Oahu small businesses create new strategies to offset decline in Japanese tourism
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Oahu small businesses create new strategies to offset decline in Japanese tourism

Economic factors are changing how Japanese tourists view travel to Hawaii in the post-pandemic era — and the growth model for small businesses that cater specifically to their customers.

For over 18 years, Sugako Johnson was one of the few wedding planners in Hawaii who specifically catered to Japanese couples seeking an American-style wedding.

Her independent operation on Oahu, which she describes as a “one-man show,” didn’t fit the model that most of the industry operates under.

“More than 90 percent of Japanese couples who get married in Hawaii use Japanese companies selling cookie-cutter wedding packages,” Johnson said. “These are not local companies. These are Japanese companies selling Hawaiian weddings to Japanese people.”

But that all changed in 2020 when the Covid-19 pandemic hit. With travel restrictions halting the arrival of Japanese guests, who made up 90% of her customer base, Johnson had no choice but to move out of her office and begin considering changing her business model.

Travel restrictions and quarantine guidelines have crippled Hawaii’s Japanese wedding industry during the pandemic. (David Croxford/Civil Beat/2023)

The effects of the lockdown have been brutal on Hawaii’s Japanese wedding industry. Watabe Wedding Corp., an industry pioneer known as one of the largest wedding planners for Japanese clients, was on the brink of collapse until it was acquired by a retail and pharmaceutical company in 2021.

However, for small local businesses like Johnson’s Bliss Bridal, their only alternative before closing was a complete rebuild.

She started a new job as a venue coordinator on the North Shore and expanded her network to other local wedding professionals, landing several jobs from American couples.

When the pandemic ended, it completely moved away from its Japanese-only service. Now, just 20% of its customers are Japanese.

“I’m trying to market myself differently now,” Johnson said. “My strength is definitely Japanese planning. But I don’t want my clients to see that that’s all I specialize in. I want them to see that I can do both—plan for the locals and for the Japanese.”

Before the pandemic, about 1.5 million tourists from Japan visited Hawaii each year. But with the Japanese yen falling to a 38-year low against the U.S. dollar, they have failed to return in pre-pandemic numbers.

Independent companies serving this large market are key to Hawaii’s tourism industry. Tourists who don’t use Japanese travel agencies prefer to use services that offer information in Japanese, Akiko Oshima, economic consul at the Japanese Consulate General in Honolulu, said in an email.

These small businesses, run mostly by Japanese-speaking locals, make traveling much more enjoyable.

However, to mitigate the risk of a possible prolonged recession among key customers, many of these operations are creating new business models.

Decades of low yen and inflation

Often referred to as a dream destination, Japanese tourists made up about 15% of all visitors in 2019. This year, their presence in Hawaii has dropped to about 7% of total visitors, according to the state Department of Business, Economic Development and Tourism. The number of visitors from Japan in the first three months of this year was less than half of the number during the same period before the pandemic.

Eugene Tian, ​​​​chief economist of DBEDT, said the main reason for the slow economic recovery is the exchange rate, which discourages Japanese from planning expensive travel to the U.S.

What’s more, the historically low yen exchange rate means that those who decide to take this step spend less.

“The most important indicator for tourism is actually visitor spending,” Tian said. “We see that only the Japanese reduced their spending compared with 2019.”

In the first five months of 2019, Japanese visitors spent an average of $239 per day, including spending on accommodation, food and retail. This year, they spent almost exactly the same, at about $238.

However, taking into account inflation, Japanese people’s daily spending has decreased, Tian said.

Tourists enjoy Koolina Lagoon 1 Tuesday, March 12, 2024, in Kapolei. Resorts including Disney's Aulani cater to tourists in West Oahu. (Kevin Fujii/Civil Beat/2024)Tourists enjoy Koolina Lagoon 1 Tuesday, March 12, 2024, in Kapolei. Resorts including Disney's Aulani cater to tourists in West Oahu. (Kevin Fujii/Civil Beat/2024)
Inflation has caused Hawaii hotel prices to rise by more than 30% compared to 2019. (Kevin Fujii/Civil Beat/2024)

For example, hotel prices are up about 34% compared to 2019, according to the Hawaii Tourism Authority’s May Hawaii Hotel Performance Report. After allocating a large portion of their budget to inflated travel costs, Japanese tourists have a much smaller budget for optional expenses, such as shopping.

According to DBEDT, compared with 2019, Japanese tourists’ spending on shopping fell by 28% this year, while spending on accommodation, transportation and food increased by double digits.

All this has led to East Asian tourists having an increasingly negative opinion of Hawaii.

This year, according to a DBEDT survey, nearly 40 percent of Japanese tourists said their visit to Oahu was a bad investment. Among mainland visitors, who were not affected by the exchange rate, only 4 percent rated their trip to the islands as a bad deal.

