As Japan’s Olympics tourism boom turns bust, once-hopeful businesses count the cost

“We took the decision to completely redesign and revamp the place as a direct result of Japan winning the right to host the Rugby World Cup and the Olympics,” Lunt said.

“I took out a loan of around 30 million yen from our bank, who were more than happy to give it to us, and we went right through, from top to bottom, in preparation for what we fully expected to be a really busy couple of years.”

Initially, the gamble paid off. The family-owned business, which can trace its roots back to 1945, was so busy during the six weeks of the international rugby tournament that it “had to stop taking reservations for weeks down the line”, Lunt said.

“We did not anticipate being quite so busy when the Olympics and Paralympics came into town, but we knew there would still be a lot of visitors in Tokyo and we were absolutely certain that the summer of 2020 was going to be another good one.”

Covid-19 put paid to that idea, however, as Japan’s government began introducing a series of orders last spring that restricted the operating hours of bars and restaurants – or shut them down entirely – in a bid to control the spread of the virus.

“In the space of three days, we went from packed out and business as usual to dropping off a cliff and every reservation in our book cancelled,” Lunt said.

Japanese authorities cannot, by law, force bars or restaurants to close – but Lunt said he decided to “do the right thing” and follow official requests, temporarily closing the business that was founded by his Japanese wife’s family even though it meant laying off 27 employees.

With the Games postponed to 2021, tourists indefinitely barred from entering the country, and fewer Japanese venturing out to eat and drink amid repeated infection flare-ups, Lunt said he was forced to renegotiate an earlier loan just to meet day-to-day business expenses. But the cost has been astronomical.

“Financially, the pandemic has been devastating to me and a lot of businesses like ours,” he said.

“I turned 62 in April and in another five years we planned to have paid off the original loan and I could think about retiring. Now I have close to US$1 million in loans and debts to pay back and a business that cannot operate.”

“I’m estimating that it will be an additional 10 years of hard labour before I am able to retire now – and that’s if everything goes smoothly from now on,” he added.

Hiro Miyatake set up the Bear Luxe Corp. network of travel companies in May 2018 to cash in on an expected boom in luxury travel to Japan, and was similarly anticipating soaring visitor numbers for the Olympics. After all, he said, all the signs had been positive over the last decade, with Japan’s government embracing tourism as a key driver of the national economy.

“It has been unbelievable – in the bad sense of the word,” he said. “Hotels that had taken thousands of bookings linked to the Olympics have lost pretty much all of them, with the only exception [being] IOC officials or sponsors.

“But that is a fraction of what it was. And we still don’t know if the Games are going ahead this summer, so those bookings could go as well.”

Many high-end hotels in and around Tokyo invested heavily in upgrading their facilities and services in the run-up to 2020, Miyatake said, with the Keio Plaza Hotel, for example, spending millions on revamping rooms on its exclusive Club Lounge floor that have not been used since.

He said the hotel operators, travel agents and owners of other tourism-reliant businesses he has spoken to remain optimistic. “Some say they are getting a handful of enquiries from overseas for the end of this year or the early part of 2022, and they point to the US travel market picking up and positive signs in the industry in Europe,” he said.

But though the travel sector may be starting to slowly recover in North America and

, Japan still has a ban on foreign nationals entering the country, with

in Tokyo and nine other prefectures as a fourth wave of infections that saw more than 7,000 new cases per day at its height only just beginning to recede.

More worryingly, fewer than 4 per cent of Japan’s 126 million population have received a

so far, with less than two months to go before the planned Olympics opening ceremony on July 23.

Herd immunity is still a distant dream and inbound tourism is unlikely to return at any scale until next year at the earliest – a disaster for the government’s pre-pandemic plans to shift the nation’s tourism industry into overdrive.

Support for 50 new “world-class” hotels,

, indicated the government’s long-term commitment to a tourism sector that had grown from a mere 6.79 million international arrivals in 2009 to more than 31 million by 2018. An ambitious target of 40 million foreign tourists was set for 2020, amid suggestions Japan might welcome as many as 60 million by the end of the decade.

Last year’s target was obviously missed – but tourism-reliant businesses such as Hoshino Resorts, which operates 41 hotels and resorts across Japan and Asia, say they still see the Olympics as an opportunity.

“People might not be able to travel to Tokyo, but there will be millions of people around the world watching on television, they will see Japan and it will be in the forefront of their minds when they are able to start making travel plans in the future,” said a spokeswoman.

“As soon as vaccination rates improve and borders open up again, we believe people will want to come back to Japan, and that will hopefully be in the early part of next year.”

On March 29 last year – nine days before then-Prime Minister Shinzo Abe announced the first state of emergency for the Japanese capital and its neighbouring prefectures, and less than week after the Olympics were postponed – Tokyo International Air Terminal Corp. unveiled a 62-billion yen (US$567 million) refurbishment to its Haneda airport, complete with expanded check-in facilities, more car parking, a rapid-transit link to the city centre and a new hotel.

Yuika Haraguchi, a company spokeswoman, said the “investment has made Haneda better for travellers for many years to come”, though she noted it was “very unfortunate that people cannot travel to Japan at the moment because of the pandemic”.

Other businesses to have their plans upset by the virus include low-cost airline Zipair, which was set up by flag carrier Japan Airlines in 2018. Mark Morimoto, a spokesman for the Tokyo-based subsidiary, said “everything looked really positive and promising for the industry” at the time of the airline’s founding – but plans to expand its fleet from two aircraft to 10 have since stalled.

He remains upbeat about the future, however, saying the airline “used the time wisely” to improve the services and facilities it can offer “just as soon as large numbers of people are able to travel again, which we are hoping will be in the very early part of next year”.

Ashley Harvey, general manager of travel marketing agency Aviareps Japan, was less optimistic, however. “I suspect that a lot of companies took out loans to extend their businesses on the assumption that there was going to be a significant post-Olympics boom, which is a perfectly reasonable assumption to have made,” he said, pointing to the increase in visitors London experienced after the 2012 Games.

“That is what everyone expected and wanted, but it’s not going to happen now.”

Some hotels completed in time for the Olympics have chosen not to open their doors yet, he said, while others have mothballed most of their operations, including the all-important food and drink side.

“A good number of these properties were paid for by banks or financiers with little background in the hospitality sector, but they saw an opportunity to make money and jumped at it,” he said. “Now, I can see some of those deals defaulting and properties being sold off.”

If that happens, it should serve as a lesson to future investors, Harvey said.

“I would have loved the Olympics to have been a runaway success for Tokyo, I really would,” he said. “But it has been a disaster, mostly for reasons beyond anyone’s control, and I think others will be far more wary in years to come.”