Japan’s appeal as a travel destination lies partly in its versatility. Somewhere among the 14,000+ islands that make up this Pacific archipelago, there is something for everyone-from metropolitan modernity to natural spectacles, the spirituality of Shinto and Buddhist temples to the heady rush of winter sports, and more. But, because the country opened to international travel almost a year later than countries outside of South Asia, the recovery of tourism-which contributes significantly to the country’s economy-has been behind other regions.
However, when the borders did reopen it didn’t take long for foreign travelers to return and, in 2023, the number flocking to Japan’s shores (slightly) surpassed 2019 figures. Japan was reportedly the fastest-growing destination among Millennial and Gen Z travelers in 2023 (Bloomberg). Furthermore, a relatively weak Yen also means inbound tourists may see Japan as a good deal, tempting them away from other destinations.
Flywire asked 100 Japanese travel providers, along with 300+ from Australia, Italy, and South Africa, about their past experiences of growth and expectations for the future, as well as their thoughts on hot travel sector trends such as slow travel and sustainability.
What came through, loud and clear, is that travel providers in Japan are optimistic about growth prospects and are keen to deliver on them. They have an opportunity to align their internal processes with client expectations by streamlining something that’s a bigger challenge here than anywhere else - international payments.
International payments causing pain, digital transformation critical
Japanese travel providers find it significantly harder than their counterparts in other countries to accept payments from international travelers. Only 61% said it was easy for them to accept payments from international payments compared to over 90% of travel providers in other countries. And, critically, nearly 5x more Japanese travel providers than those elsewhere said it was hard to accept payments from international travelers (39% vs 8% (Italy) & 6% (Australia & South Africa).
5x more Japanese travel providers than elsewhere say accepting international payments is hard for them
At the same time, only 6% said they definitely consider their payment capabilities fully digital. Most said that they were close (27%), about halfway there (37%) or starting to get there (19%). And another 11% said they hadn’t even started to transform their payment capabilities.
Whether there is a relationship between difficulty accepting payments from international travelers and lacking digital payment capabilities, or not, Japanese travel providers recognize that their payment processes impact brand, client experience, and internal efficiency and need simplifying.
Japanese travel providers tend to offer their clients a good range of payment options, a better range than their counterparts elsewhere. Over 60% said they offer customers buy now, pay later options, group/split payments, and the option to pay in their own currency. However, they still see room for improvement, particularly recognizing the impact payments could have on the customer experience. 92% said that the easier it is for their customers to pay them, the happier those customers will be, and 77% said that if it were easier for them to accept payments in their customers' own currency, guests would be more satisfied.
92% said that the easier it is for their customers to pay them, the happier those customers will be
Digital transformation of payments could simplify the process for Japanese travel providers and improve the customer experience. Pain points such as security concerns (49%), not being able to use their preferred credit card (47%), and not being able to pay in their local currency (46%) were at the top of the list and would be addressed with digital payment capabilities.
Most Japanese travel providers also believe improving their payments deliver internal benefits; over 80% said they would save money and time. Critically, 82% believe that their business would grow if they found a better way of accepting payments in their clients' own currency, their business would grow. That is only one side of the payments.
Most travel providers have problems with their outgoing payments too. Whether paying partners and vendors or making commission payments to agents, 82% wish they had a better way of making these payments.
Recovery steady, opportunities for growth huge
A smaller proportion of Japanese travel providers said that their bookings had increased compared to two years ago-only 1 in 3 compared to 1 in 7 of all travel providers-and 22% said their bookings had remained the same. Recovery in Japan has been held up because international arrivals were only permitted from October 2022 and the borders of Japan’s top pre-pandemic source countries - Korea, Taiwan and mainland China- reopened around the same time or later.
However, Japanese travel providers have cautiously optimistic growth expectations. 94% said that they expect their business to grow in the next five years, with nearly half (46%) saying they expect growth of 5%-11% and a third (34%) expecting 11%-20%.
Interestingly, there was a reasonably even spread in the types of travel Japanese providers had seen increases in, which point to Japan’s broad appeal as a destination. Almost a third said they had seen an increase in trips taken by parents and their children as well as solo trips, and around one quarter saw increases in other trip types as well:
- multi-generational trips
- group travel (family and friends)
- trips with extended family, and couples trips
Experiences in demand, slow travel provides richness and depth
84% of Japanese travel providers have seen consumer demand for experiential travel increase. And Japan has unforgettable experiences in spades, drawing tourists to its shores. With a climate ranging from sub-arctic in the north to subtropical in the south, across the main islands of Hokkaido, Honsyu, Shikoku, Kyusyu, and Okinawa the variety of experiences on offer is staggering.
