Boom time for online travel in Japan
First the good news. Online travel is the standout trend not only in Japan but across Asia.
Which probably explained the general upbeat mood of an online travel agency panel at WIT Japan which featured three foreign brands – Agoda, Hotels.com, AirAsia Expedia – and four of the top local names – Rakuten Travel, Jalan, Ikyu and iJTB.
In Japan, amid a declining travel market which has seen traditional travel agency total gross bookings drop from Yen 6,281 billion in 1996 to Yen 5,930 billion in 2010, online travel continues to grow and all four Japanese OTAs reported a pick-up in customer demand and a shift from offline to online.
Rakuten Travel, Jalan and Ikyu are taking market share from the traditional travel agencies – five of whom account for 60% of the market – which explains why Japan Travel Bureau has set up an online arm, iJTB, to defend its estimated 30% market share.
Old versus new guard
From the panel discussion, it was clear that iJTB is finding it a struggle competing against the more established trio. Toshiyuku Imai of iJTB claims the others have an advantage due to their early start while his company was just getting into the space.
At Jalan, which is part of the Recruit company, CEO Suguru Tomizuka is being given wider responsibilities following a restructure – he will now lead up to six verticals including restaurants and fashion.
Tomizuka says with domestic travel accounting for 85% of the market, Jalan would continue to focus on offering domestic content for local travellers.
Following its failed expansion into China last year, Ikyu’s Masabumi Mori says he will remain focused on the luxury hotel segment. It also launched an English language website which has since been taken down, citing “site renewal”.
The company has expanded into restaurants. According to a news report, Ikyu saw a 40% jump in revenue from restaurant reservations in the year ending March, with 30 and 40-somethings now making up more than 60% of registered users.
Mori says “restaurant reservations have led to more young women using the site” and Ikyu is also now using social media to help bring back dormant members.
Rakuten Travel remains focused on expanding overseas and its biggest play is in South Korea – following its largest Japanese customer base – but CEO Masashi Okatake says it continues to face challenges of scale and finding the right model for the right market.
Wilfred Fan, North Asia director for Agoda, says it is interesting that while everyone’s business is different, the common challenge to all brands is wanting to expand: “Finding one way of operating that is scalable.”
His advice to his Japanese counterparts:
“Do it one market at a time. Get one market right first and then move to the next.”
When Japanese OTAs were asked what advice they’d give to their overseas friends wishing to expand to their shores, Ikyu’s Mori sat next to AirAsia Expedia’s Lynn says: “Buy me.”
Jalan’s Tomizuka believes brand is important. It took him five years to build up the Jalan name by successfully leveraging on the Recruit platform. “We have first mover advantage,” he claims.
Imai says local content is a challenge, and foreign OTAs struggle with getting product such as ryokans into the inventory. iJTB says it has 1,500 ryokans now listed.
Rakuten’s Okatake agrees that the international OTA model worked with the business hotel market but not with more Japanese offerings such as ryokans.
Culture, language and offering a Japanese customer experience were also cited as obstacles facing foreign brands.
Johan Svanstrom, managing director, Asia Pacific of Hotels.com, believes these issues can be addressed with time but that is the challenge facing global brands – having the resources to go into local markets and spending time in-market. He adds: “That’s the best way of growing any business, but that’s not scalable.”
Lynn, managing director of AirAsia Expedia, wants to know how different Japanese consumers were and therefore how different the user interface has to be.
“My belief is that yes, there is a secret sauce that big data can unearth but there are more commonalities than differences.”
One thing is clear: smartphones and tablets are emerging as the next important play – and WAP is on the way out. Jalan’s Tomizuka says that he was seeing up to 55% of transactions taking place on the smartphone and the move to mobile had helped him cut customer acquisition costs in half.
In a later presentation, Google’s Katzuki Oshiden, director of travel industry sales for Japan, shares April 2012 data that shows smartphones accounted for 34% of travel query volume compared with 12% for WAP and 54% for PCs. And during the recent Golden Week, mobile search queries surpassed that of PCs for the first time.
Jalan and Rakuten see mobile as a big area of growth and an opportunity to drive down customer acquisition costs.
Lynn comes back to the opportunities around the evolution of technology, especially Big Data where it can be used “to tease out those customer insights”. And he believes the area of social recommendation has yet to be addressed well by anyone.
“This is something to watch – no one has the answer yet.”
Overall, the mood is upbeat among Japanese OTAs. Indeed, despite than the dark clouds continuing to gather over Europe, the outlook remains positive for online travel in Asia.
According to PhoCusWright, of the projected APAC online travel market of $70.6 billion in 2012, Japan accounts for 45%, followed by Australia/New Zealand 17%, China 11%, India 10%, South Korea 7% and the rest of APAC, 10%.
As Svanstrom observes, growth is assured as “we sit in a region of growth”. He adds:
“More Asians are saying, I want to travel, and most will book an airline, hotel or ship online.”
OTAs are also looking forward to the entry of low cost airlines into Japan which will spur demand and further migrate customers from offline to online. They claim that low cost customers would take savings on air and spend it on high-end accommodation.
Imai of iJTB cites dynamic packaging as one area his company will be aggressive in, with it already seeing quadruple growth in its particular area of the business.
Packaged tours also remain popular in Japan. According to PhoCusWright, domestic packages account for 24% of total domestic market in 2011 while overseas packages form 32% of total overseas market.
And is there any bad news? There are, of course, worry lines in any market, but compared to other regions around the world, online travel brands in Japan and the wider Asian are enjoying the good times rather than worrying about any bad ones.
Siew Hoon Yeoh is the editor-at-large for SHY Ventures and editor/producer of WIT-Web In Travel.
She created and manages the travel insider website The Transit Cafe and also runs WIT - Web In Travel, Asia’s leading travel distribution, marketing and technology conference, and the weekly WIT newsletter.
In 2008, WIT was awarded the Most Innovative Marketing Initiative by the Singapore Tourism Board. Siew Hoon is also an established speaker and facilitator at travel industry conferences and workshops.
She is also is a published author, having written titles including “Truth, Lies & Other Stuff” and “Around Asia in 1 Hr: Tales of Condoms, Chillies & Curries”.