[Market Research] Expat Market Expansion Under COVID-19

By Caitlín-Siobhan Rea

The global spread of COVID-19 and the resulting travel restrictions and bans enforced by governments across the world have left the international travel and tourism industry in a state of unprecedented uncertainty. With inbound market opportunities heavily impacted, travel organisations, tour operators and tourism suppliers must now attempt to expand into domestic income avenues in order to survive. 

By researching the travel habits and preferences of English-speaking expats residing within Japan, Liberta Inc. and its in-house travel agency, ‘Heartland JAPAN’, have sought to identify potential sales avenues within this previously under-explored market. 

Domestic market expansion: a survival necessity

When Liberta Inc. founded Heartland JAPAN in 2017, the company’s main aim was to facilitate easier access to the global tourism market for small, rural communities across Japan without the investment funds or reputation that the country’s larger cities (such as Tokyo, Osaka and Kyoto) possessed. With more and more of the younger generation moving to urban areas, Japan’s rural population is shrinking and - in line with the country as a whole - aging rapidly. The country is facing a ‘population black hole phenomenon’ as rural residents migrate to the cities, and around 523 municipalities with a population of less than 10,000 people are expected to disappear by 2040 (Masuda, 2014). 

As Heartland JAPAN and its network of local suppliers and partners has expanded, its goal has shifted from simply introducing rural Japan to the world to helping to instill a sense of local pride amongst the communities it supports. 2020 was set to be a great year for such a mission, with the Tokyo 2020 Summer Olympics due to bring a large crowd of tourists who, viewing their time in Japan as a ‘once in a lifetime’ opportunity, formed a potential market for authentic experience-based travel. Unfortunately, COVID-19 had other plans - with international tourism down 93% across Japan as a result of the COVID-19 pandemic during March 2020 (The Asahi Shimbun, 2020), this goal has become even more important as the company seeks new ways to adapt to a lack of international market sales.  

With experts unsure when exactly international travel can safely resume, it stands to reason that the inbound tourism market can not currently be considered a reliable income source. According to recent research carried out by the Adventure Travel Trade Association (ATTA) amongst adventure travel buyer and supplier businesses, 84% of respondents reported that they had either a ‘negative’ or ‘somewhat negative’ view of their prospects for the upcoming calendar year. 32% of respondents did also report that they were hopeful of business recovering by 2020’s third quarter (July to September), but considering the fast rate of COVID-19’s spread since ATTA’s findings were published in March it’s not unreasonable to believe that businesses may now have a different outlook for their future (ATTA, 2020).

Having considered the research and data available regarding both the spread of COVID-19 and its impact on the international travel and tourism industry as a whole, Heartland JAPAN identified that a need to explore different income avenues was necessary in order to survive what may be set to be months of little to no foreign client interaction. As a result, the company decided to turn its attention to a market that has previously gone largely ignored by the Japanese tourism industry: domestic expat sales. 

The domestic expat market and its challenges

As of 2018, a record 2,497,000 foreigners were recorded as living in Japan - a population exceeding that of Nagoya, Japan’s fourth most populated city (Real Estate Japan, 2018). Yet despite the considerable number of expats within the country, they have been largely ignored as a potential source of tourism revenue. In addition, market segmentation is almost nonexistent in practice, with searches for phrases such as ‘expat family tours’ (keywords inspired by our research as detailed later within this document) returning almost no relevant results on major search engines. 

Without further extensive research, we can only hypothesise as to why the domestic Japanese tourism market - worth a considerable 21.1 trillion JPY in 2017 - has largely excluded foreign expats as target travel-product consumers (Travel Voice, 2018). One potential issue could lie in conceivable language barriers - domestic tourism organisations and businesses seeking to make the most profit will market themselves and their products in Japanese, the country’s native language. While a survey by the National Institute for Japanese Language and Linguistics found that 62.2% of foreigners living in the country understand Japanese to some degree, it’s unknown how many of them would feel both comfortable and able to find, sign up for and then take part in a tour operated purely in the language (Nakao, 2020). 

