Strategic Vision Towards 60 Million Inbound Visitors Discussion on Threats and (your) Opportunities Tadayuki (Tad) Hara, PhD, Associate Professor, Senior Research Fellow University of Central Florida Rosen College of Hospitality Management 14:45 ~ 16:15 June 13, 2016 Room 法経済学部東館 1 階法経第 5 教室 Building 12, Kyoto University, Kyoto, Kyoto, Japan
Administrative Notes (1) All slides should become available online. No needs to take notes I will allocate time for Q & A at the end while you may ask questions at any time. Please just identify your name, so that I can address you by name. You can ask questions either in English or Japanese, and I will respond in English.
Administrative Notes (2-1) Why in English? How many are using?
Administrative Notes (2-2) Why in English? How many are studying? (123+3)/ 7,200 =? That is the size of your world, if you speak, read and communicate with Japanese in Japan. You must earn export revenues which is good for the nation and for you.
Contents of the Lecture(Total 46 pages) 1. Tourism, Management versus Hospitality Management (P5-7) 2. Confirmation of Goals Why Promote Tourism (P8-9) 1. Goals for Corporation and Governments 3. Mission Statement: Example - Planning for Tourism as an Industry (p10-22) 1. Case of Mission Statements in Orlando, Florida 2. Tourism Public Infrastructure Funding Scheme and Alternative Funding 4. Identifying Possible Bottlenecks and Plan for Mitigations to Achieve National Goals (P23-40) 5. Additional Topics: Storytelling, International Internship, Research Formats (P41-52)
I: Overall Field of Tourism and Hospitality Management Field More Public policy orientation Policy Analysis Economics Geography Quantitative Tourism Industry Analysis Planning Financial management Quantitative Requirements Strategy Government Tourism Marketing History HR/OB Anthropology Psychology Source: Quantitative Tourism Industry Analysis, T. Hara Business Application orientation
Difference between Management and Hospitality Management In a manufacturing sector, you create your tangible products at factories. You can store them and check their quality before sales. (Most MBA programs are based on this model) In our hospitality industry, customers are purchasing experience which is intangible, and cannot be produced and stored by the factory. Employees produce it How can you ensure the quality? How can you differentiate your product from others? Importance of managing the whole processes for consumers
Part II: Purposes of our Mission It would become highly useful for all of us (researchers, practitioners, students, workers in the hospitality and tourism industry) to confirm our mission, why we must promote tourism as an industry. Many, if not all, of misguided discussions derive from deviation from our mission. Goals and means to achieve goals should not be mixed.
II. Confirmation of Goals: Why do we promote tourism? Goals of Profit Organization? Maximize Shareholder Values by maximizing profit Ultimate National/Regional Goal for government? Maintain & Improve Quality of lives of taxpayers (= Customer Satisfaction) How do you achieve those goals? By Securing Export Revenues Which industrial sectors are competitive enough at 2016? Rely on Tourism as an Industry (to secure alternative export revenues)
III. Importance of Confirming Organizational Mission
III. Importance of Confirming Organizational Mission When you are engaged in tourism planning, you have to create common themes across different industrial sectors & organizations to let the visitors enjoy cohesive experiences in the destination. Remember, you are selling experiences which should be smooth, pleasant, and consistent. BUT, always keep in mind why you promote tourism as an industry.
III. Tourism as an Industry: Case Study 1 Our Mission is to provide a safe, secure, customer friendly, affordable services and facilities that promote the Orlando Experience. Which organization s Mission statement? (1) Hilton Orlando (2) Mears (bus & taxi company) (3) Orange County Convention Center (4) Orlando Magic (Professional Basketball team) (5) Disney Cruise (6) Greater Orlando Aviation Authority (airport) Answer: http://ja.orlandoairports.net/
III. Tourism as an Industry - Case Case: DMO - Visit Orlando http://www.visitorlando.com/ (leisure travelers) http://corporate.visitorlando.com/ (corporate page) http://www.orlandomeeting.com/ (MICE) The mission of Visit Orlando, as the industry's leader, is to market the area globally as a premier leisure, convention and business destination for the continual economic benefit of the community. Why leisure web pages for many different languages? See this http://corporate.visitorlando.com/research-and-statistics/orlando-visitorstatistics/overseas-visitor-profile/
III. Tourism as an Industry - Case Case: Orange County Convention Center http://www.occc.net/pdf/info_missionstatement.pdf The mission of the Orange County Convention Center is economic development. By hosting regional, national and international conventions, meetings and trade shows, the Center infuses the local economy with new money and expanding business opportunities.
