TokyoTomo Travel Guide

Hiromi Tagawa, president and CEO of JTB, and Akira Hirabayashi, president of H.I.S., had an open dialogue on January 7 at Travel Trade Forum (Travel Konwakai) to discuss such topics as store management, online sales, pricing, and travel value. Both of them articulated the need to reinvent business models and unveiled their strategies explaining some specific cases.

Tagawa described the current position of JTB Group as follows: “After we split our company in 2006, we made a good start, but are now gong through a difficult phase. The old business schemes are found to be doing no good any more. We are in need of making a reform, but our task is to restructure our organization and to pursue growth scenario at the same time. Those two objectives are normally conflicting and do not go hand in hand with each other, but we cannot keep pace with the changes of the times if we tackle one first and then the other.” The area of JTB’s challenges, so far as the structural reform is concerned, is in “realignment of store network,” he said, and growth scenario is in “online business, global operation, and community exchange” as well as development of human resources. By keeping up this line of strategy, he proclaims, JTB Group aspires to become “a human and cultural exchange industry,” but its ultimate goal is to become “a lifestyle industry” closely associated with the entire course of people’s life.

Hirabayashi said in the meantime, “I have undergone innumerable major changes in a short time of less than a couple of years since I assumed presidency, such as the economic crisis, oil surcharge hike, curtailment of agency commission, epidemic of the new type of flu, and the appreciated yen. Under the circumstances, H.I.S. makes it a point to deal with the changes vigorously. We must change ourselves prior to external changes in order to deal with them. That is what we are trying day to day.” While making preparation for business opportunities that would arise after capacity increase at the Tokyo metropolitan airports, he is supposed to put his energy into overseas deployment for a year or two to come. The number of business locations abroad numbered 100 last year, and they are expected to be not only the receptive outposts for Japanese travelers but to be the points where outbound travel to Japan is generated locally.

When it comes to the store realignment and online sales, while the store operation costs will become a burden to agency management, online sales are likely to grow further. Hirabayashi pointed out, “Web business will grow so much over a few years that it is likely to comprise more than a half of the total sales industry-wide.” He did not forget to mention that real store function is indispensable when they set to stimulate the travel demand in the market or to increase new passport holders. This is a kind of dilemma that the travel industry faces today.

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For the fiscal year ended in last October (November 1, 2008 – October 31, 2009), H.I.S. reported, on consolidated basis, a 20.9 percent growth year on year in operating profit at 7.1 billion yen despite a fall of 11.8 percent in revenue at 325 billion yen. Cost of sales was reduced 14.8 percent to 269.1 billion yen with continued and successful cost management in merchandising and other areas. Ordinary profit was down 10 percent to 5.5 billion yen incurring a loss of 2.8 billion yen as non-operating expenses on forward exchange contracts, while net profit soared 35.5 percent to 3.3 billion yen.

In travel business, H.I.S. carried out a tactful pricing policy on one hand and launched new brands of Ciaopresso and PREMIUM Ciao on the other. It also intensified corporate and group sales, bolstered online sales, and expanded overseas branch network. The agency embarked on inbound travel handling starting with business generated in Delhi and Manila.

Backed up with those measures, customers handled during the term increased 13.6 percent to 2,776,000. The share of H.I.S. in the total outbound Japanese travelers is assumed to be 18 percent, up three points from the previous year. Travel sales, however, dipped 11.6 percent to 323.3 billion yen because, in addition to adverse effects of the new influenza and drop of oil surcharge amount, demand of pleasure travel centered on short-haul destinations. Operating profit, on the contrary, surged 24.4 percent to 10.6 billion yen.

The agency expects an increase in consolidated revenue and earnings for the new term from November 1, 2009 to October 31, 2010. It forecasts 363 billion yen in revenue, up 11.7 percent, and 7.8 billion yen in operating profit, up 9.3 percent. Akira Hirabayashi, president, says, “These figures are based on the assumption of upward adjustment of oil surcharge and lulled state of the new influenza and other external risk factors.” As to the number of customers to be handled, he said cutthroat competition would be inevitable for a share of the market and continued, “Considering the deflationary force of economy and downward price trend, I hope to see much larger growth in the number of customers than in revenue.” For more details, refer to the table below.

Store maneuver: 15 new stores planned after scrapping for domestic market; overseas branches expected to mushroom

H.I.S. is going to have many more stores and branches in fiscal 2010. It now operates 100 branches overseas and is preparing to open 30 to 50 branches within the same year. In Japan, it will overhaul the store maneuver and realign the network, adopting a scrap-and-build method. Hirabayashi did not give any specific number in this regard but suggested large stores located near train stations would come under review. It appears that there will be a net increase of 15 stores at the end of the day.

The current online sales at the agency represent 17.3 percent of the total revenue, with a great portion of sales still being achieved at the real stores. He says investment for online transactions is earmarked apart from that of store building, commenting further, “Online sales are growing annually at the rate of 1.5 times the previous year’s level. They will keep growing over time.” Thus, the agency is putting more management resources into web business to expand sales, especially taking advantage of the highly sophisticated functions of mobile phone.

Source: Travel Vision

Travel Vision Inc. provides information on the travel industry in Japan via "Daily Travel Vision", a Japanese-language e-mail newsletter, and the "Travel Vision" website. There are nearly 110,000 people working in the Japanese travel industry, and Travel Vision is proud to be bringing travel news to more than 30,000 people through Daily Travel Vision.

H.I.S. wrapped up its booking status of overseas travel for the year-end and New Year. It looked into the bookings on its own overseas package tours and international flight tickets for depatures from December 23 through January 4. The total bookings are slightly short of the previous year’s level but are rapidly catching up as the late bookings are reportely swarming in from the beginning of December at a growth rate of 20 percent over a year ago. H.I.S. says the sales campaign from the end of November to December 7 to commemorate its branching out to more than 100 locations overseas and the following clearance sale have brouht good results. On recognition of a growing trend of consumers’ late bookings, each store is striving to capture every possible sale opportunity till the last moment.

As far as travel destinations are concerned, Korea, Guam, and other nearby destinations are much in demand. Hawaii, celebrating the 50th anniversary of its statehood this year, is also popular, showing a growth of 8 percent in bookings. Big promotions carried out by Hawaii Tourism of Japan for the anniversary, coupled with H.I.S.’s operation of exclusive trolleybuses in Honolulu, may have boosted the bookings. Other popular places are: India, Cambodia, Turkey, Australia, and Hainan (China). Destination India had been handled comprehensively by Asia Travel Section but this year it has a dedicated team and personnel assigned who specialize in China, Korea, and South Asia to merchandize and promote the destination without a break. Hainan has raised its awareness because of the agency’s repeated charter flight operation and now enjoys a growth of 92 percent in bookings. Australia marks a positve growth probably because the campaign conducted by Shinjuku Head Office worked successfully.

The holiday calender during the year-change period does not allow a long leave of absence and people tend to set their departures off the peak. The most congested day is December 30, followed by December 26 and then December 29.

Source: Travel Vision

Travel Vision Inc. provides information on the travel industry in Japan via "Daily Travel Vision", a Japanese-language e-mail newsletter, and the "Travel Vision" website. There are nearly 110,000 people working in the Japanese travel industry, and Travel Vision is proud to be bringing travel news to more than 30,000 people through Daily Travel Vision.