Executive Summary

Favourable trends loom in the air

Japans GDP surpassed all expectations in 2004, indicating hope for the countrys economicperformance in coming years. The governments efforts to revitalise the economy while injectingenthusiasm into travel and tourism cushioned the country from further setbacks, leading to increasedtravel. In 2004 incoming tourism saw a 0.8% growth compared to 2003. As a result of the Visit JapanCampaign, more travellers visited the country from South Korea, China and other Asian countries.This bolstered the number of arrivals to demonstrate a CAGR of just over 4% for the review period asa whole. This eventually pulled the country back into shape with 3.4% GDP growth in 2004, andleisure expenditure increasing by approaching 3% in current value terms on 2003.

Strong growth in Japanese visitors to China

Resurgence of travel to China occurred at the beginning of the second semester of 2004,especially when Japanese citizens visiting the country for not more than 15 days were not requiredto obtain a tourist visa. The World Heritage site in Sichuan and Yunna, brought about rapidincreases in the number of group travel packages, and boosted growth in the number of Japanesetravellers visiting for China by almost 72% in 2004. Other destinations, such as South Korea and theUS have also intensified.

Lighting up the accommodation sector

The travel accommodation market demonstrated some recovery in 2004, with an increase of more than4% in current value terms on 2003 to reach ･4,675 billion. Increasingly intense competitionto attract travellers remained evident, which could be exacerbated by the entry of foreign hoteloperators such as Grand Hyatt Tokyo, St Regis in 2005, Mandarin Oriental Hotel Group in 2006, and byHong Kong and Shanghai Hotels in 2007.

Transportation all in green

The Japanese transportation market saw an increase of 3.5% in current value terms in 2004compared to the previous year, while the volume of seats sold showed 3% growth. This was attributedto the growing confidence of travellers in the country. China is considered one to be a particularlylucrative market for air travel. With the resumption of travel confidence towards China, both JapanAirlines Group and All Nippon Airways Group devised strategies to increase their respective shares.As a result both major airlines bulked up passenger numbers by opening new routes and expandingnetworks of travel agencies to the country.

Will Japanese theme parks hold on?

Theme/amusement parks are significant in the Japanese tourist attractions market, accounting forjust over 11% of total visitors in 2004, and 31% of value sales. However, Hong Kong Disney andUniversal Studios Shanghai, which are to open in 2007, may attract tourists from neighbouring Asiancountries, drawing them away from theme/amusement parks in Japan.

Car rental doing fine

In 2004 the car rental market saw growth of 0.4% in current value terms to reach ･160.7billion, while in volume car rentals increased by almost 3%. Car rentals in Japan benefited fromincreased confidence in the travel and tourism industry, which resulted in more bookings.

Growing business over the Internet

The growing opportunity presented by the Internet is greatly felt. In 2004 online reservationsaccounted for just over 11% of total hotel sales. Travel retail via the Internet reached more than･1,700 billion in 2004, while online booking served as the most convenient way for consumersto seek out the best deals in the travel and tourism industry. Reservations and payments via theInternet and I-mode technology mobile units in Japan also commenced in 2004. The latter mobile phonetechnology allows it to be used as a 壮mart card・for electronic ticketing.

More hopeful future

With positive market conditions incoming tourism receipts are expected to grow by 6.6% inconstant value terms over the forecast period, while outgoing tourism expenditure is expected toincrease by 19%.

Favourable trends should be evident throughout the travel and tourism industry in coming years,especially as growing consumer awareness is buoyed by increasing enthusiasm among industry players.Market conditions should sustain a positive performance, enabling more key players to post betterresults.