With that said, an even simpler reason why expats are not largely targeted by domestic operators could be as simple as the ease of product creation. There are over 123 million native Japanese citizens living within Japan, who have been raised with a natural understanding of their own culture and - to some degree - ancestral history. Inbound travel businesses work with the presumption that customers may not have any existing knowledge of Japanese culture, traditions and lifestyles and build their products accordingly in order to provide the information necessary for their customers to fully engage with experiences - an extra level of preparation that companies with few foreign customers may find cost-ineffective. Even simpler, there may be concerns that foreign-born participants may have preferences that require additional accommodation, such as dietary requirements (vegetarianism and veganism, which inbound companies have learned to anticipate and accommodate, are still relatively misunderstood in Japan). 

As for why inbound tourism businesses with experience serving foreign clients don’t actively market towards expats, the answer (at least in the case of Heartland JAPAN) is relatively simple - creating tour packages that will meet the needs of expats and actively appeal to those who already have knowledge and experience of the country in which they live takes time and investment. With only around 44% of foreigners living in Japan understanding English, investing in the English-language expat market can be considered far less profitable than focusing solely on targeting the far greater English-speaking percentage of the 32 million foreign tourists visiting Japan each year (Nippon.com, 2020). 

Facing an extended period with little international business, Liberta Inc. felt that the down-time that the company was experiencing presented the ideal opportunity to research and adapt its products to meet expat expectations, so that’s exactly what happened. 

Examining the research

Liberta Inc.’s first expat travel habit survey was published on the Heartland JAPAN English-language website in April 2020. The survey, which asked respondents to anonymously share information about how often they travel, what sort of trips they take and who they take with them, was then shared via the popular ‘Tokyo Expat Network’ group on Facebook, as well as in the newsletters of two local expat tour guides who work closely with Heartland JAPAN and a Japan-based American blogger and influencer. 

The survey was completed by more than 70 respondents, 69 of which identified themselves as expats living within Japan. Respondents varied in age between 25 and 69, and all were English speakers; the survey deliberately did not ask about nationality or native language in order to avoid any bias or unnecessary segmentation based on cultural assumption. As may be expected from a survey that had been shared in a Facebook Group aimed at Tokyo-dwelling expats, a large number of respondents stated that they lived within either Tokyo’s 23 wards or the neighbouring prefecture of Kanagawa. As a whole, however, participants were found to be living across 11 different prefectures, ranging from the northernmost Hokkaido to Yamaguchi, in Honshu’s south western corner. Besides age and location, the only other ‘identity’ related information requested within the survey was in regards to employment status; just over half of participants reported that they were in full time employment, with freelance workers coming in as the second most represented group followed by those who identified as either unemployed, retired or stay-at-home spouses. 

In terms of travel habits as a whole, the survey revealed that over 78% of respondents took 3 or more trips per year, and that 36% took 6 or more trips on average. While a survey with 69 participants cannot be considered to speak for all of Japan’s English-speaking expats, the results presented are promising in terms of the potential for establishing a network of recurring clients.. What Heartland JAPAN was most interested in, however, were the answers to a question that asked participants who they regularly travelled with. 

In terms of international, inbound travel, Heartland JAPAN’s clients typically travel in couples or pairs, or occasionally in a small group consisting of two or more such pairs. Alternatively group tours, often organised as part of a B2B sale on behalf of a foreign partner travel agency, will usually consist of solo travellers or couples who have chosen to partake in an organised group tour in order to reduce cost per person. The feedback received from the expat survey, however, showed that while “with a spouse or partner” was the most common response to the question about who participants regularly travelled with (34.8% of respondents), the second most common response was “with family, including children under the age of 16”; 27.5% of respondents gave this answer, which was almost the same percentage as those who answered both “solo” and “with 1 - 3 friends” combined. 