These economic trends have led Japanese vacationers to cheaper destinations in Asia, according to Dan Spencer, director of the School of Travel Industry Management at the University of Hawaii at Manoa.

He added that Japanese tourists may be more willing to consider similar destinations closer to home.

“We have a lot more competition now throughout Asia, especially in countries like South Korea, Singapore and Hainan Province in China,” Spencer said. “Asia in general — and Southeast Asia in particular — has been one of the fastest-growing tourism regions in the world, and now that’s affecting us here in Hawaii. We just have a much more competitive landscape than we’ve had in the past.”

Both Tian and Spencer said it could take several more years, perhaps as late as 2026, for Japanese tourist numbers to return to pre-pandemic levels.

Changing business models

As a result, small businesses are developing strategies to reach new demographic groups.

Shingo Sawada, owner of Lomino Hawaii Massage School, once offered two services: travel massage sessions, which was his main business, and workshop courses for tourists who wanted to learn massage techniques while in Hawaii.

During the pandemic, in addition to completely losing Japanese tourist clients who made up more than 95% of his out-of-town massage client base, he faced restrictions on social gatherings that prohibited indoor gatherings like his class sessions.

Unable to hold classes at the school, Sawada moved his sessions outside, renting out a garden chapel that had once been a popular wedding venue. By setting up canopies and massage tables outdoors, his team was able to continue operating with a handful of local students he found through a newly launched English website, social media ads and two appearances on local TV shows.

Today, with his travel massage business still struggling, Sawada plans to change even more. He’s focusing more on his class and plans to beef up his “event massage” service, a new venture that offers massage sessions during corporate events like wellness days and team-building retreats.

Sawada is trying to attract more students from mainland China by offering training sessions in English.

“We will continue to shift our focus to more residents and mainlanders,” Sawada said. “Their numbers are growing step by step.”

Byongyun Lee’s Hana Taxi, a taxi service that once relied heavily on Japanese tourists, has started running ads on Yelp to expand into the U.S. market, having found success in attracting customers from the mainland and South Korea during the pandemic.

This year, he says, the company hasn’t seen a rebound in Japanese customers because of the yen’s sharp decline. To adjust for that, Lee plans to launch an app service that will make it easier to communicate and book with a more diverse base of customers from around the world.

The historically low yen exchange rate has also influenced the Japanese attitude towards weddings in Hawaii.

Before the pandemic, “photo weddings,” a simplified version of a normal wedding ceremony, were a major trend in Oahu’s Japanese wedding industry, Johnson said. For less than $1,000, Japanese couples could rent a dress, get their hair and makeup done, fly to popular photo spots like Magic Island or Waimanalo Beach and hire a photographer for an hour to capture their quick ceremony. It was a highly sought-after and cheaper alternative to Japanese wedding ceremonies.

Most of these wedding photography studios, as well as the companies that offered them, went out of business during the pandemic.

For today’s Japanese tourists, getting married in Hawaii has become almost a luxury.

“Now when I see Japanese people getting married in Waikiki, I think, ‘Wow, they must be really wealthy,'” Johnson said.

Nami Arai, manager of Maxi jewelry store in Waikiki, has recently noticed a change in the shopping habits of her mainly Japanese clientele.

Pre-pandemic visitors bought her store’s luxury goods as small souvenirs to celebrate a variety of occasions, including birthdays, family vacations, and even business trips. Now, most of her customers come to treat themselves as part of special occasions, like weddings and honeymoons.

While Maxi’s mostly Japanese customers bought luxury goods to celebrate special occasions before the pandemic, shopping has become less of a priority. (Suah Cho/Civil Beat/2024)

Like many independent businesses that cater specifically to Japanese guests, Maxi has had to deal with the devastating effects of the pandemic. To find an alternative to the Japanese tourists who once made up 90% of their customer base, Arai and her team looked for ways to diversify. Although they advertised only in Japanese magazines and travel guides before the COVID-19 pandemic, they began targeting English-speaking guests as well. They increased their English-language posts on social media and trained staff in English customer service.

What really saved the company from collapse was the launch of an online store, thanks to which Japanese people under quarantine could buy products without leaving their homes.

“Before the pandemic, we kept our website just as a catalog of our products,” Arai said. “But changing to an online store during Covid really saved our business.”

Their online presence has boosted sales, significantly exceeding pre-pandemic levels.

Today, the majority of Maxi’s customers are still Japanese, many of whom buy their jewelry online. Arai and her team plan to maintain, if not expand, their online store to serve those in Japan.

For Johnson, expanding into the local market has been a blessing in disguise. She’s glad she found a way to stay in business and strongly believes that entering the local wedding planning scene benefits her business in the long run.

“When Covid first hit, it was very difficult to change direction because there was no formula for situations like this,” Johnson said. “I’m not over it yet, but I’ve survived.”