By Thomas Johnson
Since the inception of the region’s tourism industry, Japanese visitorship has stood strong as a primary source market, a pillar that has propped up the hospitality trade in both Guam and, to a lesser extent, the NMI. However, in the wake of a string of popped economic bubbles in Japan and the subsequent devaluation of the yen, that pillar has formed some very visible cracks over time. With that in mind, some of the industry’s stakeholders gauge what effect the state of the Japanese market might have on the region’s tourism efforts.
“The yen is at approximately ¥125 to the dollar right now,” says Jon Nathan P. Denight, general manager of the Guam Visitors Bureau. “Just to put it in perspective, it was about ¥75 or even a little less when I started here about four years ago. So we’re talking about a 30% drop, which means that Guam has gotten 30% more expensive for them over the past four years.”
GVB’s arrival reports are reflecting that drop, with total Japanese arrivals for fiscal 2014 coming in at 825,830, a 9.5% decrease from fiscal 2013. The sizeable loss was counterbalanced by double — and in one case, triple — digit increases in non-Japanese markets, but Guam barely came out ahead with a very slight 0.1% increase in air arrivals year-on-year.
“It’s not just the yen that’s a challenge for us,” says Samuel V. Shinohara, managing director of business development for United Airlines, GVB board member and vice chairman of the bureau’s Japan Marketing Committee, “though I think that’s the biggest factor that we face, and we see it a bit more in some of the regional cities that we fly to — Osaka, Sendai, Sapporo, Niigata and Nagoya. With some of those cities, we’re the only ones providing service, so it’s a little bit less robust in terms of outbound travel, not like Tokyo which is a very developed and influential travel community. There’s a little less impact there, but there is still an impact.”
Nowhere is this felt more clearly than in the NMI, where Tokyo is now the only gateway from Japan that provides year-round service to the Marianas. By comparison to Guam, the Marianas Visitor Authority reports that the NMI has received 67,908 visitors from Japan this fiscal year, a 21% decrease compared to the same period last year. Japanese visitors now make up 18% of the NMI’s arrivals, down from 24% last year. While the NMI may not be as dependent on the market as Guam — for which Japanese visitors make up approximately 62% of total arrivals — it still marks a significant trend for the region overall.
MVA Managing Director Perry P. Tenorio says that the challenge presented by the exchange rate is compounded by several other factors, particularly the increase of the Japanese consumption tax from 5% to 8% last year. He also points out that Japan’s overall outbound travel market has been weakening over time, dropping 9% over the past three years.
As part of MVA’s efforts to maintain and restore the market, Tenorio says that stabilizing air service to Japan has become the agency’s top priority. To that end, the MVA has appointed an airlift development manager to negotiate additional or new air service with existing and new airlines, including low-cost carriers. A series of other recovery strategies are also being implemented in addition to MVA’s regular marketing and promotions.
While total NMI visitor arrivals are up 13% this fiscal year in spite of the hit from the Japan market, Tenorio says that Japan remains an important market for the MVA. “Increases from China and Korea are pushing the growth of our arrivals at this time, but the sustainability of Japan is still essential for our market diversification strategy to ensure that the NMI doesn’t become over-dependent on any one source market. We continue to work closely with our private sector partners to maintain and revive the market, and we look forward to a turnaround, hopefully very soon.”
In spite of the downturn in the market and its impact on volume, GVB Japan marketing officer Nadine Leon Guerrero says that the drop will not necessarily have much of a negative impact on GVB’s execution of its Tourism 2020 plan, given that the long-term intent was to lower Japan’s share of the visitors market and, much like MVA, decrease single-market dependency.
“We had already planned to bring the market mix down so that other markets would have a chance to grow and so that Guam is not completely dependent on one market,” Leon Guerrero says. “For the 2020 plan, focusing on yield was the primary goal for the Japan market, and I think we’ve been successful in that respect. Premium package tours have increased dramatically, though, so perhaps we were too successful.”
Denight adds that GVB has been pushing its Premium Guam campaign for the past several years in a bid to essentially trade volume for yield. He expects that the trade will lessen hotel and airline dependence upon the Japanese market and free up room and seat inventory to further diversify into other markets.
“We do have to monitor it because we don’t want to price ourselves out of the market entirely and lose out on volume,” he says, “but our board is very committed to the Japan market, and they’ve authorized us to give sales incentives to the Japanese travel agents. Supporting the travel agents at this point is important because we know they’re having a tough time with the yen rate, and we want to do as much as we can. We’re also starting a co-op advertising program where we subsidize 25% of an ad on TV or in the subway or in a magazine, and it’s been very successful in helping us compete against bigger budget competitors like Hawaii.”
