Business

Virus brings wave of change to travel and retail sectors in Japan

Jiji

The coronavirus fallout is changing the landscape for the travel and retail industries, with tourism demand slumping and personal consumption hurt by the avoidance of nonurgent travel outside home.

Hotel operator Hoshino Resorts Inc. is sponsoring the restructuring of White Bear Family Co., a travel agency based in Osaka. The headwinds from COVID-19 led the operator of the Shirokuma tour to go bankrupt with debts of ¥27.8 billion last month.

Behind the bailout is Hoshino Resorts' bid to tap the domestic travel market, as government-imposed entry restrictions have nearly wiped out foreign tourists in Japan.

Hoshino Resorts Chief Executive Officer Yoshiharu Hoshino is confident about expanding its business during these tough times. "We have up until now expanded business while working on business rehabilitation," he said.

Hoshino Resorts aims to get a slice of what could be diverted from the ¥2 trillion to ¥3 trillion that has so far been spent annually overseas by Japanese nationals.

But the domestic market outlook is bleak, as the number of new infections reported daily is increasing again.

Industry players have also been disappointed by the exclusion of trips to and from Tokyo from the government's Go To Travel campaign to shore up tourism demand through government-subsidized discounts and vouchers for travelers.

Meanwhile, many restaurant chains are closing down their loss-making establishments to survive the virus crisis.

With social-distancing measures cutting into profitability, some operators may run into financial difficulties if stay-home efforts intensify again.

This would trigger the acceleration of mergers and acquisitions targeting distressed companies.

Pepper Food Service Co., which runs the Ikinari Steak restaurant chain, hopes to survive by selling strong businesses. Some industry players, however, say the company faces harsh competition as steak restaurants have a low barrier to entry.

While supermarkets enjoyed brisk sales due to stay-home demand, department stores had to close many outlets during the coronavirus state of emergency between April and May.

Three major operators including Isetan Mitsukoshi Holdings Ltd. have reported red ink.

Even before the coronavirus crisis, the industry was suffering from structural problems due to the rise of online retailers and other rivals.

"Moves toward realignment will gain momentum, involving stores in areas pounded by the aging of the population as well as long-established stores in the Tokyo metropolitan area," said an executive at a major department store company.

The plight of the industry spilled over to some apparel-makers whose main avenue of sales is through department stores.

Renown Inc. went bankrupt in May owing to funding difficulties. It has yet to find a sponsor.

Onward Holdings Co., which posted a net loss for March-May, is trying to turn around its operations by teaming up again with Zozo Inc., so that it can resume sales of its apparel products on the Zozotown online marketplace.

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