The Heavy and Long-term Impact of Coronavirus on Tourism in Japan
Covid-19: An Unprecedented Crisis
With a 1.8 million global death toll at the end of 2020, the Novel Coronavirus 🦠 is undoubtedly the source of a dreadful pandemic.
But in addition to a sanitary crisis, the pandemic also spurred economic and social crisis on an unexpected scale in the world. Entire sectors of our structural operations have been shaken to their core. As for Japan, even if it is one of the countries the less impacted by Covid-19, traveling to and touring in Japan as a tourist has been impossible since late March 2020 and will be for several months in 2021.
This situation, totally unheard of in peace time, reshuffled the cards of many industries, starting with tourism industry. Whereas some countries like France managed to protect most of an industry accounting for 8% of its GNP, while protecting the rights of consumers and employees, tourism in Japan was greatly impacted despite the national travel incentive GoTo campaigns.
📉 A brutal drop of travelers numbers in Japan
The fact that Coronavirus is the worst crisis ever impacting the tourism industry is already acknowledged. Figures show a 57% decrease at least in the world in 2020.
Japan National Tourism Organization’s statistics show a dramatic drop of foreign visitors’ numbers in the archipelago as soon as February, when China received the virus’ first blow. Between April and September included, from the peak of global lockdowns and with the strict closure of Japanese borders, foreign visitors’ numbers dramatically dropped by 99%. The figures slightly "improved" in November, the drop was only of 97%, thanks to the reopening to businessmen, students and working holiday visas holders:
A seven-eighths decline is expected for the whole year. As a comparison, 2009 Global Financial Crisis only impacted tourism in Japan by 20%, and Fukushima Daiichi Nuclear Disaster in 2011 caused a decrease of more than a third compared to the precedent year.
And unfortunately, it is likely that tourism industry will not bounce back as quickly as after the two last crisis. 2021 is expected to show low figures, especially compared to 2019’s records, due to early 2021 new developments:
- The spread of a new virus strain in mid-December, imported in Japan by Japanese travelers coming back from the United Kingdom,
- And the possible delay of vaccination in Japan as authorities want to perform their own phase 3 tests, with actual vaccination stage beginning in late February at best.
The recovery might only start in 2022 thanks to the particular interest prospective travelers nurture for Japan, and the enforcement of sanitary measures.
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🛩 Tourism related companies impacted at various levels
If the crisis is of an unheard scale, it did not impact all the companies in the same manner. Smaller shops have been the most impacted, as soon as early August, with more than 400 bankruptcies due to Covid in Japan. In Japan, about 9 million persons work in tourism industry.
But brutal capitalism and cynicism have made their way in the pandemic. Thus, the largest tourism companies inelegantly pulled through.
The large travel agencies networks
The first travel agency in Japan, JTB, faces an unheard-of turmoil:
- 6,500 jobs will be cut in the world, which represents 20% of its global staff, 2,800 will be cut in Japan, and 3,700 in the world.
- ¥78,17 billion (~702.9 million dollars) financial losses between April and September,
- 115 outlets closed in Japan and 190 overseas;
- 30% pay cuts on the fiscal year 2021.
TUI, the large group of travel agencies, envisioned as soon as mid-May the dismissal of 11,5% of its staff (more than 8,000 out of 70,000) and the closure of 70 outlets. The German government already granted two successive emergency funds to the company for a total amount of €3 billion, but the cut announcement was made by the CEO from his residency in Morocco… A few months later, the company nonetheless received an additional €1,8 billion.
A few months before the Covid outbreak, its senpai Thomas Cook went bankrupt (leaving 22,000 unemployed) after years of financial difficulties that could be directly linked to a bad management, including the millions of pounds payed each year to the company directors.
Evaneos, which is not a travel agency (but only an intermediary between prospective customers and local agents, providing an umbrella company service for a fee), according to several corroborating testimonies from several prejudiced customers, could not prevent several of its local partners not reimbursing or make a credit-note, which led to many complaints.
