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PATA Forecasting the Japanese Outbound Market
 
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Aviation Trends
Market and Destination Trends
Technotrends
Food for Thought
San Francisco, April  1998

By Jim Moritani
Publisher, Travel Journal Inc., Japan

There is a lot of talk in the Japanese travel industry about what will happen this year and in the longer term future. Well, nobody really knows. We can only predict what will happen, based on factors such as economic conditions, market trends and consumer behaviour.

Many Asian destinations are facing major economic problems and their currencies have been greatly devalued. This means that their funding for tourism promotions in Japan has either been reduced or cut completely. With the exception of Hong Kong, most of these destinations registered positive growth in Japanese arrivals during the first 10 months of 1997.

To Japanese customers who are becoming more careful in terms of spending, these destinations represent value for money. So we can expect more Japanese to visit Asia this year. Indonesia, for example - despite its economic problems - is projecting a seven percent rise in Japanese arrivals for 1998. That is good news.

How about the outbound market overall? We can expect it to reach about the same level this year as in 1997 - just under 17 million outbound trips. However, we cannot count on the big increases that we had grown accustomed to seeing in the past. There are three main reasons for this:
 

1. Consumers are not as willing to spend their money as they have been in the past.
2. The economy is facing a recession coupled by a number of scandals in the financial sector and government.
3. Domestic travel is becoming more attractive as prices fall.
The Japanese travel industry as a whole is facing tougher times. The recent well  publicised bankruptcies were due to the current economic conditions, but also to tough competition in the marketplace. In November 1997, sales of overseas travel at Japan's 50 major travel agencies declined for the first time in 32 months. They also fell in December. And bookings for travel through March this year are down compared with the same period last year

Yet many companies are making great efforts to cut costs and find new ways of offering consumers better deals while operating profitably.  One such example is H.I.S., which has become one of the most profitable travel agencies in Japan today.

We can only hope that the influential repeat travel sector - including the independent, or FIT market which makes up a large percentage of Japanese outbound travel, will help keep the market on the right track. An encouraging sign is the US$ 2 billion  in special tax cuts being proposed by the Japanese government. These are expected to have a positive impact on consumer spending.

We can also expect to see national tourist offices, tourism related organisations, hotels and airlines, particularly those in Southeast Asia - join forces and undertake joint promotions.

Aviation

More than a few observers believe there will be some changes in airline alliances this year. It is one relatively easy way for the airlines to increase their traffic reach at relatively low cost. And perhaps a more important factor is the knowledge they will gain of new market sources. It is one thing to decide, for example, that the Russian market holds good potential, but another to quickly find out more about that market, and then start to work in the marketplace.

Initially the electronic ticketing service will be available only on the Hong Kong - Singapore - Hong Kong route through direct booking with Cathay Pacific but later in the year, the service will become available through travel agents and more routes will be added. Cathay Pacific is currently investigating the possibility of offering the U.K., Australia, Malaysia and the U.S. as electronic ticketing destinations.

Market and Destination Trends

WTO figures on spending - which are, in some cases, receipts registered by respective destinations from particular markets (so need to be interpreted with caution) show that Japan accounted for close to 50 percent of all spending abroad by residents of Fast Asia Pacific. In second place, but a long way behind, was Korea-ROK with nine percent, ahead of Chinese Taipei. Figures for 1997 are not yet available.
 

The London-based Travel & Tourism Intelligence (TTI) predicts that world tourism can expect a slowdown in growth rates over the next decade or so. It should be noted that this prediction, which comes from TTI's recently published International Tourism Forecasts to 2070, was made before the start of the different Asian crises last year. The expected slower growth rates, which would follow 10 years of booming growth, should pick up again after 2000. 

Of particular interest to Pacific Asia are the forecasts for China. In 4995, TTI says that Chinese long-haul totaled 1.25 million trips. By 2010, the number is forecast to rise seven-fold to over 10 million, making China the sixth biggest long-haul origin market in the world after the U.S., Japan, Germany; the U.K. and Canada.

Africa registered the biggest growth in arrivals in Fast Asia Pacific (WTO's definition for the Pacific Asia region minus South Asia) in 4997, albeit from a small base - 9.5 percent to 449,000. In second position in the growth ranking was Europe, up 5.2 percent to 10.4 million, followed by South Asia (+3.3 percent to 1.3 million) and the Americas (+3.2 percent to 6.2 million). 

Long-haul market growth was generally stronger than growth from intra-regional sources, although this did vary from one destination to another. The destinations relying the most heavily on long-haul tourism business are the Philippines - 44.6 per cent of its arrivals in 1997 were from longhaul sources - China and Japan.

Leisure travellers in Western and Asian markets have distinctly different holiday booking patterns from each other, according to the U.K.- based Travel Research Centre (TRC) which conducts Leisure Travel Monitors in both markets. Surprisingly; TRC's research suggests that Western travellers err towards being more conservative and organised, with half the market booking at least three months ahead of time. In stark contrast, over 50 percent of all Asia leisure travellers book only one month before departure.
 