III-2. Case Study : Tourism Public Infrastructure - Orlando Convention Center Partly Based on Presentation prepared by the Orange 10/13/2017 15 County Convention Center, Orlando, Florida, USA
3-2 Tourism Infrastructure Funding Business Model of Convention Center may be an useful example. Convention Center is usually built by local/national government as a public facility They are often operated at losses if you look at its Financial Statements (I/S, B/S). Draws certain tourists segments (longer staying, higher spending visitors) to the region, benefiting wider hospitality industrial sectors at Off-peak season Hotels, Restaurants, Local transports, retail shops, amusements, translators, destination service companies, interpreters, AV rental, luxury limousine car companies benefit from increased visitors. Resulting in job creation, tax revenue generation as a critical infrastructure for export revenues of the regional economy
3-2 Issues with Tourism Infrastructure Funding Government Tourism Public Infrastructure (Convention Center) Construction of Tourism Public Infrastructure is often funded by government s ordinary budget. And often the project does not generate enough cash flow, so government has to continue to subsidize its operation while it benefits industry and create jobs by attracting visitors. Inbound Visitors
3-2 3-2 Issues 観光インフラ資金調達 with Tourism Infrastructure : オーランドの例 Funding Government Tourism Public Infrastructure (Convention Center) Muni.Bond Inbound Visitors Investors Debt Service Destination Marketing Special Purpose Escrow Account Government issue a municipality bond to raise construction cost of the Tourism Infrastructure. It is non-recourse and government offers no guarantee. Government impose a special purpose tax (TDT) which will be used for (1) Bond debt service (2) destination marketing only.
III-2: Build a structure in which tourism revenues will be circulated in regional economy and contribute for growth of the revenue Tourist Development Tax (local special purpose tax on hotel room charges Visitation by tourists will generate special purpose tax revenues Do not put it in ordinary account but earmark it for 1. tourism promotion (destination marketing), which is conducted by DMO 2. Debt service for municipal bond for construction of a Convention Center (= tourism infrastructure) 4-19 10/13/2017 19
3-2 Orange County Municipal Bonds
3-2 TDT $175 Million in 2012 Table 2: Orange County, FL Tourism Development Tax Revenues Orange* tax % Increase % 1995 $68,257,785 5.0% -- 1996 $81,059,719 5.0% 18.76% 1997 $92,862,345 5.0% 14.56% 1998 $97,935,188 5.0% 5.46% 1999 $100,539,325 5.0% 2.66% 2000 $109,411,700 5.0% 8.82% 2001 $97,932,100 5.0% -10.49% 2002 $94,701,200 5.0% -3.30% 2003 $94,512,900 5.0% -0.20% 2004 $114,317,500 5.0% 20.95% 2005 $122,151,700 5.0% 6.85% 2006 $137,204,800 6.0% 12.32% 2007 $165,661,400 6.0% 20.74% 2008 $165,064,400 6.0% -0.36% 2009 $140,202,100 6.0% -15.06% 2010 $153,276,500 6.0% 9.33% 2011 $176,533,100 6.0% 15.17% 2012 $177,607,100 6.0% 0.61% Source: Orange County, FL, Comptrollers' Offices TDT to be used for (1) Debt service for 4-21 Convention Center Construction 10/13/2017 21 Municipality Bond (2) Annual Marketing Budget for Orlando $226 million in 2015
3-2 Tourism Industrial Sectors and dependence Auto Rental & Leasing (58%) Travel Agency (21%) Amusement (20%) Cinema(18%) Ships(17%) Gas Station (7%) Airplanes(76%) Hotel (80%) Shopping (3%) Taxis(46%) Buses(23%) 4-22 Restaurants(17%) Source: Data based on Bureau of Economic Analysis, Commerce Dept, USA Sports(32%)
The latest National Goals for Japan This is NOT to discuss if the national goals can be achieved, BUT to discuss how they can be achieved. [Annual number of Inbounds] Currently 20 million 40 M in 2020, 60M in 2030 [Expenditures by Inbounds] $34Billion in 2015 $80B in 2020, $150B in 2030 (J: $185B in 2015 $210B in 2020, $220B in 2030) (34/219=15%, 80/290=27%, 150/370=40%) (Japanese GDP = $4,170 Billion in 2015) relative share would be 5.2%, 6.9%, 8.8% at least) Do you think these are impossible, or challenging?
