When will Japanese inbound tourists come back?

It has been more than one year since the COVID-19 pandemic spread almost all over the world. Some global investors have acquired large hotel portfolios. Other investors have been investing into residential port in Tokyo central. Others have been very much active to invest logistics and data centers together with Japanese business partners.

I would like to share our analysis on how the hotel market goes, especially for the second half of 2021

Let me explain one by one.

1 The stock market down turn

As I have been checking the stock markets every day. Most of analysists expects this bullish market would not last for good. Thus, sooner or later the clash appears. One of the trigger, from my point of view, is easing of the travel restrictions. For the past one year and a half, people have stuck at home and spent their time into the investments via internet. Once the lock down has eased, people stop their investments, turn the fund into cash and start spending. However, this may be the trigger of the stock market, investment sentiments would be more weakened, and people would not chose to travel to overseas countries, especially in Asia.

So, this stock market trend would negatively affect the inbound tourist’s come back.

2 Japanese Yen appreciation

Once the economic trends change, the stock prices in major markets would go down. Japanese Yen has been considered as the currency hedge tool like government bonds of major countries. So, basically, the value of Japanese Yen will be appreciated against major currencies like USD or Euro. Especially, against Chinese Yuen, the Yen value would be appreciated. This would obviously be a negative impact on tourism industry. As the tourists from China was the key driver of inbound tourist boom, we may not see the clear recovery of tourism.

3 Harsh price competition

Even when the global lock down has been eased, and people has started traveling, up until the end of 2019, most of major cities in Japan had already evidenced over-supply of hotels. For the limited number of tourists, there will be a large amount of room supply coming to the market. Therefore, there should be a harsh price competition at which some hotels will be forced to sell their rooms even by recording losses.  This trend would middle term leads to the travel industry downturn.

4 Travel restriction

Comparing to other countries, in Japan, the number of patients and death ratios have not been so serious. However, major cities in Japan have been very much cautious of virus spread and insisted to maintain a serious move restriction. Even majority of Japanese have kept their remote works. Even though other countries travel restriction has eased, it may take some time for Japanese to actually remove our own travel restrictions.

5 Lack of human resources

Around 2018-2019, there had been an inbound tourists’ boom in Japan. Especially in Japan, in hotel industry, the lack of human resources had been a serious issue. Non-Japanese workers had been the important resources. Since Covid, the skilled hotel workers have dynamically moved to one from the other, Japanese brand to Western brand, three star to four or five star, etc. So there are considerable number of hotels who would not be able to catch up sudden increase in tourist demand. Even though they can expect a good demand recovery, due to the lack of resources, they would fail to sell hotel rooms at their expected prices.

Further queries or doubts, please email to ytomizuka@abrilsjp.com

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