Technotrends

Asian suppliers eager to woo the American independent traveller should be marketing their products and services electronically. In 1997, about four million tickets, or one percent of the total sold in the U.S., were transacted via the Internet, according to the Air Transport Association. By the end of this year, some 13.4 million Americans are expected buy tickets online, the report says.

The growing popularity of the Internet seems to be partly due to the rise in number of travel agents charging processing fees which range from US$ 5 - 40. An estimated 50 percent of all agents on the U.S. 'vest coast now charge such fees and the percentage is set to increase rapidly
 
 

Europe, meanwhile, is reported to be on the verge of a cyber shopping spree of epic proportions, according to a recent report by London-based Datamonitor, with the number of European online shopping sites expected to increase by more than 10 times over the next four years - from 1,748 in 4997 to 14,882 by the year 2001. The value of online commerce should rise over the same period from US$ 96 million to more than US$ 3.2 billion. 

There are few signs of any approaching boom for the time being. Only one percent of west European homes use the Internet for shopping and in Germany; Europe's most active Internet nation, online commerce generates only one tenth of one percent of the total estimated US$ 1 trillion retail market. But things are changing quickly. By 2001,  seven percent of west European homes should be shopping online, Datamonitor predicts from nine percent in Germany down to two percent in Italy - and travel should account for over 30 percent of total sales volume.

Mr. Daniel Affolter, chairman of the board of Kuoni Travel, says technology is very important as it provides for closer contact with the client. It is cheaper to continue with existing clients than to look for new ones. But while direct contact between the supplier and customer will grow, Mr. Affolter maintains, it will never completely replace the middleman.
Thomas Cook's telephone booking service generates 10 percent of all its U.K. bookings volume. But it is increasingly being superseded by bookings through kiosks with video-phone connections now in a large number of locations. Interactive TV is currently in its second test phase. 

The group's Catalist (sic) Trading Exchange, its new virtual network designed to tailor holidays for the independent leisure traveller, currently has 10,000 different products or components online - but with a capability of 100,000. Current capacity is expected to double or triple within 18 months.

TUI Germany received only 50 bookings a month online in 1997 - out of 80,000 page views daily. But it expects online business to account for around three percent of its total sales by 2000. At last year's sales level, this would have meant more than 455,000, or 13,000 monthly.
According to the 1997 OAG Business Travel Lifestyle survey, which represents the views of more than 5,250 business travellers worldwide, nearly one-quarter of all business travellers have used the Internet as a source of travel information - with the Americans and Japanese leading the way in adapting to cyberspace. A surprisingly high 13 percent of Japanese respondents reportedly regard the Internet as their main travel information source - compared with the worldwide average of three percent. 

As a general rule, the younger the business traveller, the more likely he or she is to use the Internet for travel information. The share for the under 35 year-olds is 40 percent as against 10 percent for those over 55. 

Once business travellers have logged on, the Internet is clearly addictive. More than half - or a high 80 per - cent in Japan - say it is a convenient way to make travel bookings, and even more regard it as a reliable source of travel information.

IBM is moving more deeply into the travel business in Pacific Asia, and it has added a number of customers in recent months with its new technology products and services. The company now looks after all the technology requirements for Air New Zealand and Ansett, and recently added Cathay Pacific as another airline oursourcing this important requirement. China Airlines also recently signed for IBM to implement its electronic ticketing plans. This year, IBM expects to introduce kiosks for ticketing.
 

Food for Thought

Will Asia have to change its product offers in order to attract more business from Europe? There have already been reports that the Caribbean attracts some holiday business because there are more all-inclusive packages available to that region, and a segment of the market in Europe is looking for this type of package. But even "all-inclusive" might have taken a new turn.

A report in Travel Business Analyst says that one of German's three largest tour wholesalers, Touristik Union International (TUI), is offering a package that includes your holiday clothes! For a one-week stay costing US$ 1,168 at the Jack Tar Village in the Dominican Republic, holiday makers need only an airline ticket-no luggage. They are given a credit note for use at the resort boutique which buys them about 20 items, including underpants (one for each day), Bermuda shorts, trousers, shirts, sunglasses, deodorant, toothpaste and sun lotion.

Mexico has been cited by a number of people as a case study for Asia. The fall in the value of the Mexican peso in 1993 made overseas travel twice as costly for residents. The impact of the Asian financial crisis will be the similar for travellers from some markets in Asia - certainly those from Indonesia, Korea ROK, and Thailand. In 1992, there were 11.2 million arrivals from Mexico around the world, declining by nine percent in the year of the crisis, 1993.

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For additional information contact:
Ms. Nancy Cockerell, Editor and Researcher
Pacific Area Travel Association
Web Site: http://www.pata.org/patanet
Email: patacom@ix.netcom.com

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