How postponing the Olympics to 2021 is impacting Japan’s tourism industry.
Art Basel Hong Kong, Rugby World Sevens, the Tony Awards, Cannes International Film Festival…countless events have been canceled since the outbreak of COVID-19. The latest event to fall victim? The 2020 Summer Olympics and Paralympics, which were originally set to take place in Tokyo from July 24 to August 9, but have since been postponed to summer 2021 with the hope that the new coronavirus pandemic, which has been sweeping across the globe since December 2019, is under control by then.
The event has only ever been canceled three times in its history—1914, 1940 and 1944—all due to world wars. Postponing the Olympics is a massive disappointment for sports fans everywhere, but how does it affect Japan’s tourism industry? We asked analysts, hotel operators, and tour guides what happens now.
Why Is Hosting the Olympics Such a Big Deal for Tourism?
There are myriad reasons why cities vie to host the games, like national pride, new jobs, mega sponsorships, tourism, and the glow of the international spotlight for two weeks straight. Ever since Tokyo was selected for the Summer 2020 Olympics in 2011, the country has been busy preparing.
According to the Japan Times, the country has invested heavily–to the tune of at least $12.6 billion–in infrastructure expansions to barrier-free facilities, new sports venues, and international marketing campaigns. And the preparations were about to pay off. In just four months, the country expected to welcome an estimated 600,000 foreign visitors to celebrate the games, shop, dine, and explore. The Olympics would have had a lasting impact on jobs and tourism.
“For Japan, the 2020 Olympic Games is more about soft legacy,” says Dr. Monica Chien, a a senior lecturer at the University of Queensland Business School in Australia who specializes in tourism, sports, and consumer behavior. “The Olympics can be a catalyst for social change, aid recovery, and reconstruction in areas affected by disasters, and increase regional revitalization.” This means that the Olympics are about more than just a sports competition—it’s about creating a lasting tourism infrastructure.
Due to a rapidly aging population and deflation, Japan has been in an economic slump in recent years, she says. The country was hopeful that the Olympics could disperse visitors to lesser-known destinations, spur regional economies, and “help restore vitality through the power of sport and tourism.” Instead, some experts estimate that the cancellation will cause a 1.4% dip in the country’s annual GDP—a hit that the country really didn’t need right now.
How Has the Cancellation Affected Tourism?
One of the major goals was to diversify the country’s tourism market since the vast majority of inbound travelers are from Asia. “Tourism in Japan was already struggling before the coronavirus pandemic, amid a diplomatic spat with South Korea that prompted boycott calls,” says Chien. “Visitors from South Korea previously made up the second-largest contingent of tourists to Japan, behind only China.”
With the Olympics, Japan hoped to pique the interest of farther-flung guests by showing off its incredible natural beauty, history, and culinary chops. “It was expected that the global media exposure would generate awareness and interest in Japan as a tourist destination among American, European, and Australian travelers,” says Chien. “And by hosting some of the Olympic events in regional and disaster-hit areas [such as Tōhoku in northeastern Japan, which suffered a devastating earthquake and tsunami in 2011], Japan was hoping to boost visitors to these destinations and hopefully create sustained tourism demand post-Games.”
Even before the games were postponed, Japan’s tourism was already floundering due to COVID-19’s early outbreak in the region. In February, the number of foreign visitors plunged by approximately 58 percent compared to the same month the year prior, driven by a drop in travelers from China.
Within the Industry, Who Gets Hit the Hardest?
Anyone in the industry—hotels, airlines, tour operators, travel agents—will be directly impacted by the postponement due to widespread cancellations. “The postponement has added another layer of trouble and anxiety to growing concerns about the outlook for Japan’s economy, possibly pushing the country into deep recession,” says Tyler Palma, the Tokyo Office Manager of InsideJapan Tours. “Smaller businesses in Japan reliant on tourism are likely to be devastated.”
“Smaller businesses in Japan reliant on tourism are likely to be devastated.”
For many in the industry, the cancellations may have been inevitable due to the rapid spread of COVID-19 and ensuing travel restrictions. “We’ve certainly had plenty of cancellations, but we are trying to emphasize to our customers that this will not last forever,” says Palma. “Japan is not going anywhere so we are rebooking our customers for trips in the future.”