In the same vein, Spanish company eDreams Odigeo was awarded an infamous "golden cactus" (Cactus d’or), by France consumers association 60 millions de consommateurs, for its websites GoVoyages and Opodo to distinguish the company that exasperated the most its customers in 2020. Thousands of consumers’ claims have been filed as the customer service was unavailable and they could not get a refund for their cancelled trip.
Lastly, the editing company of software Amadeus, used by many professionals as a management tool for their clients’ booking, announced in July a restructuration with a cut of 1,800 jobs.
Airbnb, that has been criticized for unfair competition and negatively impacting traditional hosteling for several years, announced in early May they will fire more than a fourth of their employees (1,900 out of 7,500). In the meantime, the company has levied 2 billion dollars and entered the stock market listing in December, multiplying by 2,5 its initial value…
Large international hostel groups did the same:
- Accor cut 1,000 jobs out of 18,000 to reduce costs by €200 million,
- Hyatt cut 1,300 jobs,
- Intercontinental fired 10% of its staff.
Air France and many other airlines have made it difficult to contact their customer service for several months, with nearly impossible contact by phone, and several weeks response delays to e-mails. The reason was simple: after outrageously raising the prices of return flights ✈️ for travelers surprised by lockdowns, most of them first refused to refund the cancelled tickets (in august, €1 billion were still awaiting refunding according to The European Consumer Organization!) and it was totally illegal. As a consequence:
- French Consumers Association UFC Que Choisir has formally notified 57 companies in April and sued 20 in May, including Air France,
- The European Consumer Organization (Bureau Européen des Unions de Consommateurs) still found 8 airlines breaching consumers’ rights at the end of July.
Aeroflot, despite being a member of SkyTeam / Star Alliance, was the last to continue applying a non-refunding policy on some cases until December.
In June, Air France shamelessly announced cutting off 16% of its staff, namely more than 7,700 jobs by 2022… Its subsidiary company Hop! was also concerned, with 1,020 layoffs out of 2,400 employees.
AF was not the only airline to act this way, as many proceeded to cuts in the world:
- Lufthansa dismissed 22,000 collaborators,
- 12,000 for British Airways and 4,500 for EasyJet (almost 30% of the total number of employees for both companies!),
- 4,300 out of 21,300 for Singapore Airlines,
- 10,000 to 40,000 for Delta Air Lines,
- 13,500 and potentially 36,000 for United,
- Up to 40,000 out of 130,000 for American Airlines,
- And 27% of the staff of Southwest Airlines, and salary cut off in negotiation for the remaining employees.
The low-cost company AirAsia Japan went bankrupt, and stopped operating on December 5. They announced in November not being able to refund the 23,000 tickets purchased for a total of ¥520 million (~4.7 million dollars).
Air Italy, South African Airways, Level, Miami Air International and Norwegian have followed in bankruptcy.
Lastly, the Japanese companies:
- All Nippon Airways (ANA) announced in October a ¥510 billion ([yen 510 000 000 000]) loss over the fiscal year 2020 and negotiated a 30% lowering of salaries with its employees, then a cut of 3,500 jobs out of 45,000 in the group by 2022.
- Japan Airlines expects a ¥200 to ¥270 billion (~2.4 billions dollars) loss, but does not plan cutting off jobs.
The aeronautical sector
Aircraft manufacturers, as a consequence and quite logically, announced the reduction of their activities:
- Airbus in June with 15,000 jobs cut off in the world (11% of its staff) including 5,000 in France by mid-2021,
- Boeing in July, with a 30,000 jobs cut off (out of 160,000) by the end of 2021,
- And the subsequent impact expected on their subcontractors and partners.
Aéroports de Paris (ADP) is also expecting turmoil with a 700 jobs cut, 10% of their employees.
General Electrics announced in early May 2020 the cutting of 13,000 jobs related to aircrafts.
It is thus estimated that on the first six months of the crisis only, the aeronautical industry has lost all the jobs created between 2009 and 2019.
