NB: This is a guest article by Kei Shibata, co-founder and CEO, Venture Republic Inc.
China often gets the most attention in Asia-Pacific (especially by those looking in from the West) because of its sheers size and the social evolution that has taken place there in recent years.
But just across the East China Sea is Japan, of course, home to many of the early tech revolutionaries (companies and individuals) and still one of the most dynamic, digitally savvy and creative countries on earth.
Based on the four pillars of travel tech which Tnooz often uses in presentations, here is a rough guide to online travel in Japan and some of the issues (good and bad) for local and foreign companies.
Devices
Mobile penetration and usage in Japan is at the top of the world’s league tables. 3G penetration is at over 95%, and over 50% of Google’s travel-related searches emanate from a mobile device.
The large domestic OTAs have been focused on mobile for a long-time now, and approximately a third of their revenues are booked through mobile phones and tablets.
They also offer highly customized services for Japanese consumers across multiple platforms, including HTML5, IOS and feature phones.
Additionally, these players include relevant localized content, reward programs and other features popular with Japanese consumers.
International players will certainly need to take into account these market characteristics in order to be relevant, and ultimately successful.
Social commerce
Social commerce in Japan certainly provides opportunities for both international and domestic players. At present, there is no successful case study for socially-optimized travel services, user acquisition or distribution.
Additionally, the social platform arena is more fragmented than in other markets with Facebook, Twitter and Mixi (a local SNS) taking market share of 22%, 20% and 16% respectively.
Needless to say, there are noteworthy start-ups trying to cooperate with these three social platforms although some players like Trippiece started being ahead of the game.
Unique to Japan, the market is seeing creative services emerge that utilize a combination of elements from social, mobile and gamification. Colopl is the most successful operator within this space, with an successful IPO already behind it in December 2012.
Search
In spite of the absence of the large American-European players such as Kayak, the metasearch space in Japan is becoming well-established with much room for growth.
Venture Republic, the largest domestic metasearch engine, which operates both the Travel.jp and Hotel.jp domains, has experienced over 50% user growth in 2012, whereas the domestic OTA’s have only experienced about 15% YOY growth.
Google’s prospects in Japan are also challenged, and the company has yet to launch it’s Hotel Finder and Flight Search services.
The Japanese travel market offers no significant data aggregator, similar to what ITA achieved mostly in the US, and fares and availability are not centralized in the GDS.
For example, to offer a comprehensive and relevant consumer service, Travel.jp is required to directly deal with over 200 domestic travel agencies to aggregate local/private airfares and package/hotel deals.
Distribution
Travel distribution in Japan tends to be dominated by traditional agencies, such as JTB and HIS, which all offer their own online booking capabilities.
There are only a few pure-play OTAs within the top 20 of travel distributors. Tour packages are still popular amongst consumers, as package providers often sell competitive and simply structured deals (flights and hotels + ground transportation).
The Japanese market is starting to see significant changes in air distribution.
Earlier this year, three LCCs (AirAsia, Jetstar and Peach Aviation) began servicing the Japanese market, spurring both more consumer demand for air travel and pressuring the established duopoly of ANA and JAL.
Domestic OTAs, and especially the largest two – Rakuten and Jalan – play an important role in hotel distribution and in particular aggregating the market for ryokans (Japanese inns) and small hotels.
Opportunities in Japan may exist for the large international players such as Agoda, Booking.com, Expedia and Hotels.com, however these companies will need to overcome a number of obstacles including low margin structure, fragmentation and hyper-competition from the well-established domestic distribution companies.
NB: This is a guest article by Kei Shibata, co-founder and CEO, Venture Republic Inc.
NB2:Tokyo camera image via Shutterstock.