Most first-time visitors to Japan are, of course, keen to experience the bright lights of Japanese city life. But, by venturing out to lesser-known regional destinations, travelers can find different, authentic experiences that pique their interest. Whether art, traditional crafts, cuisine, culture, or spirituality, the memories of their experiences will stay with them forever.
Slow travel neatly intersects the experiential travel trend, and is about connecting with a place, its people, and its culture. Instead of landing, ticking off a bunch of must-see sights, and then leaving just as quickly, slow travel, as the name implies, means taking more time to see less. An ecologically and environmentally-conscious way to experience a destination, slow travel encourages sustainability and respect for the host nation and its people.
And slow travel is popular in Japan. 47% of travel providers say they have seen an increase in demand for slow travel, and a further 39% are seeing the same level of demand. What’s more, 8 in 10 say they believe the trend will continue to grow in popularity.
Sustainability recognized as commercially desirable, more needs to be done
A central pillar of slow travel is limiting environmental impact on a destination. Consumers are increasingly mindful of this and are making eco-conscious choices as a result. In fact, 78% of Japanese travel providers said there has been an increase in customers looking for sustainable options in their travel plans over the past few years.
The ultimate slow travel mode of transport for long distances is rail. It is also a more environmentally-friendly choice than the alternatives. Japan’s trains are a fast, frequent, and cost-effective way to travel both long and short distances. From the high-speed shinkansen (bullet train) to local rail lines, subways, mountain railways, and scenic tourist trains, rail is the easiest mode of transport for travelers to see all the different sides of Japan. Trains make it easy for travelers to move between islands, within cities, or get out to the countryside while knowing they are being mindful of their carbon footprint, reducing their reliance on car hire or flights.
Japan's spectacular landscapes also lend themselves to eco-tourism, involving a variety of fun, eco-friendly activities such as hiking, canoeing, cycling, diving, snorkeling, and visiting its many National Parks to see the unique wildlife as well as the temples, shrines, castles, onsen and more.
90% of Japanese travel providers say they have implemented sustainability-focused policies/products. However, only 13% say they have implemented a large number. 52% say they have implemented some and 25% say they have only implemented a few. There is clearly more to be done then, something the respondents acknowledged with 84% saying that the travel industry needs to do more to become more sustainable. And if doing the right thing is not incentive enough, the commercial benefits might be-80% of Japanese travel providers say sustainability is becoming more a determining factor in how travelers plan their travels.
Accommodations for alternative working patterns attractive to international travelers
The Japanese work culture is known for being traditional, conservative, and very office-based, so it is not surprising that remote working is less common there than in countries across EMEA and the Americas. But despite this Japanese travel providers recognize the commercial benefit of catering to travelers with non-traditional working patterns. The demand is certainly there; 79% have seen an increase in customers wanting for remote work facilities. In response, over half of Japanese travel providers (54%) have changed the way they offer travel packages because of remote working or a 4-day working week and the same number are planning to.
When asked how a 4-day working week or more flexible working would impact traveler behavior, 45% said it would encourage more advance planning for trips, and another 42% said it would encourage more family vacations. Just over a third said it would encourage more solo travelers and more back-to-back trips. Offering packages to attract flexible workers could well positively impact growth.
Overall view of AI positive, significant impact on time-consuming processes
Interestingly, more travel providers in Japan say that the Artificial Intelligence (AI)/ChatGPT will hurt the travel industry than their counterparts in other countries (35% vs 15% (Italy), 6% (Australia), and 5% (South Africa)). However, a significant proportion (60%) believe its impact will be positive, and 84% say there is definitely a place for AI/ChatGPT in the travel industry as long as it is balanced with personal touches.
8 in 10 Japanese travel providers said that companies in the travel sector are beginning to use AI effectively, and that AI will impact how they interact with partners/vendors in the travel industry over the next few years.
According to Japanese travel providers, AI will impact the time-consuming aspects of their service most. One-third said that trip research, itinerary planning, and scheduling would all be impacted the most by AI. Crucially, utilized effectively, AI will allow staff the time to focus on delivering a more personal service to their clients. In fact, almost one-third of travel providers say that the most significant impact of AI will be more personalization.
The overall picture for Japanese travel providers is positive. They are poised to capitalize on popular trends in travel, with growth likely for most. Furthermore, if they can solve their problems with international payments, that growth will be supercharged.
- Find out how Flywire can solve payments for accommodation providers, Destination Management Companies and Tour Operators
- Find out how luxury Japanese ski resort, AYA Niseko, automated their payment process, streamlined their internal processes and improved the payment experience for their guests at the same time
- Read our report: “Travel Provider Insights 2024 Trends, observations, and growth drivers for the future of travel”