Inbound tourism continues to thrive as a record 28.7 million tourists visited Japan in 2017, up 19 percent from the previous year and apparently keeping the nation on track for the government’s target of boosting the annual number of visitors to 40 million in 2020. Challenges remain that must be overcome, however, such as a tight supply of accommodations that cater to overseas guests and a heavy concentration of visitors from East Asia. Further efforts should be made to realize the full potential of inbound tourism as one of the nation’s key growth industries.

Tourism is indeed a rare sector that has consistently exhibited sharp growth in recent years. The number of inbound tourists, which stood at 8.36 million in 2012, set record highs for the sixth year in a row. Along with domestic factors such as the weaker yen that made Japan a less expensive destination and the easing of travel visa requirements on various countries, the international travel boom continues to be aided by an increase in the services of low-cost carriers and the expanding ranks of people in many countries with enough disposable income to afford overseas travel.

Consumption by inbound tourists in 2017 is estimated to have hit yet another record of ¥4.4 trillion, a 17 percent increase from the previous year. Inbound tourism is now a key factor that shores up land prices in popular tourist destinations. It has the potential to grow into an engine of the economy, particularly for struggling regional economies outside of major urban areas — so much so that efforts should be made to quickly overcome hurdles to its future growth.

One of the frequently cited hurdles is the tight supply of lodgings for foreign travelers. According to the Japan Tourism Agency, about 75 percent of inbound tourists in the last July-September period stayed at hotels and 18 percent at Japanese-style inns, while 12 percent stayed in private houses and rooms — known as “minpaku” — that are rented out to tourists. The room occupancy rates at city hotels and business hotels are already around 80 percent on national average, but they’re close to fully booked in Tokyo and other major cities such as Nagoya, Osaka and Fukuoka as well as their environs. Increasing the supply of hotel rooms to meet tourism demands is an urgent task.

The occupancy rates of Japanese-style inns, meanwhile, are still relatively low — at up to 50-60 percent — partly because their location and services often don’t meet the needs of foreign visitors. Efforts should be made to enhance the convenience of such inns for inbound tourists, including investments in new features that guests from overseas will find attractive.

Legislation lifting curbs on minpaku services across the country will take effect in June, and there are hopes that the greater use of private houses and apartments for lodging will help fulfill the needs of foreign tourists. However, concern lingers over the potential for problems to arise between local residents and tourists staying in such facilities who make excessive noise or fail to observe local practices involving trash disposal. Such problems have already emerged in areas where minpaku services are available on a limited basis (or illegally). Municipal authorities, meanwhile, are introducing their own rules regulating minpaku lodging in their areas.

It will be a challenge to strike a balance between the interests of local residents, who may fear possible disturbances to their neighborhoods, and tourism needs. The municipal authorities should make transparent rules on minpaku in their areas through close consultation with local residents and businesses — while also keeping an eye out for illegal minpaku operations.

Visitors from China, South Korea, Taiwan and Hong Kong account for more than 70 percent of the total number of inbound tourists. The number of Chinese travelers grew 15 percent to 7.35 million, while those from South Korea surged 40 percent to 7.14 million. In the past, however, the number of visitors from the two countries have suddenly declined when Japan’s relations with them became strained over diplomatic disputes such as territorial rows. A concentration of tourists from one region risks leaving the tourism industry vulnerable to international political and economic upheavals. Efforts should be made to encourage more visitors from countries in other parts of Asia, as well as from the United States, Oceania and Europe,to serve as a hedge against such risks.

Along with the traditionally popular destinations like Tokyo, Kyoto and Osaka, some prefectures and municipalities have succeeded in attracting more tourists to their areas through their own clever promotional efforts, such as “branding” campaigns that are aimed at overseas tourists and by inviting low-cost carriers to launch services in local airports. A key policy challenge for the government will be how to sustain such efforts by local authorities.

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