Market share of travel agency

Japanese travel agency face online travel agencies!?

The gross value of travel consumption in Japan, including domestic travel consumption by Japanese, came to about 26 trillion yen(about 26 billion dollars) according to the report of Japan Tourism Agency. The total sales of Japanese travel agencies was about 5.7 trillion yen in 2017. That of domestic travel was about 3.4 trillion yen, that of foreign travel was 2.0 trillion yen, and that of inbound tourist was about 220 billion yen.

The market size of tourism industy in Japan trended to increase until 2007. However, it decreased because of Global financial crisis in 2007-2008. It recovered from 2009, but it decreased again because of aftermathe of the 2011 Tohoku earthquake and tsunami. There was turning point of tourism industry in 2013. Japanese economy recovered by Abenomics and quantitative-qualitative easing of JGB. In addition, the number of foreign visitors was increasing from 2013 since the yen was low.

The number of Japanese tourist in 2017 is about 650 million. This number increases slightly or remains flat in recent years despite of aging society. The gross value of travel consumption also increases slightly or remains flat. Family trip and honeymoon account for 60% this number. The most popular transportation means is automobile, it account for 44%.

On the other hand, the number of foreign visitors exceeded 250 million in 2017 and continues to increase now. Especially, this number of 2015 went up 45.6% increase from the previous year. This number exceeded the number of Japanese tourists travelling abroad in this year. The largest number of foreign nationals came from China, the second is South Korea, the third is Taiwan.

Japanese government promoted to increase the number of foreign visitors from 2003 by "Visit Japan Campaign". In addition, it set up Tourism Agency in 2008. The number of foreign visitors was only four million in early 2000's, it had doubled in ten years in the result. Japanese government is trying to have 40 million foreign visitors until 2020.

However, the number of travel agencies in Japan was decrasing year by year. There are 9,884 travel agencies in Japan now, but there were about 11,066 travel ageincis in 2003. The reason is online travel agencies(OTA) have made remarkable development. They are increasing their sales and profit instead of travel agencies which have stores. The online travel market is about three trillion yen. 1.5 trillion yen is the total sales of OTAs, and another 1.5 trillion yen is the total sales of directly selling by airline and railroad companies.

JTB(Japan Travel Bureau) Corporation is the largest travel agency in Japan for a long time though OTAs increase their sales. Its sales is about 1.6 trillion yen in recent years. JTB used to be a sales department of Japan Travel Bureau Foundation which is a practical academic research institute specialised in tourism. Japan Travel Bureau Foundation is state-owned enterprise, but JTB Co. was committed a government agency to a private entity in 1963. Therefore, it ties up with many public institutions.

HIS which is the second largest travel agency is very popular with young people because of its bargain airplane tickets. Its sales marks second only to JTB, but its sales of domestic travel and travel for foreigners is smaller than sales of JTB and NTA(Nippon Travel Agency). HIS aims to diversify, it runs some leisure facilitis and hotels like Huis Ten Bosch and Robot Hotel which is named Hen-na-hotel. In addition, it is proactive in expand the oversea. It established a new company with LY.com which is OTA in China () and invested in MakeMyTrip which is one of the largest OTA in India.

KNT-CT Holdings Co. is the third largest travel agency. KNT(Kinki Nippon Tourist Co.) and CT(Club Tourism International Inc) integrated their operations and established a new holding company KNT-CT Holdings in 2013. They were popular with middle-aged people because of their group tour and package tour. The package tour of CT achieved a high level of customer satisfaction in the online package tour ranking.

Japanese famous OTAs are Rakuten Travel, Jyalan-net operated by Recruit Holdings and Yahoo! Japan Travel. Rakuten and Jyalan-net account for about 50% of Japanese OTA market. Their share is shrinking in recent years because of foreign OTAs. Especailly, Expedia and Booking Holdings(Priceline Group Inc) are expanding their share of this market. Japanese travel agencies will continue to fight not only domestic OTAs but also foreign OTAs.

JTB is a unlisted company, but HIS(TYO:9603), KNT-CT Holdings(TYO:9726), Rakuten(TYO:4755) and Recruit Holdings(TYO:6098) are listed on the Tokyo Stock Exchange. Foreign investors can invest in Rakuten on NYSE by ADR(American Depositary Receipt). They can invest above companies through many ETFs, iShares MSCI Japan ETF(EWJ), Wisdomtree Japan Hedged ETF(DXJ) and more. Many Japanese companies increase their sales and profit with weak yen. If investors want to hedge an impact of fluctuations in foregn exchange rates, they should invest currency hedged ETFs, Deutsche X-trackers MSCI Japan Currency-Hedged Equity Fund(DBJP) and iShares Currency Hedged MSCI Japan ETF(HEWJ).