Shinohara says that competitors like Bali, Thailand and the fellow U.S. destination of Hawaii are becoming particularly aggressive in pushing for the Japanese market. “Hawaii, in particular, is always such a big challenge for us to compete with just because the destination has so much to offer,” he says.
Even with the stiff competition and significant drop in Japanese air travel, however, Shinohara says that United will maintain its commitment to both Guam and Japan. “Guam is a major part of our operation; we have a significant employee base here, and I have no desire to make decisions that will impact our ability to give people economic reasons for living here. So we’re trying hard to make things work, but we can’t do it all ourselves, so we’re partnering with GVB on markets where we need some extra help. I’d love to say that we’re going to open up into five more cities and start doing better in the next three months, but the reality is, if it’s not the yen, it’s the social insurance contributions and the consumption tax, and that has impacted people’s ability to take leisure trips. But we’re committed to Japan, and we’re going to continue serving the markets that we serve.”
In regards to competition from other destinations, Denight and Shinohara feel that a good portion of the revenue being lost to other destinations can be redirected to local coffers by educating the Japanese public more about Guam’s proximity to Japan. While older Japanese travelers and prior visitors know that Guam is only a three-hour flight from Japan, studies indicate that many younger travelers are under the misconception that Guam is much further away. To that end, GVB will be launching a new 2016 campaign at the Japan Association of Travel Agents expo in September, featuring actor and former pop idol Toshihiko Tahara, focused on Guam’s proximity to Japan.
The campaign will be directed at Japan’s older “silver” market, which has proven itself to be a solid demographic both in terms of reliability and yield. It will also target the otona market, a slightly younger adult market associated with the pursuit of maturity and sophistication.
Milton K. Morinaga, managing director of PHR-Ken Micronesia, GVB board member and chairman of the Japan Marketing Committee, says, “We did a similar campaign a long time ago, letting the Japanese public know that Guam is much closer than Hawaii […]. I think Japanese people need to be informed that not only is Guam close by, but it’s an American destination and it’s cheaper than going to Hawaii. If you travel to Hawaii, you lose a day, room rates are expensive, and it’s just not as affordable of a destination anymore. We also need to emphasize that you can get the same products in Guam that you can in Hawaii without the added cost of sales tax.”
Competition from Hawaii and Asian travel destinations notwithstanding, GVB and MVA now also find themselves competing with Japan itself as the nation redoubles its efforts to encourage domestic and inbound travel.
“Japan is really beefing up their domestic travel and tourism structure,” Denight says. “They’ve historically been focused on outbound travel, but they’re making a switch to inbound travel, with a goal to have 20 million visitors inbound to Japan by 2020. They’ve got Universal Studios, Disneyland, cultural destinations, mountain destinations for skiing, and they’re upgrading Okinawa as a beach destination. It’s a lot to compete with.”
In response, Denight says that GVB has been pushing the non-leisure market, with student and Meeting, Incentive, Conference and Exhibition tourism numbers going up as leisure numbers have been going down. In fact, many members of Japan’s growing hospitality industry are now traveling to Guam for incentive trips.
“Non-leisure is definitely one area where we’ve been growing,” Denight says. “While the general consumer business has been decreasing, we’ve been increasing in school groups and big-time with company incentive trips. These companies, particularly the ones that are strong in the export market, are doing better, and they’re incentivizing their employees — not necessarily through raises, but taking everyone to Guam as part of a company trip.”
Leon Guerrero says Guam is number one in the Japanese student market. Of 260 different schools that planned trips to the United States over the past year, 158 of those schools selected Guam as a destination, and Leon Guerrero estimates the average school size at approximately 300 pax per school.
As part of a company that has traditionally trafficked in primarily Japanese tourism, Morinaga says that the growing Japanese MICE market has become a large part of PHR-Ken’s strategy going forward.
“PHR-Ken is always diversifying its market mix to compensate for when the primary market is slow, and we’re always attempting to forecast market changes. MICE is growing in Japan because a lot of companies are making money from inbound tourists, and they want to do a quick getaway. So a lot of hotels are experiencing small groups, taking up 10 or 20 rooms at a time. MICE is the biggest thing right now, so that’s what we’ll be promoting.”
Morinaga adds that MICE business is constantly on the sales agenda for PHR-Ken employees, with each of PHR-Ken’s five hotel properties putting a different emphasis on what it can offer the market.
“But as long as people come to Guam, everyone flourishes. So I’m less concerned about selling my hotels; my position in GVB is to sell Guam. That’s why I think it’s good that [Dusit Thani Guam, which opened late June,] is coming online because I hope they’ll put more [public relations] money into Japan to subsidize GVB and help advertise Guam.” n