Historical Data on Inbound to & Outbound from Japan
IV. Possible Bottlenecks and Plan for Mitigations 20 M 60 M, 3 times more visitors to Japan! Non-physical bottlenecks Shortage of Labor force (front and back) Shortage of Managerial Personnel (top, middle) Physical bottlenecks Accommodations Hotels, rental units Airports, Immigrations, JR Pass exchange Transportations- buses, trains, rental cars
Relative Importance of Tourism Figure 29: Size of Tourism GDP to National Economy Country (Study Year) TGDP Spain (2004) 11.0% Austria (2005) 6.4% Switzerland (2004) 5.1% New Zealand (2005) 4.8% Australia (2005) 3.9% United Kingdom (2003) 3.4% Germany (2003) 3.2% Norway (2005) 3.1% USA (2005) 2.6% Sweden (2004) 2.6% Finland (2005) 2.4% Canada (2006) 2.0% Japan (2006) 1.9% Source: Presentation by Tadayuki (Tad) Hara, PhD, at the 2008 UNWTO Conference in Bali Paper Title: Results of 7th Research on Economic Impact of Travel and Tourism in Japan Subtitle: Quantifying the Relative Importance of Tourism as an Industry.
Relative Importance of Tourism FIGURE 30: Size of Tourism Employment to Total Employment Country (Study Year) Employment % Norway (2005) 6.8% New Zealand (2005) 5.8% Switzerland (1998) 5.2% Australia (2005) 4.6% USA (2003) 4.2% Canada (2000) 4.0% Sweden (2002) 3.0% Japan (2006) 2.6% Source: Presentation by Tadayuki (Tad) Hara, PhD, at the 2008 UNWTO Conference in Bali, Paper Title: Results of 7th Research on Economic Impact of Travel and Tourism in Japan Subtitle: Quantifying the Relative Importance of Tourism as an Industry.
External Business Environment Source: MLIT PDF: http://www.mlit.go.jp/common/001033672.pdf From 2010 to 2050, population is expected to decrease from 127M to 90~100M range, while inbound visitors are aimed to increase from current 10M to 30M+ in the next 10 years. Labor shortage = time for Japan to think about utilization of (1) shortterm labor (2) immigration of skilled (and unskilled) workers (3) subsequently, cross cultural management.
Strategic Requirement: Develop Human Resources suitable for the National Goals There will be no doubt about shortage of labor force in Japan You cannot expect all foreigners (98.3% of people in the world) to speak Japanese Japan will need not only those foreign labor forces but also many younger generation of their own who can understand, communicate with, lead and manage diversified labor force in Japan. (If you can do this, you will get paid higher salary) Start from better utilization of female workers, and hospitality industry has been one of the most receptive industrial sectors to embrace
Internship cross cultural management experience An update on my Japan adventure! Today is June 6, 9am The resort caters to guests from all over the world, so I have been using both Japanese and English to communicate with guests. Some guests don't speak either language so it has been exciting and a great learning experience figuring out how to communicate with them. I am very proud of how far my Japanese has come so far. I love the language and it is much easier than I initially thought it would be. The staff at Kafuu is so incredibly kind and helpful, and I have noticed that is a trend here in Okinawa. Also, everyone in Okinawa has an incredible work ethic no matter what they are doing. Everything that is done in Okinawa is thoroughly thought out and completed to perfection. I am excited to continue my adventure and I will try to keep everyone updated as I do so!
