Japanese travel agencies cut costs in battle for survival | Philippines / Asia

Editor’s note: The travel industry is facing unprecedented headwinds due to the spread of the novel coronavirus. The Yomiuri Shimbun follows the industry as it continues to search for ways to survive. The following is the first installment in a series devoted to the efforts of the tourism industry in Japan.

TOKYO – “Hello. You can take a tour of Tokyo without it being too crowded,” shouted a jinrikisha rickshaw driver as he offered rides in front of the Kaminarimon gate of the Sensoji temple in the district of Tokyo. ‘Asakusa in Taito Ward, Tokyo.

Asakusa enjoyed clear autumn weather on October 18 as the rain the day before lifted. Nakamise-dori shopping street was packed with tourists.

“Recently, people’s loud voices have been heard,” said Koji Ojima, president of the Warabiya souvenir shop in the street.

However, Warabiya’s sales are down 90% from the previous year. “At one point, I thought about changing the business model,” he said. The period when the company’s performance was at its lowest still comes to mind, he said.

The state of emergency declared in April effectively put an end to the tourism industry.

Major travel agencies such as JTB Corp., KNT Co. and HIS Co. have temporarily closed their outlets one after another. The total transaction value of 47 major travel agencies in May fell 97.6% to 9.5 billion yen from the same month a year earlier.

“The coronavirus has pushed us to the limit of our traditional business model,” said a source at a major travel agency. “The travel industry is a low margin, high volume business. We can’t do business if we don’t have the numbers. “

It is said that the travel industry deals with meals, transportation and accommodation. Travel agencies combine these three elements to create package tours, making money from the sales commissions paid by each operator.

However, travel agencies typically only earn around 10% of the total cost of a tour package in the form of commissions. According to consolidated financial results for the year ended March 31, the largest company in the Japanese travel industry, JTB, generated revenue of 1.2 trillion yen, but operating profit – which accounts for the profit of its main business – was 1.3 billion yen, barely 0.1% of sales.

The operating profit margin hovered around 0.5% before the virus spread.

Travel agencies urgently need to cut costs. JTB plans to close around 100 or 20% of its outlets nationwide, over a period of around five years, while HIS will close 80 to 90 outlets, or one-third of its 260 outlets, d ‘here next summer.

“The era of many opportunities is over,” said HIS President Hideo Sawada.

Online travel agencies have made this predicament a force.

Travel agencies under pressure to accelerate the digital switchover

“We have been inundated with bookings, and there are areas where the subsidies are about to run out,” said an official from NTT Docomo Inc., which operates Travel’s online booking site.

With the ban on travel to and from Tokyo being lifted on October 1, website traffic peaked around noon on October 7. The travel agency had to stop selling discounted products online around 9 a.m. on October 9.

The shortage of subsidies has spread to Jalan.net and Yahoo! Travel, and both websites have taken action to lower the maximum discount to 3,500 starting October 10.

The Japan Tourism Agency quickly revised the allocation of grants to maintain the discount rate, which made online travel agencies stand out.

The industry has dubbed this phenomenon the “OTA bubble”. OTA stands for “online travel agent“.

Having no physical stores, these online travel agencies can keep rents and labor costs low. AirTrip Corp., which operates a travel booking site, reported consolidated sales of 24.2 billion yen in the fiscal year ended September 2019, or about one-fiftieth of JTB’s sales, but its profit margin d Operation was much higher than that of JTB at 3.1%. .

Another strength of AirTrip’s business is the fact that users can make their reservations using a computer or smartphone without having to meet in person at a point of sale of a travel agency. trips.

“The novel coronavirus will accelerate the shift of travel agencies to digital technology,” said Keiichi Tsujino, specially appointed professor at Ryutsu Keizai University and travel industry expert.

Spring tourism campaign

“We will do our best for a resumption of tourism. We are expecting visitors, so we would like to ask for cooperation,” said Aomori Governor Shingo Mimura, welcoming the heads of JTB, Nippon Travel Agency Co., East Japan Railway Co. (JR East) and other companies at a Tokyo hotel on October 19.

He has come to Tokyo to ask travel agencies to plan a tourism campaign for the Tohoku region, which will begin next spring.

Responding to Mimura’s request, Tetsuro Morisaki, President of View Travel Service Co., a subsidiary of JR East, said, “We will be planning a product suitable for ‘Beyond Corona’.

For large travel agencies, the ability to plan and deliver trips to customers is their lifeline.

As a countermeasure against the new coronavirus, there are new plans for “less congested” tourism and a longer stay in one place. Expectations remain high for agencies to lead the way in such travel styles.

When Hiroshi Tabata, the former commissioner of the Japan Tourism Agency, left his post in July, he offered a few words to the executives of a travel agency: “In order to establish a new style of travel, the ability to plan and to offer trips as a “travel concierge” is being tested. Now is the time to change. “

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