quarterly market report Japan January - March 2008 Market Highlights # of outbound visitors: 17,298, 247 (Jan- Dec 2007) % change from previous -1.4% (2007 vs. quarter: 2006) # of visitors to Canada: 343,451 (Jan-Dec 2007) % change from previous -14.4% (2007 vs. quarter: 2006) Comments / Other information: Jan 2007-13,316 pax / Jan 2008-10,908 pax, ( -21.2% ) - JATA (Japan Association of Travel Agents) announced Visit World Campaign on January 9, targeting the number of Japanese to visit overseas to 20 million level by the year 2010. - Canadian Embassy doubles working holiday VISA from 5,000 to 9,500. This will bring a significant impact on increasing number of Japanese visitors to Canada since they will attract their parents and friends to Canada - Soft Start for Outbound Tourism in 2008. With the exception of a few destinations such as Macau, Bali Island and Singapore, most destinations so far are reporting lackluster traffic from Japan in the start of 2008. Air Capacity - January & February unchanged from November & December Japan 1
- Tokyo/YVR from 9 weekly by 767 (210 seats) to 7 weekly by 767 in M arch - Tokyo/YYZ from 5 weekly by 777 (349 seats) to 7 weekly by 777 in March - Osaka/YVR increased one flight from 5 weekly to 6 weekly by 767 in March Following is variance over 2006/2007 winter capacity for Air Canada. NOV -11% DEC -16% JAN -26% FEB -13% MAR - 5% Economic / Political Environment GDP growth: 1.5% forecasted economic growth: 1.2% unemployment rate: 3.8% inflation: -0.1% Jan 2008 consumer price index: -0.1% Jan 2008 exchange rate: 100 JPY = CA$1.028 net national disposable income: n/a Comments / Other information Japan's Nikkei stockmarket surged by 4.3% on February 14 its biggest one-day jump for six years following better than expected economic growth figures. Air fuel surcharge increased to JPY40,000 in April. Productivity is disastrously low: the return on new investment is around half that in America. th 2 Quarterly Market Report
Consumption is still flagging, thanks in part to companies failure to increase wages. The government has not been able to declare an end to deflation, as nominal GDP growth has been hit by the slump in residential investment that began with the imposition of a new construction law in June 2007. Wages for all industries fell throughout 2007 and household spending remained weak. To make matters worse, last July the opposition Democratic Party of Japan (DPJ) won control of the upper house of the Diet. The upper and lower houses of the Diet now controlled by opposing parties, and sin ce the upper house has nearly equal powers to the lower one, the opposition can frustrate virtually every government initiative. Japan's politics is skidding for the buffers. The crash may come as early as March, over budget differences. The ruling Liberal Democratic Party (LDP) would probably prefer to call the next lower house election in late 2008, but disputes over the budget for fiscal year 2008/09 (April-March) could force an election as early as April or May. Emerging Tourism Trends - There are very strong interest in Anne of Green Gables 100 th Anniversary and PEI among Japanese media and contents providers as well as among Japanese consumers. Initial reports from wholesales indicate strong sales and they will continue to market with increased departures into the summer. - Churchill has been getting attention for polar bears and environmental topics (global warming). - Croatia, Dubai, Czech and France have been featured well on media. - Extreme destinations such as the Arctic or deserts, and unique/special interest travel are featured on TV shows. (People enjoy the experience and the destination by watching TV only where they never consider going to for their vacation.) Current consumer trends in Japan: Blogging SNS - Mixi (Facebook), YouTube Japan Rejuvenating Travel Japan 3
