Size of the Japan travel market and 2020 outlook

Despite challenging macroeconomic conditions, rising tensions between China and the U.S., and a trade war with South Korea, Japan's travel market grew by 3.6% in 2019 according to Phocuswright‘s latest travel research report Japan Travel Market Update 2020 (see figure below). With gross bookings of $104.4 billion in 2019, Japan has the second-largest travel market in the Asia Pacific (APAC) region, trailing only China.

The increase in travel activity associated with the planned Summer Olympics in July-August 2020 would have given a significant boost to all travel segments. Though short of the initial target of 40 million visitors, the government had predicted that 34 million foreign tourists would visit Japan in the year of the Olympics. With the games now postponed to 2021 and the virus outbreak having crushed even normal travel activities, Japan's travel market is projected to decline by 54.2% in 2020, totaling $47.8 billion.

Once the leader in regional online penetration, Japan now has the lowest online share of travel gross bookings among all major travel markets in APAC, including Australia/New Zealand, China and India. In 2020, online penetration is predicted to grow incrementally in Japan but will remain well below the 50% mark, primarily due to the Japanese preference for booking rail offline through kiosks. While online bookings in Japan are gaining traction, offline channels, including traditional retail agencies, remain vital. In 2020, 55% of travel bookings will be made offline.

Suppliers will continue to command a greater share of the online market due to the presence of strong brands in the air and rail segments. OTAs have a considerable lead in online hotel distribution, and have benefited greatly from the surge in inbound tourism. Due to their unique strengths, suppliers and OTAs maintained their online market shares, at 59% and 41% respectively, for five years, through 2019. However, as more travelers lean towards booking direct amidst the ongoing COVID-19 crisis, suppliers will gain in the short term, taking their share of the online market to 61% in 2020.

The full report presents a high-level overview of the Japan travel market in 2020, including the impact of the pandemic on major players, key segment analysis, and sizing and projections through 2020. Download it here.

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