Recent Changes

1
Recent Changes in Japanese Outbound Travel Market
May, 2006 Fumihiro Sakakibara MilePost
Consultants Inc.
2
Japanese Outbound Travelers
Number of Tourists
Declining Economy
Picking up
18,000,000
17,820,000
16,831,112
Opening of Kansai Airport
17,403,565
Terrorist Attack in NY
13,297,000
Iraq War
SARS
Gulf War
Appreciation of JPY
3
Market Size of Japanese Outbound Travel

• 17,403,565 97.7
• 17,818,590 100.0

Sep. 2000 Aug. 2001 12 Month Total
18,223,480
4
Japanese Outbound Travelers, 20002005
Number of Tourists
18,000,000
17,820,000
3.4
Sep,00Aug.01 18,223,480
17,403,565
3.4
16,831,112
13,297,000
5
Japanese Outbound Travelers by Age, 2000 vs 2005
6
Changes in Male Travelers by Age Group1997, 2000
and 2005
7
Changes in Female Travelers by Age Group1997,
2000 and 2005
8
Change in Japanese Outbound Travelers by Gender
and Age Group (2005/2000)
251,000
-1,092,000
9
Change in Departures by Gender and Age Group
(2005/1997)
1,291,000
-1,431,000
10
Japanese Outbound Travelersby Destination, 2005

• Spain 593,263
• Singapore 588,500
• Indonesia (04) 575,218
• Canada (04) 437,000
• N. Mariana 351,739
• Philippines (04) 382,307
• U.K. (04) 347,000
• Malaysia 340,027
• Switzerland 333,202
• Vietnam 320,605
• New Zealand 154,925

• U.S.A 3,883,906
• inclHawaii (1,522,356)
• includeGuam ( 955,246)
• China 3,389,976
• Korea 2,439,809
• Taiwan 1,124,334
• Thailand(04) 1,212,213
• Hong Kong 1,210,848
• Australia 685,500
• Germany(03) 646,778
• France(04) 642,000

Total 17,403,565
SourceNTOs
11
Destinations Decreased in Numberof Japanese
Travelers, 2000 vs 2005
-
2000
2005

Peak Year
X 1,000

• U.S.A 5,061,377 3,883,906 - 1,177,471
  -23.3 5,368,000 97 -1,484
• Singapore 929,895 588,500 - 341,395
  -36.7 1,179,007 95 -590
• Hawaii 1,825,588 1,522,356 -
  303,232 -16.6 2,092,480 97 (-570)
• Switzerland 623,291 333,202
  -290,089 -46.5 623,291 00
  -290
• France(04) 852,000 642,000 -
  210,000 -24.6 990,000 97
  -348
• U.K.(04) 557,000 348,000 -
  209,000 -37.5 570,000 97
  -222
• Hong Kong 1,382,417 1,210,848 - 171,569
  -12.4 2,382,890 96 -1,172
• Malaysia 455,981 340,027 - 115,954
  -25.4 455,981 00 -116
• Canada 540,095 437,000 - 103,095
  -19.1 729,343 96 -292
• Guam 1,048,813 955,245 - 93,568
  -8.9 1,113,012 97 (-158)
• Australia 720,411 685,748 - 34,663
  -4.8 813,892 96 -93

Total - 2,653,236
-4,607,000
12
Destinations Increased in Numberof Japanese
Travelers
-

2000
2005

• China 2,201,528 3,389,900 1,188,372
  54.0
• Spain 300,823 593,265 292,442
  97.2
• Taiwan 922,865 1,127,184 204,319
  22.1
• Vietnam 152,755 320,605 167,850
  109.9
• Cambodia 19,906 137,849 117,943
  592.5
• Czech 56,867 122,613 (04)
  65,746 115.6
• Russia 62,619 92,329(04)
  29,710 47.4
• Turkey 89,238 116,974 27,736
  31.1
• Macau 144,888 169,115 24,227
  16.7
• Sri Lanka. 10,266 17,148
  6,882 67.0
• Fiji 19,674 25,160 (04)
  5,486 27.8
• New Zealand 151,373 154,925
  3,552 2.3
• Mongolia 10,283 13,196 (04)
  2,913 28.3

Total 2,429,620
13
Previous Experience of Overseas Travel - First
Timers -amongst those who made overseas travel
in the year

10.1
9.3
5.1
3.8
Source JTB Report
14
Number of Overseas Trips in 2004amongst those
who made overseas travel in 2004Average 1.7
times
Twice
4 times (2.3)
No. of overseas trips in the previous year
5 or more (2.9)
3 times
Once
Previous Experience of Overseas Travel,
2004Average 14.5 times
4-5 times
10 or more times
Previous travel experience
Once
2-3 times
6-9 times
15
Previous Experience of Overseas Travel by Major
Market Groups, 2004
In 2004
Total Experience
Times
Times
1.8
2.0
1.7
1.6
1.7
1.6
1.5
14.5
21.8
22.3
14.4
13.5
12.6
7.9
16
Seasonality of Japanese Outbound Travel Market,
2000 2005
Number of Tourists
Summer Holidays
Change of Fiscal Year Spring Break
17
Monthly Departure by Age Groups
End of year New Year Dec29 - Jan 3
Summer Vacation Jul20 - Aug31 O-Bon Aug10 to Aug15
Spring Break Mar20 - Aprl5
End of year New Year Dec29 - Jan 3
Golden Week Apr29 - May 5
18
Monthly Departure by Age Groups
Spring Break Mar20 - Aprl5
Summer Vacation Jul20 - Aug31 O-Bon Aug10 to Aug15
End of year New Year Dec29 - Jan 3
Golden Week Apr29 - May 5
End of year New Year Dec29 - Jan 3
19
Monthly Departure by Age Groups
Golden Week Apr29 - May 5
Summer Vacation Jul20 - Aug31 O-Bon Aug10 to Aug15
End of year New Year Dec29 - Jan 3
End of year New Year Dec29 - Jan 3
Spring Break Mar20 - Aprl5
20
Trends in Travel Arrangementsfor Overseas
Travelers Over Age 20
35.1
27.9
20.7
35.0
27.5
22.7
39.2
26.9
18.7
43.7
22.0
22.1
22.1
23.1
42.1
21
Travel Arrangements by Experienceof Overseas
Travel, 2004
56.3
18.4
16.5
7.6
60.2
22.3
8.6
62.2
22.1
6.1
55.8
28.7
4.2
39.4
47.0
22
Internet User Population
()
(X 10,000)

