The land of the setting sun

Japanese visitor arrival numbers to New Zealand have beendeclining steadily over the past 18 months.   But unlike similar downturns overrecent years which were driven by one-off global events (September 11, SARS,and the Iraq war), the falling numbers this time round do not have a single,easily identifiable cause.   Moreover, the fall in the number of Japanese peoplevisiting New Zealand comes at a time when the total number of Japaneseholidaying abroad is beginning to rise.   So why has New Zealand fallen out offavour with the Japanese?   And is this really something the New Zealand tourismindustry need be concerned about – won’t the burgeoning numbers of middle-classChinese more than offset a decline in Japanese holidaymakers?

A drop in the bucket

Of the 17.4m Japanese tourists who travelled abroad in2005, less than 1% (155,000) visited New Zealand.   China was the destination ofchoice for 20% (3.4m) of Japanese travellers, while other close-to-home Asiancountries South Korea (14%), Thailand (7%), and Taiwan (6.5%) were alsopopular.   Europe and the US (Hawaii in particular) were the favourite long-hauldestinations.

Japanese tourist arrivals in New Zealand peaked in thesummer of 2002/03, when the 12-month running total exceeded 170,000.   SARS andthe Iraq war kept many Japanese at home over the remainder of 2003, but by theend of 2004 the annual total was back over 165,000.   Since then, however,Japanese tourist numbers in New Zealand have fallen markedly, with the annualtotal hitting a 12-year low (141,300) by September 2006.

Worryingly for the local tourism industry, the rate ofdecline in Japanese travelling to New Zealand has far exceeded the slowdown inthe total number of Japanese holidaying abroad.   Indeed, the 13% annual fall inJapanese tourists in New Zealand over the September quarter this year comes ata time when the total number of Japanese holidaying abroad is beginning torise, as the graph below shows.

So what happened to our mojo?

At a conference held on the Japanese market in May,Tourism New Zealand identified a number of factors that have contributed to thedwindling numbers of Japanese visitors:

  • There has been a loss of price competitiveness – strength in the New Zealand dollar and high air fares have made New Zealand a more expensivedestination.   The rising costs have coincided with an increasing awareness ofvalue-for-money among Japanese travellers.
  • There is now less of a premium placed on "safe" destinations – ina world absent of the turbulence of September 11, SARS, or the Iraq war, theallure of New Zealand’s "safe haven" image has faded in the eyes of theJapanese.

  • New Zealand is perceived as an agricultural, somewhat boringdestination best suited to elderly travellers.
  • Much of New Zealand’s loss of price competitiveness can be attributed to the sharp liftin the New Zealand dollar over the past six years.   From a low of  ¥43 in 2000to its peak at  ¥82 last year, the Kiwi strengthened an astonishing 90% againstthe yen, far outstripping the relative currency appreciations of other keylong-haul competitor destinations.   Coupled with a reduction in passenger seatnumbers, the relative strength of the Kiwi made holidaying in New Zealand moreexpensive when compared to other countries.   In 2004, package tours to New Zealand for Japanese travellers were up to 25% more expensive than those to Canada, Europe, Australia, or the US.

    Golden goose

    The Japanese market is important for two reasons.   Thefirst is its size.   With approximately 130m inhabitants, the second largesteconomy in the world, high GDP per capita, and an aging population sitting on amountain of cash, Japan ticks all the boxes in terms of tourism growthpotential.   Secondly, and perhaps more importantly, is the spendthrift natureof Japanese travellers.   When measured on either an expenditure-per-visitor oran expenditure-per-night basis, the Japanese have consistently been in the topone or two nationalities over recent years (see graphs).  

    It is remarkable that expenditure per visitor for Japanesetourists is so high considering the brevity of their stay.   At an average of13.8 nights per visitor over 2004 and 2005, the length of stay for Japanesetourists was lower than that of their Chinese (18.4) and South Korean (14.7)neighbours, and is also shorter than that of the typical visitor from the US(the west coast of the States is a similar distance from New Zealand as Japan).  

    The money and the bag

    With the Chinese economic juggernaut creating anincreasingly wealthy and inquisitive middle class, it is certainly tempting forthe tourism industry to lump future growth prospect hopes in the made-in-Chinabasket.   Indeed, the growth in Chinese visitor numbers in recent years has beenimpressive – arrivals have tripled from 33,500pa in 2000 to more than 100,000pain September this year.   And the numbers are set to grow further with thecommencement of Air New Zealand’s direct service to Shanghai in November.  

    But while the Chinese market is of undoubted potential,its development ought not be at the expense of other already establishedmarkets, particularly the lucrative Japanese one.   New Zealand is anestablished brand in Japan, the networks within the travel industry there havebeen well traversed, and local operators are attuned to the requirements of theJapanese market.   With these structures already in place, the marginal benefitof any effort aimed at rejuvenating Japanese arrival numbers may well exceedthe return to investment in less developed markets, at least in the short term.

    A new dawn

    Three critical drivers of tourism activity point to aturnaround in the Japanese market over the medium term:  

    1.  The exchange rate: New Zealand dollar weakness over the next 12 monthswill alleviate pricing concerns, boosting per day spending as well as liftingarrival numbers.

    2.  Economic growth: The Japanese economy is finally waking from itsslumber.   The Japanese economy grew 2.6% in 2005, and is forecast to grow atcomfortably above 2%pa this year and next.

    3.  Advertising: Tourism New Zealand has allocated an additional $4.5m topromoting New Zealand in Japan.   The campaign will be a continuation of theexisting 100% New Zealand promotion, but will place greater emphasis on thediversity of experiences New Zealand has to offer.

    Further out, the Rugby World Cup in 2011 shapes as idealopportunity for the tourism industry to raise New Zealand’s profile with theJapanese.   While well behind baseball and football in terms of popularity,rugby is nevertheless widely followed in Japan, and with their national teamlikely to be present at the tournament, the event will receive broad coveragein the Japanese media.

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