Japanese Travel Market Struggles to Keep Pace

October 14, 2009

The Asia Pacific travel industry has not completely escaped the ravages of the global recession. PhoCusWright's Asia Pacific Online Travel Overview Third Edition highlights some markets that have performed quite well in 2009 and others that have suffered. The Japanese market is struggling in the face of both internal challenges and external pressures.

Japan is estimated to have the largest travel market in the Asia Pacific region, with a total market of US$65.7 billion and an online travel market of $11.5 billion. Despite its relatively small domestic market (compared to other giants like India and China), Japan's total travel market is huge since suppliers cater to the outbound market as well. While the Japanese people are quite accustomed to technology—in fact they are early adopters of the Internet—the country's rigid regulatory structure makes it challenging for some intermediaries to do business efficiently. Online travel agencies that have managed to adjust to the different GDS requirements include Rakuten and Recruit. Both cater mainly to the hotel market, since the airline market continues to be dominated by two flagship carriers, resulting in less choice and inventory.

In the airline segment, Japan Airlines (JAL) and Air Nippon (ANA) hold the major market share. The low-cost carriers in Japan have yet to gain considerable market share, as they are restricted from flying internationally. Recent data shows JAL in a precarious position. It has piled up nearly $1 billion in debt and is seeking a public bailout. A split or a partnership with a carrier like Air France – KLM or American Airlines is not unlikely. ANA is also considering codeshare agreements with Air China to combat dwindling demand. According to PhoCusWright's Asia Pacific Online Travel Overview Third Edition, 2009 will be a very difficult year for the overall Japanese airline industry.

PhoCusWright projects an extremely challenging year for the country's lodging industry as well. The global downturn has had a major impact on most of the leading hotel chains in Japan, especially those catering to the corporate traveler. With higher online adoption rates on the supplier Web sites, the outlook is brighter for the online market. While occupancy rates continue to slide, marginal increases in both the average daily rate and RevPAR¹ in the recent quarter have helped maintain some revenues.

While the total travel industry is projected to decline in Japan over the next few years, the online portion will continue to grow. This growth will be fueled by a number of factors, including rapid adoption of alternate distribution channels such as mobile. In addition, social media is emerging as a significant force, and is likely to drive more consumers online for travel information, recommendations and other content. Lastly, we can expect to see stronger online penetration of other travel categories such as rail and cruise, which until now have not seen much traction online.

For more detailed analysis, refer to PhoCusWright's Asia Pacific Online Travel Overview Third Edition. The report includes reviews of the major Asia Pacific markets and projections for recovery and future growth.

Asia Pacific Opportunities: PhoCusWright Connect has compiled a series of articles and exclusive analyst commentaries about the vast opportunities present in the Asia Pacific online travel market—read more.  



  ¹ Source: STR Global

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