Domestic Travel Japanese destination resorts, Okinawa. Asia short-haul and Europe Health and Anti-aging LOHAS (Sustainable Tourism) Michelin Guide Tokyo Luxury purchases and self-indulgence. Market Development Activities CTC Japan hosted in-market Strategic planning meetings with Provincial partners from Canadian provinces, BC, AB, ONT, on March 13 in Tokyo. The purpose of the meeting was to gain support on establishing closer working relationships in-market with a view to collaborating on larger, bigger impact programs led by the CTC as well as greater sharing of information relating to trade, media and consumer programs. In association with these meetings, the CTC hosted key travel trade clients to functions in both Osaka and Tokyo to introduce Derek Galpin as the new Managing Director and usher in a new era of collaboration and joint promotion between the CTC and the Canadian provincial offices. CTC Activities Trade Development - Regional Seminars in Kita Kyushu and Fukuoka with Tourism B.C., Travel Alberta, Ontario Tourism, Fairmont Hotels, Brewster and Northwest Airline 60 agents participation Jan. 23 & 24 - KNT annual convention on Feb. 5-110 KNT staff participation - Travel Trade Reception in Osaka 64 agents participation on March 11 - Travel Trade Reception in Tokyo 147 agents participation on March 13 - Marketing meeting with 10 key wholesalers in Osaka on March 12 - Marketing meeting with 7 key wholesalers in Tokyo on March 14 4 Quarterly Market Report
- Fam tour to Yellowknife in late February for Aurora promotion with Air Canada inviting 13 agents - Fam tour with Travel Alberta and Air Canada from February 28 to March 6 to develop winter business, inviting 7 Canada Specialists. Consumer Development -Development and launch of CTC Japan Ski website - Naeba "Whistler Café" promotion ends March 31-2 nd year of this successful and high profile campaign situated at the gondola base of Japan's most popular ski resort. - Fellow 2008 Ski Canada Campaign ends March 31 - CTC integrated campaign with Japan's most upscale ski tour operator. Included consumer seminars, ski media coverage, web and traditional print components. Media Advertising values for Q1 : $7,192,600 - Launched Anne of Green Gables 100 th Anniversary Promotions with NHK, Shincho-sha(the publisher), Mitsukoshi and other department stores, and Gekidan Shiki (Theatre company for musical show). Tourism PEI and Atlantic Canada Tourism Partnership as well as travel agents such as HIS, KNT, NTA, JALPAK, JTB are our tourism partners for sales. - Trans-continental train trip was filmed by a TV crew for Dream Train program which will be aired for 60 min x 4 programs at BS-i. Panasonic, VIA, Air Canada are our partners. - CTC jointly hosted a Quebec Media Club reception with Tourism Quebec and we invited 50 qualified media to the Celine Dion concert after the reception. - Famous photographer Kazutoshi Yoshimura visited Yellowknife and started his Aurora project for his photo exhibition and photo book. NWT Tourism and Aurora Village are our partners for the project. - Vacation Guide 2008 was completed - Distribution March 2008. - CTC and Ontario Tourism jointly organized Ottawa media fam. - CTC and Tourism BC jointly hosted 2010 super fam. Japan 5
Public Relations n/a Competitive Environment California Tourism Mounts First Campaign in Japan Fueled by a US$6 million annual budget, California Travel & Tourism Commission (CTTC) is expected to help boost U.S. bound travel from Japan over the next seven years. Through the guidance of AVIAREPS Marketing Garden Ltd., the campaign by CTTC marks its first major consumer advertising campaign in Japan, said Matthew Boone, its director of international marketing-asia-pacific who led a 13-member delegation to Japan last week. California in 2006, for which the most recent statistics are available, commanded a 49.2% share (649,000) of the 1,259,000 Japanese visitors to the U.S. mainland but a 17.6% share of the overall 3,673,000 that set foot on U.S. soil, including Hawaii and Guam. Japan is also the second-largest international market. It will consist of high visibility TV campaign, expecting to create huge impact on general consumers in Japan. They plan to continue the same level of investment for 7 consecutive years with strong commitment in the Japanese market. Canada can expect significant spin-off effect, with excellent opportunities to create combined Canada-USA Westcoast tours along with other more traditional "two nation vacation" themed packages. New Zealand: Tourism New Zealand is making a large push into the Japanese tourism market launching the largest New Zealand promotional event ever staged in Japan to coincide with a $1.8 million campaign just launched into the Japanese market. Aimed to give the Japanese a fresh take on what New Zealand has to offer, from 17-24 November, The New Zealand Paradise Week will promote New Zealand s food and wine, fashion, music and the most up to date activities for tourists. Australia: 6 Quarterly Market Report