Even amongst Heartland JAPAN’s most established inbound travel competitors, there is a noticeable lack of  ‘family-friendly’ tours on offer. There are a great many reasons that can be attributed to this; in the terms of Heartland JAPAN, the compatibility of experiences (traditional cultural performances such as ‘Kagura’, which feature heavily in Heartland’s tours and packages, require long durations of silent focus, which is not considered compatible with young children), issues regarding adaptability (rural accommodation, such as ryokans, usually feature shared bathing facilities and set meals which do not always appeal to families) and a lack of general market demand mean that child-centred tours have not been a priority. As a result, options for families with children are slim - this is a market that now, with some proper research and investment, could present a worthy challenge for Heartland JAPAN over the coming months.

In terms of the activities and ideas that interested respondents, Heartland JAPAN was enthusiastic to see that there was a high demand for a range of tour types that the company already has experience in offering to international clients, such as active tours (cycling, hiking, etc.), relaxing onsen hot spring visits and a focus on Japanese culture and traditions (including authentic dance performances, interaction with locals and even hands-on craft making). The true challenge, however, is how to market the tours to customers with experience of life in Japan and the confidence to explore the country by themselves; over 70% of survey respondents reported that they had already visited 6 or more of Japan’s prefectures, while nearly 30% had explored between 21 and 47 prefectures so far. In order to convince the well-travelled expat market to participate in an organised tour (perhaps even in a location that they have already visited), the need to provide unique experiences that would usually be too expensive or difficult for expats to organise by themselves is paramount; this, in itself, is a hurdle that will require a considerable amount of dedicated planning and research.

Final reflections

While tours aimed at foreign expats is still a relatively unexplored market in terms of domestic Japanese tourism, the absence of inbound customers is expected to force more travel businesses such as Liberta Inc.’s Heartland JAPAN to consider promoting their products at a local level. While even domestic travel is still unadvised by the Japanese Government, the situation is constantly changing and it’s unknown when and how the restrictions will be lifted. In order to meet domestic demand head-on and gain an advantage over competitors, early preparation is key; by actively interacting with expats and listening to what interests them, Heartland JAPAN seeks to plan and operate tours that will appeal to this new target market and help to establish a network of loyal customers both at home and overseas. 

[References]

• Masuda, H. (2014) The Death of Regional Cities: A horrendous simulation [Online] Available at: https://www.japanpolicyforum.jp/politics/pt20140120152454.html [Accessed 11th May 2020]
• The Asahi Shimbun (2020) Japan sees worst ever drop in foreign visitors in March [Online] Available at: https://www.asahi.com/ajw/articles/13302523 [Accessed 11th May 2020]
• Adventure Travel Trade Association (2020) Adventure Travel Business Impact Monitor Survey: COVID-19 March 2020 Snapshot 
• Real Estate Japan (2018) Record Number of Foreigners Living in Japan: 2018 Japanese Govt Survey [Online] Available at: https://resources.realestate.co.jp/news/record-number-of-foreigners-living-in-japan-2018-japanese-govt-survey/ [Accessed 11th May 2020]
• TRAVEL VOICE JAPAN (2018) Domestic travel consumption in Japan reaches 21 trillion JPY in 2017 [Online] Available at: https://www.travelvoice.jp/english/domestic-travel-consumption-in-japan-reaches-21-trillion-jpy-in-2017 [Accessed 14th May 2020]
• Nakao, Y. (2020) Plain Japanese, please: Amid tourism boom, easy form of language could help ease communication. The Japan Times. [Online] Available at: https://www.japantimes.co.jp/news/2020/01/13/national/plain-japanese-tourism-language/#.XrzeyppS_-Y [Accessed 14th May 2020]
• NIPPON.COM (2020) 32 Million Tourists Visit Japan in 2019 [Online] Available at: https://www.nippon.com/en/news/ntv20200110001/32-million-tourists-visit-japan-in-2019.html [Accessed 15th Mary 2020]