Japanese Travel Industry in the Era of COVID-19
October , 2020
The spread of COVID-19 has had a major impact on the demand for tourism worldwide. On July 22nd, the Japanese government began its “Go To Campaign,” targeting the industries of tourism and transportation, which have been greatly affected as a result of the spread of the coronavirus. The campaign is a public-private integrated demand-boosting effort, available for a limited period. The government has budgeted 1,679.4 billion yen ($15.8 billion) for the campaign, and the Cabinet Secretariat, METI, MLIT, and MAFF are collaborating on the campaign.
Travel to Japan before the COVID-19 Pandemic
In 2018, Japan ranked 11th in the world and 3rd in Asia for the number of inbound foreign tourists. In 2019, the numbers of foreign tourists visiting Japan reached 31.88 million, setting a record for the 7th consecutive year and 2020 was supposed to be a great opportunity for Japan to display its culture and attractions to the world due to the hosting of the 2020 Summer Olympic and Paralympic Games.
The total number of domestic overnight travelers in Japan was 311.62 million in 2019 and the total number of domestic day travelers was at 275.48 million. A further increase of overnight and day trips was seen during 2019’s Golden Week, a ten-day holiday that also marked the change to the Reiwa era in Japan.
The Impact of COVID-19
The impact of COVID-19 on tourism has been drastic. According to a survey by MLIT, Japanese accommodations reported that bookings had decreased by more than 70% in comparison with the bookings in March of 2019, with a further decrease of 80% in April due to the state of emergency being declared. The state of bookings worsened in May, with about 90% of surveyed facilities reporting a decrease of more than 70%. The decreases in bookings had improved to 50% in June and 30% in July. Although the economic woes of the travel industry remain in dire straits, an improving trend has begun to take place.
Figure 1. Percentage Impact on Bookings (year-on-year)
Source: Ministry of Land, Infrastructure, Transport and Tourism
Regarding the airline industry, domestic flights have shown a gradual trend of recovery. However, the number of passengers on international flights has decreased by more than 95% compared to same month statistics from 2019 and the situation remains severe. The final profit and loss of Japan Airlines and All Nippon Airways for the period of April to June of 2020 was a total deficit of 200 billion yen. From the current situation regarding the coronavirus, it is expected that these severe circumstances for airlines will continue.
The “Go To Campaign”
The Japanese government has been promoting the “Go To Campaign,” which is divided into four sub-campaigns: the “Go To Travel Campaign,” “Go To Eat Campaign,” “Go To Event Campaign,” and “Go To Shōtengai Campaign.” The “Go to Travel Campaign” commenced on July 22 and the “Go To Eat Campaign” starts sequentially on October 1st; the other two campaigns will be implemented after mid-October. The “Go To Travel Campaign” aims to promote domestic travel and subsidizes up to 50% of the price of travel expenses, capped at 20,000 yen per night. The benefits also include a discount of 70% on travel expenses and the remaining discount of 30% will be given as a regional coupon. The regional coupon can be used only during the travel period at certain locations, such as restaurants, souvenir shops and transportation at the selected destination. In addition, there is no limit on the number of consecutive nights or usage.
Users of the campaigns can receive point-based rewards and coupons in the “Go To Eat Campaign” and discounts and coupons in the “Go To Event Campaign.” The “Go To Eat Campaign” aims to stimulate demand for restaurants with proper infection control measures and support farmers, forestry and fishermen who supply foodstuffs. People who make reservations online will be given points up to 1,000 yen per person, which will be valid for their next order. The “Go To Event Campaign” distributes discounts and coupons equivalent to 20% of ticket prices to those who purchase event or entertainment tickets via the target ticket sales company. By doing this, the campaign aims to stimulate demand in entertainment industry, which has been hit hard by the pandemic. The “Go To Shōtengai Campaign” aims to restore the bustle of shōtengai by supporting business and promoting the attraction of shōtengai through the implementation of various events.
According to the MLIT Minister, Kazuyoshi Akaba, the total number of people using the campaign from July 27th to August 20th reached about 4.2 million. However, the number of passengers traveling by Shinkansen and airplane were low due to most trips being short-distance trips by private cars.
From April to June of 2020, Japan experienced its largest decline in GDP since 1955. Until September, travel to Tokyo was not eligible for “Go To Travel Campaign,” but the government added Tokyo to the campaign in this month. Therefore, it is expected that the number of people taking part in the campaign will increase. Thus the government is obliged to thoroughly implement measures to prevent the spread of infection in continuing and promoting the campaign, and consumers need to continue taking coronavirus precautions correctly, in order to keep the economy going.