There were 49,900 visitors from Japan during November 2007 bringing the total for the eleven months to November 2007 to 522,700, a decrease of 12 per cent relative to the same period of the previous year. (December 50,700) Japanese immersed in Australia s World Heritage Over 500 retail travel agencies throughout Japan took part in a competition to promote Australia s World Heritage sites. The agencies were required to set up an in store display to promote the sites with eleven winners awarded for their creativity. In February, the campaign focused on Western Japan including an eight page supplement introducing the World Heritage sites to readers of the Asahi and Yomiuri newspapers in Osaka and the Chunichi newspaper in Nagoya. It is estimated the supplement will reach 1.5 million households throughout the area. The month of February also saw advertisements featured throughout the subway stations in both areas. Alaksa More tourists than ever are expected to visit Alaska through the end of March to take in the famed Aurora Borealis, and in anticipation Japan Airlines has increased the number of direct flights to Fairbanks to 16 through the end of March. The flights depart from Tokyo and Osaka and include two charters from Fukuoka and Nagoya through Hankyu Express International. Winter tourism to Fairbanks was once considered ludicrous because of the cold weather and short days, but is an increasingly important segment of the local economy: 56,000 visitors came to Fairbanks in the fall and winter of 2006 for business and pleasure, according to a state-sponsored survey conducted last year. Japanese travel agents are now offering tour packages that include flights, hotels, transportation and activities such as stops at the Aurora Borealis Lodge on Cleary Summit. Hawaii The recent formation of the Japan-Hawaii Tourism Council (JHTC) will help resort destination of Hawaii draw an estimated 1.544 million Japanese travelers by the year 2011. A Memorandum of Understanding (MOU) was signed between the Hawaii Tourism Authority (HTA) and the Japan Association of Travel Agents (JATA) last week that paves the way for a series of measures to reverse the downturn in Japan 7
Japanese arrivals that started a decade ago, reflecting a free fall of some 1 million Japanese visitors to date. Rex D. Johnson, HTA's President and CEO, said that with Japan generating some 17.53% of all visitors to Hawaii, it remains the largest international source market for Hawaii. In 2007, Hawaii welcomed 1,314,619 Japanese visitors, down 3.76% from a year earlier. Combination of Factors Leads to Drop in 2007: JNTO While there was no major single threat to tourism such as SARS or terrorism as was seen in 2003, a combination of factors contributed to the annual drop in outbound travel in 2007, the first in four years, said the Japan National Tourist Organization (JNTO). It said that the provisional figure for 2007 reached 17,298,131, down 1.35%, to become the fourth-highest tally in the history of overseas travel since its start in 1964. It follows the record-high year of 2000 (17,818,590), 2006 (17,534,565) and 2005 (17,403,565). JNTO said that the weakening of the Japanese yen against major currencies such as the Euro, the Korean won, the Thai baht, the English pound and the U.S. dollar during the course of the year created in the minds of consumers a sense that overseas travel was too expensive, compounded by the ongoing increases in fuel surcharges. For example, the leveling off of travelers to South Korea could no longer be sustained by the "Korean Boom" of several years ago -- fueled by the popularity of Korean dramas and movies such as Winter Sonata -- as the strengthening of the Korean won made trips to the country more expensive as consumer goods were equally pricey as those seen in Tokyo. And consumers are less inclined to travel as they have seen little or no trickledown benefits from Japan's so-called "economic growth." Meanwhile, travel to China boomed for most of the year, thanks in part due to the major efforts by the governments of both countries and the travel industry in Japan to commemorate the 35 th anniversary of normalization of deplomatic relations between Japan and China by offering commemorative package tours timed with special events in Japan and China. Trouble such as terrorist attacks in Manila (Oct. 19), political demonstrations in Myanmar (August and September), the earthquake in Sumatra (Sept. 12), the 8 Quarterly Market Report