IV. Possible Bottlenecks and Plan for Mitigations 20 M 60 M, 3 times more visitors to Japan Non-physical bottlenecks Shortage of Labor force (front and back) Shortage of Managerial Personnel (top, middle) Physical bottlenecks Accommodations Hotels, rental units (Airbnb) Airports, Immigrations, JR Pass exchange Transportations- buses, trains, rental cars
LCCs and Japan as Destination in Perspective
LCC Market Shares Around the World Low Cost Market Shares Around the World Year low cost operations began Year(s) in which market de-regulation took place Share of Overall Market (%) Region (country) North America USA 1978 1978 24-25% Canada 1996 1996 30 Europe UK/Ireland 1995 1993 40 EU 1999 1995 20 EU expansion 2002 2004 less than 1% Australia/NZ Australia 1990 1990 30+ NZ 1996 1984 30+ Asia Malaysia 2001 2001 2 Singapore 2001 2001 less than 1% Japan 1998 1998 1 China n.a ongoing n.a Thailand 2004 2003 less than 1% India n.a 2003 less than 1% Rest of World Brazil 2001 1998 3 South Africa 2001 1999 1 Gulf States 2004 2003 less than 1% Source: Table 1 "Where next for low cost airlines? A spatial and temporal comparative study" Francis, Humphreys, Ison and Aicken, Journal of Transport Geography 14 (2006)83-94
Market Development Stages (2006) Market Developments of Low Cost Airlines Compared to the US Stages USA (as a benchmark) Canada UK Europe Mainland Eastern Europe Asia Australia NZ Rest of World 1. Innovation V V V V V V V V V 2. Proliferation V V V V V 3. Consolidation V V V V V 4. Second Phase of new entrants V 5. Consolidation V 6. Market Maturity V Source: Table 2 "Where next for low cost airlines? A spatial and temporal comparative study" Francis, Humphreys, Ison and Aicken, Journal of Transport Geography 14 (2006)83-94
Strategic Identification of Hidden Assets There appear to be existence of high quality airports with excess capacity in Japan Japan has an extensive network of airports across the nation. Currently there are five first class airports which are able to handle intercontinental flights. Narita International Airport (Narita: NRT) Kansai International Airport (KIX) Tokyo International Airport (Haneda: HND) Chubu International Airport (NGO) Osaka International Airport (ITM)
Airports: Important Infrastructure for Inbound Tourism Japan s airports system is well developed with five first class airports near major cities, over 20 second class airports, some of which can handle international flights, and nearly sixty third-class domestic only airports. Capacity constraints exist predominantly with two first class airports three first class airports and most regional airports have excess capacities = critical infrastructure already exists to meet increase in inbound tourism!
Source: Ministry of Land, Infrastructure, Transport and Tourism, Japan
Interesting Case of Sanford Airport Orlando Orlando Sanford International Airport covers 2,010 acres (813 ha) and has four runways: Runway 9L/27R: 9,600 x 150 ft. (2,926 x 46 m), Surface: Asphalt Runway 9C/27C: 3,578 x 75 ft. (1,091 x 23 m), Surface: Asphalt Runway 9R/27L: 6,647 x 75 ft. (2,026 x 23 m), Surface: Asphalt Runway 18/36: 6,002 x 150 ft. (1,829 x 46 m), Surface: Asphalt/Concrete The airport is owned by the Sanford Airport Authority and managed by TBI plc, one of the world's leading airport operators, which owns London Luton Airport, Cardiff Airport, and Belfast International Airport in the United Kingdom, as well as Stockholm-Skavsta Airport in Sweden, and operates airports in South America. Because of that affiliation, Orlando Sanford International Airport is served primarily by British charter air carriers servicing the European market for leisure travel to Central Florida. TBI is also the provider of ground handling services for airlines. Although it is primarily a landing point for European travel, Sanford is also the second largest focus city for Las Vegas-based Allegiant Air. Airlines http://www.orlandosanfordairport.com/airlines.asp
4 Promotion of Inbound Hidden Asset An academic research on perceptions of Japan among US residents (FL, VA-2010) showed Food, High-tech images as the strongest associations with Japan Airfare being too expensive perception was statistically significant among those who never visited Japan LCC can definitely contribute to mitigate this perception. Bring first-time visitors to Japan and expose them to Food & High-tech. Some local airports have good land transports to major Rail systems. Almost all Japanese regions have distinctively tasty local foods & surprisingly abundant choices of International Foods. (Not marketed to inbound visitors) According to Japanese TSA, visitors impacts to railroads are relatively larger in Japan indicating possibility of joint-marketing by LCCs and Japanese Rail companies)
V. Additional Topic: Importance of Proper Story-telling to Inbound Visitors If a non-japanese visitor asks you how Japan with beautiful old culture, away from any industrialized Europe suddenly became a global economic power in the last 150 years, can you explain that in English? S/he wants to visit tourism destinations to learn about the process of how Japan transferred itself from closed agriculturebased feudal system to industrialized democracy. What do you recommend?
