In the spring of 2020, when the first state of emergency was declared, even when taking into account the fact that many of the city’s major hotels were forced to temporarily close, thus greatly reducing the number of guestrooms available, the occupancy rate plummeted to a record low of 6%. The average room rate also fell by as much as 40% or more, and for most of the period, except for some periods such as during the “Go To” campaigns, hotels were unable to recover their costs despite being open for business. The hardship faced by those in the industry, who continued to stay in business while relying on employment adjustment subsidies to keep their employees motivated and employed, is immeasurable. Those stores and facilities that were able to stay open were the lucky ones. Sadly, some businesses simply weren’t able to make it through.

 

Kyoto’s accommodation industry, which was already seeing incredibly fierce competition prior to the COVID pandemic, had seen an increase in the number of businesses closing, but the number shot up in FY2020 (April 2020 - March 2021) due to the COVID pandemic, with 632 businesses confirmed to have closed their doors for good in that one-year period. Reports of illegally run private accommodations, which had exceeded more than 1,000 per year, also dropped off, down to just a few dozen. On the other hand, the number of new business openings, while not as strong as in pre-Covid days, has remained at about half the number of business closures. The number of accommodation facilities in the city had been approaching 4,000 just before the pandemic struck, but has now settled down to around 3,500.

That said, the number has remained significantly higher than the 1,000 seen around 2014. Furthermore, the number of guestrooms hasn’t decreased that much from its peak of approximately 58,000. To summarize, guesthouses and other small-scale facilities were forced out of business by the COVID pandemic, while the large-scale facilities that were slated to be built since before the pandemic have been opening at a steady pace, though there were some delays in the opening dates.

 

Here, I would like to discuss a comparison of the facilities covered by the Tourism Association, broken down by location. The locations are divided into four categories: Kyoto Station Area, Downtown, Urban Area, and Other. A comparison of changes in the revenue per available room (calculated by multiplying the occupancy rate by the average room price, which corresponds to revenue per room; abbreviated “RevPAR”), which is considered the most important management indicator for accommodation facilities, shows that facilities in the “Other” category had recovered to their pre-Covid levels as early as the time of the “Go To” campaign of autumn 2020. Since then, the Other RevPAR has remained consistently higher than that of other areas, with some months in 2023 exceeding twice its pre-Covid levels. It should be noted that this “Other” category corresponds to the outskirts of the city, which are less likely to get caught up in the excessive competition seen in station and downtown areas, and the facilities located in these areas are characterized by their ability to attract visitors in a manner similar to famous tourist attractions. Even when taking into account the fact that the opening of a number of high-priced facilities in “Other” areas after COVID created an upward bias in the numbers, the data suggests that these branded facilities were less affected by the pandemic. In fact, wealthy travelers were able to travel in ways that avoided crowds and without worrying about being seen by others, even in the midst of the pandemic, by securing their own private spaces by block-booking entire facilities and vehicles, thus reducing the risk of infection from others. As such, higher-priced facilities were likely to be the recipients of such demand. Conversely, facilities in the vicinity of train stations competing with one another are still in a difficult situation, as their RevPAR figures are below the pre-Covid levels in 2023.

 

Next, let’s take a look at the impacts of the Covid pandemic on different markets according to data broken down by the region from which overnight visitors come. Naturally, the number of overnight visitors dropped sharply for all regions due to the pandemic, and the tourism industry was supported by overnight visitors from neighboring regions in Japan and national support for travel, a phenomenon that had never existed before COVID.

As restrictions on inbound travel started easing in October 2022, the first country to see a recovery in demand was South Korea. The transfer of government power to a new administration coupled with improved sentiment toward Japan, as well as its closeness, which makes it less susceptible to fuel surcharges, contributed to a rise in overnight demand to the extent that October 2022 figures surpassed those of the same month in 2019.

The next regions to show a recovery in demand were Hong Kong and Taiwan, and then the following spring, tourists from Western countries, who have a tendency to take time when planning and arranging travel to Japan, also returned to see the spring cherry blossoms. The following summer, individual travelers from mainland China began to increase as well, and I was surprised to see that China had become the top region as early as July 2023, even before the ban on group travel had been lifted. In the fall, Western tourists will again make up a larger proportion, and the Chinese market is finally expected to make a full-fledged recovery during February of next year during the Chinese New Year holidays. On the domestic side of things, accommodation provided by Japanese tourists, who provided a great deal of demand during the pandemic, is rather stunted in its recovery. Even if reservations by foreign visitors are made well in advance as they were in the pre-Covid era, the occupancy rate should still be around 70% due to there now being more accommodation facilities available, so there shouldn’t be a situation in which Japanese visitors want to make reservations but are unable to. That being said, if we were to pin down a specific reason for the lack of demand from Japanese tourists, it would have to be the increase in lodging costs. Average room rates at major hotels in the city surpassed pre-Covid rates by early 2023, due of course to an increase in inbound tourism as well as higher fuel costs and an increase in labor costs. A historically weak yen has also made traveling to Japan seem much cheaper for foreign visitors than it was before COVID. As more and more facilities take the bold step of setting their prices in response to this demand from inbound tourists, domestic travelers may feel that the current pricing is too steep, especially after having experienced discounted travel through means such as nationwide travel support.

 

Looking back on these varying trends in each market, we can recognize the importance of attracting customers in a balanced way, without relying too heavily on one specific market. Regions that were dependent on tourists coming from mainland China still have a long way to go before they fully recover from the COVID pandemic. In order to be able to cope with the possibility of risks such as natural disasters and political instability, we need to keep making efforts to attract customers from every possible direction.

 

 

There is no doubt that the COVID pandemic was catastrophic for the tourism industry, and it also forced the DMO to cancel many of the projects it had planned. This, however, also led to opportunities for us to try new things.

