ‘White Season’ tends to sell itself but there is a concerted effort to promote the “Green Season” as well as the “Brown Seasons” of spring and autumn and more and more tourists are finding the Niseko area has numerous attractions and diversions to keep them entertained in a relaxing environment. ‘Food tourism’ is also big on the menu.

Statistics recently published by the Japan Tourism Agency point to Japan being the 33rd most visited country in the world and Japan ranks 8th in Asia. To put this into context, Australia is ranked 11th in the world just behind Mexico whose foreign tourism is obviously dominated by sun-seeking Americans. France is the country with the most foreign visitors and the US ranks second in the world. China is the most popular foreign tourism destination in Asia and is ranked 4th in the world. But Japan is working hard to build its image, be more accommodating, especially of the Chinese tourists and international tourism to Japan will continue to grow.

As we watch Japan struggle to capture and cope with the sudden boom in tourism especially from China, are there opportunities for Australian businesses to capitalize through the provision of goods and services to Japanese companies?

The anecdotal evidence seems to be that whilst the Chinese are spending a lot while in Japan, spending tends to be primarily on bargain priced electrical goods or cosmetics and medicines from discount stores. Australian managed bars and restaurants in Japan make the same lament as their Japanese counterparts when it comes to serving Chinese diners – they tend to choose the highest quality/cost foods on the menu and drink tea all night, thus eroding the profits of the establishment.

Bearing in mind that it’s generally tough going for higher cost and better quality food and beverage products from Australia in this deflationary Japanese market, there may be possible niche supply opportunities for Australian companies exporting products and ingredients tailored to the Asian markets to also look at diversifying their supply to businesses catering to those customers in Japan.

However, there are probably more significant opportunities in the services sector. Quite a few Australians throughout Japan are involved in hotel businesses, from management positions in the major international chains through to the entrepreneurial Australian who has invested in a couple of the quintessentially Japanese ‘love hotels’. This should indicate that Australian expertise and insight into services associated with profitable and successful tourism business is valued in Japan.
Therefore, I can envisage opportunities for Australians with experience in providing training, management and expertise associated with running tourism related service industries as being highly regarded in Japan – a position which is backed up by our own successful tourism industry and the recognised success of Australians in the sector in Japan.
High personnel costs in Japan mean that Australian businesses which can identify staffing efficiencies, offer a full suite of services targeted to specific sectors of the tourist market without the inefficient ‘over-servicing’ of customers as often happens in Japan, will find opportunities for growth in line with the growth in tourism to Japan. New entrants to the market have the advantage of being able to go to where the market need is rather than relying on the expectation that foreign tourists will travel somewhere merely because that’s what Japanese tourists have always done. This is another reason why Niseko has flourished while other Japanese ski resorts have floundered, even though shinkansen lines were laid to their doorstep.

In the meantime, happy skiing! And if you need some more warm weather, you can always fly from Haneda to Kuala Lumpur for 5,000 yen!


David Lawson
Trade Commissioner and Consul
Australian Consulate (Austrade), Sapporo
David is currently filling this position on a temporary basis. David joined Austrade in 1997 to fill the same role in Sendai after running a Japan-specialist consultancy for 9 years. Since finishing his term in Sendai in 2001, David spent 4 years as Austrade’s Trade Commissioner in South Australia and recently completed an assignment as Consul-General and Trade Commissioner in San Francisco.