V. Additional Topic: Importance of Proper Story-telling to Inbound Visitors 手に取れない 経験 を売るのは 物を販売するのとは違う https://www.youtube.com/watch?v=itfri6n73wg https://www.youtube.com/watch?v=rgdrj74mbwi
4-2 Ex-3 Marketing and Sales Concept This is the difference between selling concept and marketing concept for Tourism Products. You do not use visitors detailed data Selling Concept Lots of promotion materials Simple Data on # visitors, expenditure would suffice Starting Point Focus Means Ends Japan (from Existing Japanese Tourism Selling & Profits from Higher viewpoint) Products Promoting Number of Visitors Marketing Concept Market (potential inbound visitors) Customer Needs Integrated Marketing Profits through Visitors' Satisfaction Start from Focused marketing Detailed Data on knowing on differentiated Visitors required 10/13/2017 customers segments for measurement 43of success
CONCLUSION: Enabling 60 Million Confirm Goals for Tourism Promotion Development of tourism as an high-growth regional export industry Japan already has hidden assets (airports & ground transportation system) for regional tourism export. Create Business Model to finance tourism Consider taxation scheme to tax on consumption, not on providers of commodities Tourism must be marketed (not only to visitors but also to residents) Human Resource Development Not enough HR developed before critical shortages surface. This means there are unprecedented opportunities in the hospitality industry & tourism-related sectors, if you are capable of cross cultural management & hospitality management to earn export revenues! Then you should be paid top-level salaries Thank you very much. Tad Hara http://www.youtube.com/watch?v=c0u9s0lwxqo
Extra Issue: Current Status of Higher Education in Hospitality & Tourism in Japan [USA] 180 Universities with Hospitality/Tourism programs (2/3 hospitality management, ¼ tourism?) Around 50 offers Masters degrees, 15+ offers Doctorates. About 50,000 students Tenure-truck system led to high-research environment [Japan] 46 Universities with Tourism Studies (none in Hospitality Management) Around 6 offers Masters degrees, 3+ offers Doctorates About 15,000 students Self-Imposed seclusion led to low research outputs
全学術分野による世界学術研究国別ランキング All Area Refereed Research Paper output 1996-2012 1 7 年間
新薬開発分野学術研究国別ランキング Drug Discovery Research Paper output 1996-2012
Economics & Econometrics Research Paper output 1996-2012 経済 計量経済分野学術研究国別ランキング
Tourism, Leisure & Hospitality Management Research Paper output 1996-2012 観光 レジャー ホスピタリテイ経営分野学術研究国別ランキング
Historical Data on East Asian Regional Competition in Research in Hospitality & Tourism Japanese Advantage of being the first to create tourism department appears to have been fully amortized & depleted. アジア初の観光学科設置の先行者利益はほぼ崩壊 Fierce regional competition among China, Taiwan, Hong Kong and Korea left Japan completely in the dust. 2007 年頃からの中韓台湾観光系学者による世界での熾烈な研究競争に劣後 最新データ (2014) 日本 :18 韓国 :97 ( 香港 :100) 台湾 :138 中国 :186 50
Optional: Another Hidden Export Industry - Education Doubling the number of Japanese students studying abroad from 60,000 to 120,000 by 2020 Doubling the number of overseas students in Japan from 140,000 to 300,000 by 2020 Funding for Environmental Infrastructure (Housing, tuition, etc.) Rapid expansion of courses offered in English Thorough Internationalization of Universities (all English) School year adjustment (April vs September) lead to international competitiveness of universities Currently: Self-Imposed seclusion = lack of international competitiveness. (similar to the end of Edo era) Ripe for Evolution (first, recklessly fight against the world, and learn your self)
Globally Accepted Academic Research Format: Important for Graduate Students 1. Introduction 1. Why should people read this research paper? 2. Literature Review 1. Weak in many research manuscripts from Japan 3. Methodology and Data 1. Quantitative vs Qualitative 4. Analysis 5. Further Discussion & Analysis (optional) 6. Conclusions/limitations/future research