• 79,480,000 in 2003
• 62.3 of Japanese total population.

23
Internet Users by Age, 2003 2004

24
E-Business by Travel Agencies

Source JATA
25
Departure Ratio By Prefectures
0.0 - 5.0 5.1 - 10.0 10.1 -
15.0 15,1 - 20.0 20.0 - 25.0
Sapporo
?
Kansai
Narita
Fukuoka
?
?
?
?
Nagoya
Departure Ratio () Annual number of
international departure / Population
26
Share of Airline Seat Supplyby Major Airports ()
27
Travel Arrangements by Experienceof Overseas
Travel, 2004
56.3
18.4
16.5
7.6
60.2
22.3
8.6
62.2
22.1
6.1
55.8
28.7
4.2
39.4
47.0
28
Package Tour Distribution Channel in Japan
Airlines


Retail Agencies /Outlets
Wholesalers
Airline Seat Distributors
JTB KNT NTA
Call Center Web Site
Hotels
Land Operators
Online Agent
Consumers

International Offices of Major Travel Companies
Direct Marketing Company
Other Suppliers
Bus Restaurants Tour Guides Rail Attractions Shopp
ing
,
HIS Hankyu Club Tourism
NZ
Japan
29
Top 10 Travel Agenciesby Overseas Travel Sales
x million yen
FY2000
FY2005
FY1995

• JTB 410,903 540,745 (1) 485,043 (1)
• Hankyu 253,678 234,688 (3) 107,011 (6)
• H.I.S 249,408 190,684 (4) 71,053 (9)
• JTB World 214,102 74,169 (9) 85,925
  (7)
• KNT 173,439 250,279 (2) 278,218 (2)
• NTA 160,090 156,056 (5) 168,281 (3)
• NEC 122,497 119,583 (7) 120,681 (4)
• JALPAK 103,662 148,917 (6) 111,552 (5)
• JTB Traveland 59,177 59,999 (11) 41,233
  (10)
• Nisshin 47,558 49,326 (12) -
• ANA Sales 47,337 N/A N/A
• Tokyu 46,161 73,206 (10) 85,529 (8)

30
Top 10 Best- Performing Travel Agencies
FY2003 Profits
x million yen

• Hankyu 29,037
• H.I.S 26,668
• ANA Sales Tours 16,667
• JTB Traveland 13,778
• KNT 13,706
• NTA 11,047
• JAL Travel 9,259
• Sagawa Support Service 8,161
• Keio 7,196
• Meitetsu 7,138

31
Summary of Major Changes

• Recent Japanese market changes at warp speed.
• Overseas travel market is expanding.
• Elderly is a market leader. 2007 will be the year
  of revolution with bulk of retired segment.
• Young female travelers are rapidly losing their
  market share.
• Traditional popular destinations are losing their
  market shares.
• Travel repeaters are increasing.
• Seasonality is flattening with the greater
  diversity of travel season by segment.
• FIT market is expanding.
• Local markets are loosing the market share.
• Distribution mechanism is changing.

32
Japanese Population Distribution, 2005

Over 90 85 80 75 70 65 60 55 50 45 40 35 30 25 20
15 10 5 0
Male
Female
Baby Boomers born 19471950
Children of Baby Boomers

X 1000 persons
33
Companies with Fixed Retirement Policy and
Retirement Ages
34
Impact on the Economy of Consumption by
Baby-boomer Retirement

• 3,230,000 people during 5 years from 2007
• Total additional consumption 7.7762 trillion yen
• Expected effect on consumption
• Holiday villa 35.3
• New home / reform of house 17.2
• Overseas travel 12.6
• Financial commodity 7.7
• Renewal of vehicle/motor bike 4.2
• Study learning 3.1

Source Dentsu
35

• Review the traditional business model.
• Product, partners, distribution, wholesalers vs
  direct marketiers
• - Product/market matching. -
• Examine the best scheme to respond the needs of
  individual travelers and to ease them to travel
  to and in the destination.
• - Review of air fare structure. -
• Create the climate that encourages new sellers.
• Review the current marketing master plan.
• Market analysis, strategy, targets, branding,
  tactics,
• pricing policy, resources.
• Routine market information collection and
  analysis on the changes. Immediate response to
  the expected changes.
• Accurate understanding on ones position as a
  travel destination in the competitive market.
• Rebuilt the productive network with the Japanese
  travel trade.