Tourism Attractive Markets

Reason1. 世界3位の経済大国、日本

In this report, we focus on the following three attractive markets in the tourism industry:


(1)Financial services


One of the objectives of tourists visiting Japan is shopping. Very often, cashless payments are the norm in their home countries. Hence, the introduction of cashless payment systems is essential to increase the tourists’ satisfaction and convenience. In particular, South Korea and China, which accounted for nearly half of all tourists visiting Japan in 2019, are pioneers of cashless, making it imperative to improve consumer convenience (See Figure 6). Furthermore, there has been an increase in online payments with the coronavirus pandemic. Even brick-and-mortar stores are emphasizing cashless and contactless payments to reduce chances of contact between employees and customers in the case of handing over cash.


 Bar graph showing “Cashless payment status in major nations (2017)”. Korea 97.7%, China 70.2%, Canada 62.1%, Australia 59.9%, the United Kingdom 56.1%, Singapore 53.3%, Sweden 47.4%, the United States 45.5%, France 42.7%, Japan 21.4%, and Germany 16.6%. Created based on data from Commission for Promotion of Cashless Settlement.

Against this background, Alipay by Alibaba (a Chinese multinational technology giant) and WeChat Pay by Tencent (another Chinese company) have entered the Japanese cashless payment market. Several other foreign companies are expected to join the Japanese market to meet inbound demand.

It is worth noting that Japan's cashless payment ratio has been rising with the government's initiative of consumption tax reward point program for cashless payments from October 2019 to the end of June 2020. The number is expected to rise further amid the pandemic, where "contactless" is encouraged. The government’s target cashless payment ratio has been set to 40% by 2025, and is aiming to have the highest ratio in the world (80%) in the future.


(2)OTA (Online Travel Agencies)


OTAs have already surpassed traditional travel agencies globally in terms of market size, owing to heavy smartphone and internet usage. Although traditional travel agencies still dominate the Japanese market, the OTA market size was approximately 2.552 trillion JPY in 2018, and this share is increasing every year (See Figure 7). Changes in the travel dynamics of visitors to Japan are also driving the growth of the OTA market. The shift from group travel (package tours) to individual travel (Foreign Individual Tour: FIT) has been remarkable, partly due to increased repeat visits to Japan, with the percentage increasing from 66.8% in 2014 to 78.7% in 2018.

 Bar graph showing “Trends in market size of conventional travel agencies and OTA sectors in Japan” from 2014 to 2018. The market size of conventional travel agencies declined year by year from 59 trillion JPY in 2014 to 53 trillion JPY in 2018. OTA increased year by year from 18 trillion JPY in 2014 to 26 trillion JPY in 2018. Created based on Euromonitor data.

While Jalan.net, Rakuten Travel, and Ikyu.com are Japanese OTAs, foreign OTAs such as Expedia (USA), Airbnb (USA), Booking.com (Netherlands), Skyscanner (UK), and Agoda (Singapore) have been actively expanding into Japan in recent years, indicating that they consider Japan, which is witnessing a rapid growth in the tourism sector, as an important market. Although tourism demand has declined at present, it is expected that the OTA share of Japanese market will increase with the acceleration of digitalization after the containment of the coronavirus.


(3)Hotels/Accommodations


Although the short-term outlook for the hotel industry, which has been hit hard by the spread of the novel coronavirus, is desolate, it is a promising market in the medium- to long-term. Of the total 543.24 million overnight stays in 2019, Japanese people accounted for 441.8 million, or 81% of the total (See Figure 8). It goes on to show that while the rapid growth of inbound demand has received attention, Japanese tourists remain the mainstay of the Japanese hotel market. Therefore, it is necessary to encourage domestic travel demand to establish a foothold and prepare to restore the inbound demand after the pandemic.


 Bar graph showing “Total number of lodgers” from 2015 to 2019. Breakdown of Japanese and Foreigners is also shown for each year. 504 million in 2015 (438 million Japanese and 66 million foreigners), 492 million in 2016 (423 million Japanese and 69 million foreigners), 510 million in 2017 (430 million Japanese and 80 million foreigners), 538 million in 2018 (444 million Japanese and 94 million foreigners), and 596 million in 2019 (480 million Japanese and 116 million foreigners). In 2016, the number was the smallest at 492 million (423 million Japanese and 69 million foreigners) within the period, and thereafter increased every year to the highest in 2019 at 596 million (480 million Japanese and 116 million foreigners). The increase in the number of foreigners is more noticeable than that of Japanese. Created based on data from the Japan Tourism Agency.

The type of hotel that attracts particular attention is a resort (full-service hotel). Resorts account for less than 10% of the total number of rooms in Japan. Considering the scale of domestic travel and the potential increase in inbound demand for post-corona travel, the number of resort hotels in Japan is noticeably small, and there is plenty of room for entry by foreign companies (See Figure 9). Moreover, as this aligns with the Japanese government's plans (announced at the end of 2019) to build 50 world-class luxury hotels across Japan, the resort market is expected to grow.

Global hotel giants such as Marriott, Hilton, IHG (InterContinental Hotels Group), and Hyatt have already opened luxury hotels. A prestigious Hawaiian resort, Halekulani Hotel, also opened in Okinawa in 2019, while another well-known Hawaiian hotel, The Kahala Hotel & Resort, opened in Yokohama in 2020. Additionally, Thailand-based Dusit Thani Hotels and Resorts plans to open in Kyoto in 2023, and many foreign hotels and resorts are all set to enter the Japanese market.


 Pie chart showing “Percentage of rooms by category”. Business hotels accounted for 58.8%, Japanese-style hotels 17.8%, city hotels 14.3%, and resort hotels 9.1%. Excluding pensions, capsule hotels, guesthouses, and other accommodations that account for a small percentage of the total. Created based on data from Metro Engines.

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