No Crowds at Tokyo 2020 Would Be Catastrophic for Japan’s Tourism Sector

Since the jury has not yet decided whether domestic viewers will be admitted to Tokyo 2020, the prospect of a complete ban on participation cannot be dismissed out of hand. That scenario would be catastrophic for several tourism-related industries in Japan, says GlobalData.

No crowds in Tokyo 2020 would be disastrous for Japan’s tourism sector

Since the jury has not yet decided whether domestic viewers will be admitted to Tokyo 2020, the prospect of a complete ban on participation cannot be dismissed out of hand. That scenario would be catastrophic for several tourism-related industries in Japan, says GlobalData.

Ralph Hollister, Travel and Tourism Analyst at GlobalData, comments: The prospect of not participating would make matters worse for Japanese companies in the tourism sector. Waiting for the announcement of the audience numbers will be excruciating for all companies involved, as the number of visitors in Germany can at least make up for some losses.

Hollister comments on the impact that going without the crowds would have on Japan’s lodging, airline and retail industries:

Accommodation ?? Bankruptcies could increase

Hollister comments, “Many Japanese hotels were built and renovated in time for Tokyo 2020. According to GlobalData, the number of hotels opened in Japan between 2013 (the year Japan was announced to host the Olympics) and 2019 rose 9.1%, reflecting the investments made.

However, many Japanese hotels closed in 2020, with Tokyo Shoko Research finding a 57.3% year-over-year increase in bankruptcies in the Japanese hotel industry. Ralph notes that due to the wave of tourism the Games would have sparked, this may have been avoided if the 2020 Olympics had taken place.

He says: “If the 2021 Games are played behind closed doors, hotel bankruptcies could exceed the 2020 level as many smaller companies will not be able to cope with a second summer with extremely low occupancy. Also, the big hotels built directly for the Olympics will be left empty, leaving the low-return interest groups in the lurch.

Airline ?? Industry heavyweights could suffer

Hollister comments, “The one year delay has exacerbated the problems of the major airlines operating in Japan, which originally expected their fleets to be at full capacity in the summer of 2020.”

On May 7th, Japan Airlines posted an annual net loss of 2.6 billion, the most valuable customers are already out of the equation.

Hollister notes, “If home visits are also prohibited, meaningful recovery becomes even less likely. Japan Airlines and All Nippon Airways dominate both domestic and international routes. According to GlobalData, these two industry heavyweights controlled 48.7% of the Japanese airline market in 2019, which also means that in addition to the potential impact of not attending the Olympics, they will have the greatest impact from the pandemic.

Sale ?? Return on investment could be low

Hollister explains, “Many Tokyo retailers were expecting a significant increase in sales due to the Olympics. Like other tourism industries, retail has invested heavily in preparing for the Olympics. Many new concepts were tested to enhance the retail and tourism experiences for the games, including mixed-use spaces with retail stores, food stalls, cafes, art, cultural events and product displays.

?? If no attendance is allowed, these event expenses will be minimal, pushing Japanese companies further into the red. ??

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