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Kazusei Kato: Competition Between Airports and Inbound Tourists to Japan

Publish: November 11, 2022

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  • Kazusei Kato

    Faculty of Business and Commerce Professor

    Specialization: Transportation Economics and Transportation Policy

    Kazusei Kato

    Faculty of Business and Commerce Professor

    Specialization: Transportation Economics and Transportation Policy

Before the pandemic, Japan was bustling with inbound tourists. Why did so many foreigners come to our country in the first place? First, the reasons likely include the abundance of tourist attractions, cleanliness, high quality of service, and low prices. Above all, the fact that Asian countries became wealthier was a major factor. As incomes grew, more people began to travel.

A characteristic of the pre-pandemic era¡ªaside from Haneda, which saw an increase in international flights¡ªwas the rise in arrivals at regional airports. As Narita Airport lost market share, the shares of airports outside the Tokyo metropolitan area, such as Kansai and Naha, grew. Furthermore, another characteristic was that overseas airlines carried approximately 80% of inbound tourists, while the share of Japanese airlines like ANA and JAL was less than 20%.

The actual scene of attracting these flights is a bit more gritty. Behind the scenes, there is the "effort" of prefectural and airport officials. Those involved in attraction efforts attend overseas trade fairs to pitch their prefectures to foreign travel agencies and airlines. After the trade fairs, they negotiate individually to discuss attraction conditions called "incentives." The details differ between scheduled and charter flights, but they vary widely, including accommodation subsidies, discounts on airport usage fees such as landing fees, support for tour development, and support for airport bus operations. Overseas travel agencies and foreign airlines are "tough negotiators," bargaining with each prefecture individually to extract favorable terms.

When a deal is reached, inbound tourists flood the airport. However, once the incentives stopped, the tourists disappeared. When the money runs out, the relationship ends. Moreover, the cost of incentives rose sharply. While it would be ideal for prefectures to cooperate in negotiations, inter-prefectural cooperation is easier said than done.

Why am I interested in such things in the first place? Transportation infrastructure needs to be used wisely while being maintained and managed. In relation to this, our group is currently conducting research on the analysis of the "neighboring effect." Analysis has reproduced the incentive competition among airports (excluding large-scale ones), revealing that neighboring regional airports are competing with each other.

Incentives represent a transfer of money overseas and do not create jobs at that stage. Tourists certainly spend money through consumption, and the policy is approved because of that amount; however, both long-term perspectives and policy comparisons remain insufficient. I hear that some regions are moving toward creating mechanisms to turn this into a cooperative game. I have high expectations for those movements.

*Affiliations and titles are as of the time of publication.