The economic fallout of the novel coronavirus COVID-19, declared a pandemic on 11 March 2020 by the World Health Organization, is slamming infection epicenters in Asia, Europe and now the US. From oil producers in the Middle East to hoteliers and restaurateurs here in Tokyo, a fast-spreading ripple effect is taking its toll on business-owners, even those in far-flung corners of the globe that have yet to confirm many cases of the coronavirus.
With the globalized world going into partial or complete lock-down over the COVID-19 pandemic, the travel sector is facing a huge stress test and immediate disruption to business as public health concerns spiral and populations of entire countries are being discouraged, and in some cases prohibited, from travel.
Like many countries, Japan is facing a delicate balance between economics and public health. For Japan’s economy, which had been riding on a wave of tourism, the impact of COVID-19 has been immediate. With travel bans and imposed social distancing, the travel industry is facing an escalating challenge with the impact of a global outbreak threatening to derail Japan’s tourism growth story. There have been some early casualties. Luminous Cruising Company, operators of the ship Luminous Kobe 2, one of the largest restaurant cruise ships in Japan which offered daytime and nighttime cruises of Kobe Port, filed for bankruptcy on Monday 2 March after being hit by a series of cancellations due to COVID-19. Yuyado Hananoyu, a traditional hot spring ryokan in Shizuoka, has suffered the same fate. Plummeting demand and travel restrictions have caused Japanese airlines to cut back capacity in some key Asian markets through March 2020, and cuts are beginning to affect the domestic market too. Meanwhile, overseas airlines are scaling back their own services into Japan.
Beyond the actions and reactions of major players in the business, government decisions have made significant impact as well. You don’t hear much Chinese being spoken on the streets of Tokyo anymore. Those customers evaporated after China, in late January, banned overseas group tours. About 9.5 million of Japan’s foreign visitors last year were Chinese, a number that has risen more than six-fold over the past seven years. Chinese visitors accounted for 30% of tourists but 37% of tourist spending in 2019, according to Japan Tourism Agency data. Chinese tourists are known for their “bakugai” or “explosive shopping” sprees.
Kyoto hasn’t been this empty for years. Hotels are quiet and have hand sanitizer on every floor outside the lifts. Attractions are looking at staffing, expenses, payables, and receivables and those running without large cash buffers are coming under immediate pressure.
An immigration services agency official told parliament on Friday 6 March that the number of foreign nationals who entered Japan in February was below 1 million. The last time foreign visitor arrivals were below 1 million in a single month was six years ago, in February 2014, when there were 880,000, according to the Japan National Tourism Organization.
In 2018 tourism accounted for 7.4% of all economic activity in Japan. In 2019, Japan hosted 31.9 million foreign visitors, who spent 4.81 trillion yen. For 2020, it is estimated that the hit to economic growth from slowing inbound tourism could be a quarter of a percentage point or more – an at least ¥1tr impact.
Just months ahead of the 2020 Olympics, the jolt to tourism may presage a broader economic impact from the coronavirus for both Japan and the global economy. Tour guide and travel agent colleagues across the industry are fielding cancellations and postponements by the score. I’ve been checking in on them and the general consensus is grim.
One issue specific to the Japanese market is that the virus has struck right before Hanami season, which was expected to be the busiest time for visitors to Japan in human history. This is different to, for example, the Caribbean, where the virus has struck in the final weeks of high season. Coming off the back of the Rugby World Cup in 2019, 2020 was supposed to be a record year for foreign arrivals and a boon for an economy already on the brink of recession. The change in flight paths to Haneda Airport was projected to allow for an increase from 60,000 to 99,000 flights per year into the airport.
Concern now is that such losses could magnify in the coming weeks here, where some hoteliers are reporting significant drops in advance bookings. Cancellations and postponements are largely coming from guests 45 and older. Millennials are still far more willing to travel if they can, taking advantage of the fact that tourist sites and attractions are less crowded, but this too is changing as the decision is increasingly now being taken out of their hands.
Some countries that are able to hermetically seal can encourage residents to vacation domestically to offset the numbers. However, given Japan is in the contagion phase rather than the containment phase, that approach will not cut it.
In response, the government needs to make it easier for tourism-dependent businesses to get loans. This has been happening at a prefectural level, but greater national support is needed.
Undoubtedly, the situation is going to get even more serious and acute. The hope is that people will reschedule and return to Japan when the situation normalizes. This has been my direct experience, with the vast majority of Maction Planet guests choosing to postpone rather than outright cancel their trips.
I am sure I speak on behalf of everyone in the travel industry when I thank all guests for their support and patience during this time. Everyone is extremely saddened by the effect this is having on vacation plans and everything that entails. Everyone in tourism who I know personally is working hard to cushion the impact on guests as much as possible.
I’ll end with a sardonic comment from an industry colleague who is busy trying to rearrange flights for her guests: “After seeing the hold times I’m stuck on, aren’t you glad you used a travel agent?”
Ways to help your tour operator or travel agent friends:
These suggestions apply to all freelancers and many other businesses – artists, musicians, interpreters:
If you have used their services:
- Write a review of your trip on TripAdvisor, Google Reviews or Yelp – check with them for what their forum of choice is. Ideally do this if you enjoyed your trip and are going to give a high rating 🙂
- Talk about your trip with your friends – word-of-mouth recommendations are the most powerful.
Even if you haven’t used their services:
- Buy a gift certificate to use in future – for others or for yourself!
- If they sell any merchandise, consider ordering some.
- Subscribe to their YouTube channel and follow them on Facebook, Twitter, Instagram, LinkedIn, TikTok and whatever other platforms they operate on!
- Share/Repost their content/work/articles – help them build a platform.
- Comment on and like their content.
Photo by Takahiro Takaguchi on Unsplash.
