Economy Japan’s tourism industry falters despite record visitor numbers

[thomas]

Japan recorded an unprecedented surge in inbound tourism last year, yet hotels and other accommodation providers have struggled to translate the influx into more substantial profits. The country welcomed 42.68 million overseas visitors over the year. South Korea sent the most visitors, with 9.46 million, followed by mainland China (excluding Hong Kong) at 9.1 million, and Taiwan at 6.76 million. Tourist spending also hit a record, with foreign visitors spending a total of 9.46 trillion yen ($59.8 billion) during the year, according to the Japan Tourism Agency.

Even so, the accommodation sector has struggled financially. Operating profit margins for hotels and related businesses were 6.6% in fiscal 2024, compared with an average of 8.1% across the wider service industry. The sector has yet to regain the profitability levels seen before the pandemic, with margins still below the 7.2% achieved in fiscal 2017.

Industry wages have wallowed. According to data from the Labour Ministry and elsewhere, average annual pay for a business with 10 or more employees was 3.9 million yen in 2024 -- more than 20% lower than the 5.27 million yen average for all industries. Wages in accommodations are higher according to the size of the business. The average income was 3.37 million yen for companies with 10-99 employees and 3.9 million yen for companies with 100-999 employees. An average employee earned 4.57 million yen at a business with 1,000 or more workers. There has been a sharp increase in visitors to Japan since the COVID-19 pandemic, exacerbating labour shortages. The employee vacancy rate in accommodations and food service reached 4.4% at the end of June 2024, higher than the all-industry average of 2.9%.

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Japan's tourism industry struggles despite record visitors

Hotel profit margins below pre-pandemic levels as per capita traveler spending dips

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