Only minor consequences for these large companies
However, they do not face difficulties to recapitalize, via public or private investors or humongous state guaranteed loans (a first installment of €7 billion for Air France, and even €9 billion for Lufthansa).
Some are still fully using tax optimization as well.
However tourism industry in Japan does not benefit from the same advantages
This situation is quite more complicated for local tourism and travel in Japan.
The first important victims of Covid-19 are:
- Tokyo One Piece Tower, that closed down on July 31 after 5 years of activity. The theme park’s budget was impaired by the loss of revenue.
- Zuboraya, Osaka’s fugu restaurant in Dotombori and Shinsekai , well-known for its inflatable giant fish, has closed down on September 15, 100 years after its opening!
- The large arcade game building Sega GiGO ("building No.2") in Akihabara and its unique façade with tube escalators on the main avenue closed in August, after 17 years of activity (its monthly rent for 1,114m² amounted to ¥16,3 million or ~US$146,559, with a one year worth deposit!). Playland Carnival in Shinjuku, and its 380 games since 1985, ended the same in November. Sega-Sammy stopped its arcade game activities at the end of 2020: a page is turned...
- Toshimaen, an amusement park in Nerima (north-west of greater Tokyo) opened since September 1926, closed on August 31. A part of its 22 hectares estate will be used to host a Harry Potter themed amusement park in 2023 on 30,000m².
- Sun Beach 🏖 Nikko River alias "Nagoya’s Waikiki beach," the largest public pool in Japan, opened since 1994, closed in the beginning of 2021 due to too high maintenance expenses.
- The same happened for Tyrol no Mori, an amusement park in Nagano, opened in 1999 and closed in November due to Covid.
- 500 karaokes of the 6,000 owned by JKBA ("Japanese Karaoke Box Association"), namely more than 8% of these companies in Japan.
- Even a giant such as Tokyo Disney Resort expects a ¥51,1 billion (~€401,7 million) loss on fiscal year 2020.
Aside these spectacular announcements, there is also a domino effect affecting all the "small" restaurants and stores depending on tourism, including domestic tourism (a record of bankruptcies was observed), and even tailors (who have lost customers due to telework), or the famous Nara shika deers that have been suffering from malnutrition for several months.
Unfortunately, the situation is the same for travel agencies specialized in travel to Japan.
⛩ Keikaku’s example: the activity at a standstill
Despite official announcements in France and other countries encouraging tourism during summer, most of borders remained closed:
- Schengen area’s borders, to foster national tourisms and help the recovery of the national economies,
- Japan’s borders of course, influenced by a traditional autarchical mind and paralyzed by the perspective of "impure" (potentially Covid-infected) foreign visitors.
The situation unfortunately continued in the next seasons.
The graph below is an exceptional disclosure of Keikaku’s website meagers viewing statistics throughout 2020 (whereas traditional medias’ view skyrocketed due to the swirls of news):
As a consequence, and more importantly, the company’s revenue in 2020 has dropped since the closing of the Japanese borders in March.
🇯🇵 How to revive tourism in Japan
So, what is the solution to go on and compensate, as much as possible, these dramatic figures and maintain Japan’s attractivity? We came up with some ideas:
First, make plans to travel in Japan! The country is safe, very clean and hygiene-oriented, and with a cultural respect for social distancing and the widespread use of face mask 😷. Traveling in Japan is safe, especially during low touristic season.
Then, by a responsible consumption: Keikaku, as a matter of fact, is a travel agency registered in France, with its own branch registered in Japan, and no subcontractor. If possible, avoid booking at impersonal big reservation centers and prefer short circuits with specialized agents who do not use multiple intermediaries and were still available during the lockdown periods.
And even if Japanese frontiers might not open before summer 2021, it is still a good idea to book now, when prices are more affordable thanks to the low demand.
Lastly, you can promote Japan at your own scale, via the social networks, by word-of-mouth, or any form of natural communication that is within your reach. The Japanese archipelago will need more than ever to revive its tourism industry and promote its wonderful and unique destinations!