So far at InsideJapan tours, more than 50% of the company’s spring bookings have been rescheduled for autumn or for 2021. “I expect this number will increase as people decide to postpone their late spring and summer trips as well.”
What’s the Situation for Hotels?
In preparation for the games, nearly 46,000 hotel rooms per day were already reserved for organizers alone—not including foreign travelers or domestic ticket holders. All of them will now be released, but it’s unlikely that new bookings will fill the void, due to travel restrictions caused by the new coronavirus.
“Currently hotel chains are slashing room rates for about 30 percent of stays during the normally busy early spring season, especially in areas that usually see more foreign tourists,” says Chien. “The issue is probably exacerbated by a boom in hotel construction in recent years. Many hotels were built and refurbished that have just opened in 2019 or scheduled to open in 2020, with the belief that the country was going to shift toward tourism and more accommodations are needed to cater for the tourist influx during the Olympic Games.”
According to a Reuters report, the Japan City Hotel Association, which represents over 200 hotels in the country is bracing for a slew of closures and bankruptcies if the government does not provide aid. The impact of the virus will be particularly painful for small, independent hotels and hostels—many of which invested in renovations ahead of the Olympics.
“In the short-term, my heart really goes out to the independent hotels, traditional ryokans (Japanese inns), family-run minshukus (Japanese-style bed and breakfasts) and other inns. These are the people that we have worked with for so many years—they have supported us and we, them,” says Palma. “This is as true for the big chains as it is for the small family-run businesses. There are just not enough people utilizing the properties to allow everyone to stay employed.”
A spokesperson from Hoshino Resorts, which operates 35 hotels and ryokans across Japan, has seen the most impact in Tokyo, where its two properties rely more heavily on foreign travelers. The company was expecting high occupancy at HOSHINOYA Tokyo and Hoshino Resorts OMO5 Tokyo Otsuka, this summer. However, business has plummeted in the past month and the vast majority of bookings have been either canceled or rescheduled.
In contrast, the company’s rural properties and ryokans, which tend to focus on domestic travelers and staycationers, are seeing relatively normal occupancy levels. In the month of March, six out of the company’s 16 ryokan-style inns will perform just as well as last year. The fate of these properties depends more on the trajectory of COVID-19 in Japan, rather than the cancellation of the Olympics.
And What About Tickets?
So far, the Tokyo 2020 organizers have sold most of the tickets—approximately 5 million out of 7.8 million in total—each of which costs somewhere between $18 and $2,760, depending on the event and competition. The IOC announced that it will honor ticket purchases for 2021, but it’s unclear if fans will be reimbursed if they are unable to go to Japan in 2021 or what will happen if the virus is still an issue.
It’s unclear if fans will be reimbursed if they are unable to go to Japan in 2021.
Even if you purchased a ticket in the US, where CoSport is an authorized vendor, the terms and conditions outlined by the Tokyo Organizing Committee for the Olympic Games still apply. According to those terms: “Tokyo 2020 shall not be liable for any failure to perform any obligation under the Terms and Conditions to the extent that the failure is caused by a Force Majeure.” Force majeure meaning unforeseeable circumstance—i.e., an unexpected pandemic. At this point, there has been no announcement regarding refunds.
Is There Any Silver Lining?
While fans and businesses alike are disappointed, many experts, athletes, and Olympics committees agree that postponing in the Olympics was the most responsible decision. Many people would not have been able to use their tickets with global travel restrictions and athletes weren’t able to train properly due to social distancing and shelter in place mandates. What’s more, enormous crowds are breeding grounds for the stealth virus.
“Rescheduling the Olympics is actually a good move as it prevents the Games from being canceled altogether, and avoids an event that is destined to be boycotted by national teams, inadequately prepared, and poorly attended, which would be an utter embarrassment for Prime Minister Shinzo Abe and his nation,” says Chien.
If the Olympics Go Ahead in 2021, What Will It Mean to the World?
“If COVID-19 is fully under control by next summer it will be an Olympics of great joy. There is so much anxiety and uncertainty around the world right now and although I am confident we will get through it, it will be great to have an event that officially marks our recovery from such an unprecedented pandemic,” says Palma.