impact of the political conflicts in Bangkok (Dec. 31, 2006), the wildfires in California (October), car bombing incident in London (June 29) and car fires at Glasglow Airport (June 30) did little to sway consumer travel demand, said JNTO of the littany of negative happenings globally. JNTO, however, pointed out that demand from travelers in their 60s and above continued to grow during the year, but it was not enough to offset the drop in travel by other age groups, especially those in their 40s compared to 2006. MLIT: Europe Leads as Top Choice Among Consumers Survey findings by the Japanese government revealed that Europe (including Russia, excluding France and Germany) topped the list of major destinations that experienced consumers want to travel in the near future. Conducted by the Ministry of Land, Infrastructure and Transport (MLIT), the survey also showed that some 25.4% of 3,000 who were polled between Feb. 8 and Feb. 13 selected Europe, followed by Australia, 10.2%; Hawaii, 9.0%; France, 7.3%; and the U.S. mainland, 6.7%. The results were based on the 3,000 respondents who traveled overseas over the past three years. The survey, which was conducted to identify current market trends and consumer satisfaction levels, also polled some 600 consumers who had never traveled abroad before. The results were only part of a report to be released later by the MLIT that were introduced at a subcommittee meeting of the Japan Association of Travel Agents' (JATA) management forum recently held in Tokyo. The 10 most popular international travel destinations for those who went abroad within the past three years also included Canada, South Korea, China and Thailand. As for those with no experience, their top choices included France, Germany, Canada, the U.S. mainland, South Korea, Guam and Taiwan, although some 19.7% said they had no particular destination in mind. Bookings at Wholesalers Trail Through April 2008 Seven of the eight Japanese travel wholesalers surveyed posted year-on-year drops in bookings for tours that departed in February 2008. And only two wholesalers show gains from a year ago for tours departing in March and April, according to the latest booking survey (February-April 2008) by Weekly Travel Japan 9
Journal. While bookings for North America, Guam/Saipan and Oceania are sluggish, those for other destinations show mixed results among tour brands, according to the survey conducted during the Jan. 31-Feb. 16 period. Agencies Need to Focus on Quality Over Price Japanese travel agencies need to break away from the practice of slashing prices to compete on volume sales and focus more on quality products aimed at Japanese senior generations and Asian high-end consumers. That was the message from Hiroyuki Motani, counselor, regional development division, the Development Bank of Japan (DBJ), to participants at the recent Japan Association of Travel Agents (JATA) forum themed "How Can the Travel Industry Take Advantage of a Boom?" He said that the shift toward development of products driven by market forces by travel agencies will serve to raise the level of the whole travel industry. Pointing to Japan's automotive industry which now faces stagnating sales in the domestic market not because of the economy but because of a declining population in the ages between 20 and 59, Motani said that changes in the marketplace is needed where power of the consumer market is primarily led by the senior market, those 60 years and older. Motani urged the travel industry to create products that satisfy the preference of individual consumers even at a higher cost, by abolishing the practice of small profits and quick returns. He also said the current ratio of travel by senior generations are expected to decline by the year 2020 when the ages of second-generation baby-boomers will reach between the ages of 45 and 49. Recognizing that it is necessary for travel agencies to create products suitable for Generation Y. Future Outlook Japanese wholesalers continue to struggle with all long-haul destinations, Canada is no exception. Late spring and summer shows strong demand for Atlantic Canada/Anne of Green Gables themed package tours which should buck the overall Canada trend. Consumer confidence and purchasing 10 Quarterly Market Report
sentiment has quickly soured over the past two quarters amidst a growing global financial crisis and resulting devaluation of the Japanese Yen alongside the US dollar with plummeting stock indexes. Spring sales to Western Canada appear to be materializing well closer to departure dates, so all things remaining equal we can expect flat or perhaps 1% growth based on maintaining same levels of airline lift and barring any major economic crisis speading to Japan. Japan 11