First, the Tourism Association was involved in running a subsidy program for measures such as ventilation and disinfection, which are necessary to dispel infectious disease-related concerns and ensure safe and comfortable tourism. In order to encourage its widespread use in the tourism industry, which has many small- and medium-sized businesses, the true value of the industry network that the DMO had cultivated up to this point was put to the test.

In order to handle the enormous amount of paperwork involved in the series of subsidy procedures, we were able to accept short-term, temporary assignments of staff from some of the city’s lodging facilities that had been forced to close, which also served as a way to maintain employment. While many of the assigned staff were likely bewildered by the unfamiliar work they had to handle, the fact that they were able to make contact with many businesses and reestablish industry networks was one positive outcome of the experience. The most significant result of these efforts is the “Declaration on Countermeasures to Prevent COVID-19 Infections (Guidelines)”, formulated in July 2020. While individual industries and businesses were attempting to devise their own measures in response to their specific situations, the DMO showed its leadership by announcing unified guidelines jointly with 23 major industry organizations in Kyoto [Photo 1]. Additionally, DMO Kyoto, which has made “industry support” one of the pillars of its management strategy, was able to further enhance this record by carrying out operations such as managing on-site vaccinations at workplaces and developing online training for telecommuting workers. When the government announced measures such as the “Go To” campaigns that started in the fall, as well as nationwide travel support measures the following year, they received industry feedback suggesting that only occupancy on weekends increased and that the gap between busy and quiet periods was no smaller. A campaign to promote overnight stays on Sunday nights was implemented in response. The trust we’ve built with the industry is what made it possible to design a system with similar effects as national campaigns yet with a much smaller budget, one based on occupancy rate data by day of the week provided by accommodation facilities.

 

There was also another significant advancement in the utilization of data: future forecasts. Restrictions on movement were imposed because of the COVID pandemic and we were in an ongoing state in which it was possible to get infected at any time. This led to travel plans being made on short notice, and it was difficult to predict demand. The Tourism Association thus began publishing occupancy rate predictions three months in advance by comparing reservation status and actual occupancy rates at accommodation facilities that had been providing us with data for a long time. We had originally received lots of inquiries from the media about future prospects, and these precise short-term forecasts created based on reservations have attracted a great deal of attention. These also contribute to the optimization of management practices such as planning purchasing, procurement, and employee work scheduling.

 

 

I’d like to introduce one more way in which data can be used. For many years, the Tourism Association has run a special open house program for cultural properties as a way to provide activities for visitors during the off-peak seasons. Before COVID, a typical experience would consist of visiting the cultural property you wanted to see, paying a fee at the reception desk, and listening to an explanation of the facility from a guide inside the facility.

This way of doing things, however, sometimes caused congestion in the late afternoon hours or when large tours would visit, making it difficult to do during the COVID pandemic. To get around that, we introduced a reservation system so that we could continue the experience while also avoiding unwanted crowding. By setting a capacity for each time slot and having reservations made according to an itinerary, business was able to remain consistent. Since the overall number of visitors decreased, price increases couldn’t make up for the loss of revenue, but making visitors aware of the need to make reservations before sightseeing has promoted the use and development of other high-priced reservation-based products. Above all, the ability to utilize customer reservation and purchase data was a major step forward.

 

Specifically, in addition to analyzing total purchase amounts and frequency of purchases based on the purchase history of each e-mail address, we also periodically sent out the latest information to registered addresses as a way to ascertain their browsing habits. Those with high purchase amounts and opening rates are considered the “fan group”, and this group was given priority when sending information and special offers to encourage their attachment to Kyoto. This is the same level of customer management that all businesses of a certain size are engaged in, so in our role as a DMO, we would like to take this one step further. The essence of a DMO is making it possible for multiple companies to cooperate to achieve what a single private entity could not achieve on its own. In other words, the idea is to expand this mechanism to increase the number of fans so that it can be used by local businesses, as well as encourage businesses to develop special experiences available only to repeat visitors to Kyoto. Examples of this type of system may exist for local customers or for products that are purchased frequently, but I haven’t heard of any successful examples for destinations that aren’t frequently visited or for cities with a reasonable population and many people involved. However, it may be possible in the case of Kyoto, where 60% of domestic tourists have visited the city 10 times or more, which is a high proportion of repeat visitors. We hope you’ll keep an eye on what we try next.

 

The downgrading of COVID-19 to a Class 5 infectious disease in May 2023 ushered in a return to normalcy for most economic activities. The number of visitors to Kyoto is expected to recover steadily, but occupancy rates at major hotels in the city are hovering at around 70%, with no signs suggesting that they are likely to exceed 90% like they were before the pandemic. One obvious reason for this is that new hotels are opening and the capacity to receive visitors has increased, but another factor is thought to be that accommodation facilities are intentionally suppressing occupancy due to a serious shortage of labor. According to a one-time survey conducted by the Tourism Association around June, 70% of responding businesses have fewer employees now than they did in the pre-Covid era and feel that they are understaffed. This shortage is especially apparent in customer service positions.

 

It’s quite possible that a big reason for this is that the rapid recovery of inbound demand is coming at a time when a new supply of part-time workers, particularly foreign students, has stopped, and staff who are capable of providing service in foreign languages are also fewer. There is also a severe driver shortage.

According to the Kyoto Taxi Business Center, which is responsible for the registration of corporate taxis in the Kyoto area, many drivers quit or retired during the pandemic, causing the number of drivers to plummet from about 8,000 to roughly 6,000, which has resulted in a surplus of vehicles.

During school trip season, there’s a particular increase in demand for chartered taxis for group activities, and getting a taxi can be difficult even when using a taxi-dispatch smartphone app.