Japan tourism industry sees stormy year ahead as Tokyo Olympics delayed


Now that the Tokyo Olympics and Paralympics have been postponed until next year, concerns are growing about whether small and midsize businesses in the tourism and service industries will be able to weather the COVID-19 storm, economists and analysts say.

With tourism traffic drying up and consumption being choked by social distancing, travel firms, hotels and eateries were expecting the Summer Games to spark an industrywide recovery before Tokyo and the International Olympic Committee agreed Tuesday on the one-year delay.

The postponement will likely wipe out demand from an estimated 9 million domestic and 300,000 foreign spectators.

Goldman Sachs had estimated the sporting spectacle to generate inbound-related consumption of ¥150 billion ($1.3 billion) by foreign travelers and ¥400 billion in domestic spending, including for merchandise and travel to Tokyo and several other prefectures hosting events for the Summer Games.

In its presentation, the bidding committee for the Tokyo Olympics and Paralympics said it had secured 46,000 rooms for organizers, governing sports officials, media and sponsors. Now all of these reservations stand to be canceled.

“We’re relieved the Tokyo Olympics are not canceled, but we’re still concerned about the outlook of the industry through next summer,” said Shigemi Sudo, the secretary-general of the Tokyo Hotels and Ryokans Association.

The industry body held a meeting Monday with officials from the Tokyo Metropolitan Government and state-affiliated lender Japan Finance Corp. to discuss financial support for its members, who are already taking heavy losses from the COVID-19 pandemic.

A government advisory against mass gatherings has led to cancellations of numerous events, including weddings at hotels.

“Medium- and small-sized hotel operators are likely to face severe financial conditions amid the spread of the coronavirus infections,” Sudo said.

Credit research firm Teikoku Databank said bankruptcies caused by the pandemic stood at 15 as of Wednesday, with six in the tourism industry and three in the restaurant sector.

“Until now, the trend was that firms that went bankrupt were already struggling financially, but there has recently been a case where the coronavirus directly forced a firm into bankruptcy even though it was doing well before the outbreak,” said Shigenobu Abe, an official at Teikoku Databank.

Analysts say the government should step up fiscal measures to support businesses facing financial difficulties until the rescheduled Olympics brings the expected economic benefits.

The impacts of the virus may linger, but the economic gains of hosting the games will not be lost, analysts say.

“As the games have been postponed and not canceled, the economic boost should materialize when the Olympics are held,” said Takuji Aida, chief Japan economist at Societe Generale Securities Japan Ltd.

The Dai-ichi Life Research Institute estimates that over the past three years, ¥13.8 trillion worth of economic effects have already materialized from building the new main stadium and other venues and accommodations.

The expected economic effects, such from spending by spectators, are projected to reach around ¥660 billion, according to SMBC Nikko Securities Inc.



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