Japan’s hospitality and tourism industry is recovering, but there are challenges

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum./

Author: Naoko Kutty, Writer, Forum Agenda, Naoko Tochibayashi, Public Engagement Lead, World Economic Forum, Japan


  • Japan’s hospitality and tourism sector is recovering in earnest after reopening its border to foreign visitors and lifting mask rules after COVID-19.
  • As a result, March saw visitor numbers reach nearly 2 million, equivalent to about two-thirds of tourist figures for the same month in 2019.
  • Japan will need to adapt to avoid ‘overtourism’ and also address post-pandemic labour shortages in both hospitality and tourism.

The Japanese hospitality and tourism industry is beginning to recover in earnest after being badly hit by COVID-19.

In October 2022, Japan lifted the ceiling on the number of foreign tourists entering the country as well as the ban on the entry of individual foreign travellers, thereby significantly easing its pandemic border control measures. Furthermore, as of March this year, the rule to wear masks, both indoors and outdoors, is now left to individual discretion.

This was a tailwind, and the number of visitors to Japan in the same month quickly recovered to 1,827,500 – a figure is equivalent to 66% of the pre-pandemic March 2019 tally and 27.5 times higher than in March 2022.

By country/region, the largest number of visitors to Japan in March came from South Korea with 466,800 – or 79.7% of the figure for March 2019; followed by Taiwan with 278,900; the United States with 203,000, and Hong Kong with 144,900. In addition, since Japan eased travel restrictions from China on March 1, the number of travellers from the country almost doubled to 75,000 in February.

Takahide Kiuchi, Executive Economist at Nomura Research Institute, forecasts that “inbound demand for the year 2023 will be JPY 4,958 billion (about $36.7 billion), which could quickly surpass the JPY 4,813.5 billion (about $35.7 billion) inbound demand in 2019 before the COVID-19 pandemic”.

However, while Japan’s economy is being revitalized in earnest by inbound consumption – boosted in part by the record low yen, which makes Japan an attractive destination for foreign tourists – the country is facing a noticeable challenge as its readiness to receive tourists is not keeping pace with the speed of the recovery in visitor numbers.

Severe labour shortages in hospitality

The hospitality and restaurant industries are in a particularly tight spot, unable to cope with the resurgence of inbound tourism.

According to a January survey released by Teikoku Databank, the percentage of companies feeling a labour shortage (non-permanent employees) amounted to 81.8% for inns and hotels and 80.4% for restaurants. Of all sectors, these two industries in particular are experiencing an outstanding labour shortage, with the percentage for inns/hotels at an all-time high.

Many in the hospitality and restaurant sectors have been forced to reduce their workforce and curtail new hiring due to closures, shorter hours and poor performance caused by the spread of COVID-19, and many employees have moved on to other jobs. The fact it is not easy to bring back staff once they have left the industry is the main reason for the serious labour shortage.

Japanese industry has been trying to solve labour shortages by accepting foreign workers. The tourism sector has relied heavily on part-time jobs for foreign students. According to data from the Japan Student Services Organization in 2021, the hospitality and restaurant industries accounted for nearly 40% of all part-time jobs for foreign students. However, foreign student part-time workers have completely disappeared since the pandemic.

Furthermore, the depreciation of the yen, which has been progressing since the second half of last year, has significantly lowered wages in Japan from the perspective of other countries. Despite overcoming the COVID-19 crisis and embarking on a path of economic recovery, Japan is no longer attractive as a country to go to as a migrant worker, and it is no longer possible to expect to attract foreign staff.

In a bid to address the problem in hospitality, hotel operations are being reformed by using digital technology to increase efficiency. JTB, a major Japanese travel agency, has developed a platform that links its core system with digital tools such as ATMs to save labour in check-out and other operations, and is now offering the system to hotels.

Tokyu Hotels, which operates 45 hotels in Japan, has also introduced NEC’s Smart Hospitality Service, which enables automatic check-in using facial recognition and QR codes, at 39 of its hotels nationwide. Users can check in by simply holding up their face to a tablet terminal at the front desk if they have registered their guest information and photo in advance – making operations more efficient.

Countermeasures against ‘overtourism’

Overtourism has long been a challenge for the Japanese travel industry, and local residents in key tourist areas have suffered from issues including crowding, traffic congestion, rubbish and noise. The ability to diversify the times and areas visited by tourists is key to preventing overtourism, while allowing the tourism industry to gain momentum for a resurgence.

According to a Japan Tourism Agency survey, most people travel on holidays, including major national holidays, and only 16.5% of travel volume occurs on weekdays, which account for 70% of the annual number of days.

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As such, the government is working to diversify travel demand by increasing the amount of coupons granted for weekday travel in its nationwide travel support programme. Now that the spread of teleworking has made it feasible to combine work and travel on weekdays, the creation of new incentives, such as work holidays, could also help to balance out travel demand.

Diversification of tourist destinations is another important issue. Pre-pandemic, the occupancy rate of accommodation facilities in Osaka, Kyoto and Fukuoka – where tourists are concentrated – rose to nearly 80%, and the negative effects of overtourism were being called out.

However, in many prefectures located along the typical tourist routes for foreign visitors, the occupancy rate of accommodation facilities was less than 50%, resulting in regional differences. In the future, it will be important to bridge these regional differences by promoting Japan’s diverse destinations, and to increase the number of people visiting non-representative tourist destinations by attracting repeat visitors.

Looking to a new future for Japan tourism

The World Economic Forum’s Travel & Tourism Development Index 2021: Rebuilding for a Sustainable and Resilient Future ranked Japan first in the development index ranking due to the speed with which the travel and tourism industry has recovered from the devastation caused by the pandemic.

Assuming that the travel and tourism industry will play an important role in global economic and social development, the report emphasizes that investment in the drivers of the industry’s development will be crucial in the future.

Meanwhile, Atsushi Takahashi of JR East Japan Planning Incsounded an alarm bell on the past Japanese approach to tourism and instead urged a new way of thinking. “We have long made decisions based on intuition, experience and assumptions. We have been making decisions for a long time without looking at data,” he said.

“The original marketing is to choose the best solution at the time from multiple hypotheses that emerge depending on how the data is viewed and interpreted. However, in the field of tourism, I feel that this is still too shallow.”

His observations stress his belief that data-based initiatives in Japan’s tourism industry are also essential to solving issues facing the sector today, as well to providing new forms of tourism services altogether.

Pre-pandemic, China ranked first in the number of foreign visitors to Japan by nationality and region, accounting for a 25.6% share. Currently, there are restrictions on issuing tourist visas to Chinese nationals, but if these restrictions are lifted in the future, the number of visitors from China is expected to increase rapidly.

In addition, the Expo 2025 Osaka Kansai – which will be held for six months and centre around the theme of ‘Designing Future Society for Our Lives’ – is expected to attract 3.5 million foreign tourists.

With these expected surges in visitor numbers, the question will be how Japan can solve the problems facing hospitality and tourism, while also creating and providing services that place value on new forms of tourism.


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