WIT Japan & North Asia closed on a high note last Friday in Tokyo with its biggest and most diverse gathering yet, with the 555 registered delegates coming from 250 companies and 11 countries, reflecting the evolution of the North Asian travel market.
Energetic start to WIT Japan & North Asia: Setting the tempo for the day.
North Asia has become its own centre of growth with travellers criss-crossing the region, facilitated by the increasing numbers of low cost airlines. Currently at less than 10% of seat capacity in the region (compared to 60% for South-east Asia), the potential is indeed immense for online travel to take flight.
Foreign brands such as Booking.com, Agoda and Expedia are seeing strong growth in the region. Booking.com is enjoying both inbound and outbound growth from Japan, Agoda is riding high on the inbound boom into Japan, and Expedia is seeing strong growth in its air+hotel packages in these markets including Hong Kong, Japan and South Korea.
From left: Timothy Hughes, Agoda; David Peller, Booking.com; Kei Shibata, Venture Republic discussing what makes North Asian markets different
And Chinese brands have become the new players to watch as they follow their customers abroad – Cindy Wang, CFO of Ctrip, said it was all about mobile for Ctrip, which is seeing 70% of its business come through these devices and companies had to meet this Chinese customer penchant to do everything on mobile.
Cindy Wang, Ctrip (left) and Melissa Yang, Tujia – expanding beyond home
CTO and co-founder of China’s largest vacation rentals company, Melissa Yang said it was time Tujia expanded its wings beyond China following customer demand and requests to book Tujia-style holidays in other destinations. With 70% of its customers family-related, Yang said Japan was a prime destination for Tujia.
It’s opened an office in Tokyo and has begun sourcing original supply for its customers. Tujia started off as a highly curated model as well as a property management company to build customer trust but as it scales, it is opening up its platform for individual home owners to load inventory “with our approval process in place”, said Yang, “to ensure quality standards are adhered to”.
Kenichiro Miyamoto, Recruit Lifestyle (left) and Kenichi Yamaguchi, iJTB
With Japan eyeing 40 million visitors by 2020, a doubling of target, and its outbound flattening, indeed decreasing, it is clear the new battleground will be the inbound market and Japan’s local OTAs are aware they have to get into this sector for future growth.
Hiroshi Nishida, Yahoo Japan
During the Japanese OTA panel featuring executives from Rakuten, Recruit, Ikyu, iJTB and Yahoo, it was clear these players whose forte has been in domestic travel recognise the inbound opportunity even if they seem reticent about how to compete against the global players for these new travellers. Their brands may be known in Japan but outside their home markets, they do not have the scale or reach of the foreign brands. Each shared plans to consolidate their position in their home markets while taking advantage of the new inbound opportunity.
One local player that’s had some success in growing inbound business from Taiwan, China and South Korea is startup Relux which specialises in ryokans and high end hotels. CEO and co-founder Takaya Shinozuka, on a panel about building global businesses, said up to 20% of his business was already coming from outside Japan.
The Japanese market however continues to be dominated by traditional travel brands such as JTB and HIS and Kei Shibata, CEO of Venture Republic, said Japanese offline brands are doing a better job of marketing and brand-building than the online players in the domestic market.
Kei Shibata: Japanese offline brands better at marketing than online in the domestic market.
However things could change as low cost airlines expand their network beyond Japan and flex their muscles in online distribution. Peach, for example, which flew 4.54 million passengers in 2015 (52% women, and 56% age 20-30), already sees more than 70% of its customers coming from outside Japan and more than 90% of bookings come through its direct website.
At the CAPA North Asia Low Cost Airline Summit, following WIT, CEO Shinochi Inoue clearly shared his ambitions to make Peach “the low cost carrier for Asia, not just Japan”. It’s why the name Peach was chosen – “it’s a symbol of good luck, it’s not a Japanese symbol”. (See related article)
Vanilla Air’s president Katsuya Goto told the WIT audience, “We are not only an airline but also an ecommerce company.”
Up to 90% of its bookings come from its B2C online channel (including OTAs), with-mobile accounting for two-thirds of traffic and one-third of bookings. Indeed it is a cross-border ecommerce company as over half of its flights are international, 70% of passengers on international flights are non-Japanese and 40% of web visitors are from outside Japan.
Its partnership in the new Value Alliance, formed last month between eight low cost carriers in the region, also gives it reach to new travellers from Singapore, Thailand, South Korea and the Philippines, as well as boost its ancillary revenues in the future.
Indeed, from the discussions at WIT, there are a few key trends that will drive change in North Asia in the next few years.
One, low cost airlines criss-crossing the region (Japan is the second largest market for HK Express for example) and Spring Airlines sees Japan becoming the next Hong Kong for Chinese travellers – the expansion of these airlines will change customer behaviour and educate more of them to book online.
Two, the rise of private accommodation in markets like Japan, South Korea and China as new travellers seek alternative experiences and on a practical level, Japan has a shortage of hotel room supply to meet its inbound target.
Three, the continued march of mobile and technology which will influence everything from customer acquisition, travel inspiration and service delivery.
The companies – from established brands to startups – that manage to ride on one or all of these trends will be well positioned for the future in North Asia’s travel industry landscape.