COVER STORY • 4

NInterview with Terrie Lloyd, CEO of Japan Travel KK, Travel Web Portal

on-Japanese Expert Helping
to Restore Japan’s Status asa Tourism Powerhouse

By Japan SPOTLIGHT
Terrie Lloyd, a dual national of Australia and New Zealand who has lived in Japan for more than 40 years,
is a distinguished entrepreneur, having founded almost 20 companies. One of them is travel web portal,
Japan Travel KK. The portal is the largest by content volume and has over 18,000 contributors who havewritten more than 40,000 articles in 13 languages. Besides this portal business, he runs a market entry
service to Japan, as well as software and website development and support.
Japan SPOTLIGHT had a chance to interview him about the future of tourism in Japan and how his
business could work to help it recover from the worst of the Covid pandemic.
(Online interview on March 31, 2023)

The Pandemic & Business

What was very harsh for both us and manyother travel agents was that in travel we often
JS: How has your travel web portal
work on a fee deposit basis. Customers willbusiness been affected by the
prepay deposits to secure their hotels andpandemic, and how do you assessother arrangements, and with the sudden
the current situation?
travel ban, we had to make many refunds tocustomers. This meant that not only did we
Lloyd: There are three sectors to travel inhave no revenue, but we also had negative
Japan. There’s the domestic sector, thedrawdowns because we had to make all thoseoutbound sector and the inbound sector. My
refunds. It was a very difficult situation all
business japantravel.com is focused on thearound and some of my competitors woundinbound sector, so most of our customers areup firing their staff and essentially closing
not Japanese. For the inbound sector, as I am
down their operations. They kept one or two
sure you are well aware, Japan was justpeople in each team, and in the case of one
before Covid-19 ranked 12th or 11th in terms
foreign company downsized from 120 staff toof the most popular destination in the world. It
probably around 30. Many of those fired
had roughly 32 million annual inboundemployees left the travel sector all together –Terrie Lloyd
visitors, of whom about 30% were Chinese.
a consequence of which is a staffing shortage
Those numbers introduced a number of issues relating toplaguing the sector now.
overcrowding, over-shopping and over-consumption.
However, my company is not a foreign company, and we didn’t
When the borders were locked down, of course the industry went
want to fire our loyal staff, so we worked hard to keep them. This
from a very healthy and buoyant situation to basically no business atmeant that during Covid we were under severe financial pressure. We
all. Fortunately, as a vertically integrated company, some of our three
did get some subsidies, but the subsidies were not intended to pay
businesses continued to operate, in particular our publishing,
everything; they basically covered around 70% of costs, leaving fully
marketing, and advertising business, where our customers are mostly
staffed firms like us to slowly hemorrhage the other 30% for almost
regional governments in Japan and large Japanese travel
three years. Yes, it was tough. In the first year I was somewhat
corporations. However, our second business division, a Type 2 travel
confident of a full recovery. For the second year I was less confident,
agency, was heavily impacted, especially since it specializes inand last year I was extremely worried about whether the Japanese
wealthy Western tourists coming into Japan. Our third division, agovernment would actually keep the borders closed even longer.
software and systems business, was still in product development, andLuckily for all of us, they reopened in October 2022.
so wasn’t yet commercially viable anyway.
In fact, the government’s timing turned out to be very good for theDuring Covid our travel agency business went from tens of millions
inbound industry. The reason is that when foreign families, couples,of yen in monthly revenue to zero in a period of about six weeks.
and groups are booking, often the arrangements are done by one ofhttps://www.jef.or.jp/journal/

Japan SPOTLIGHT • July / August 2023

19the domestic (often female) partners, who usually research and bookabout two to four months ahead of their trip. So for trips happening inMarch to catch the cherry blossom season, they would be booking in
December and January, just weeks after everyone found out that theborders were reopening. I think it’s the same for most Japaneseinbound travel companies, that around 25% of their annual revenue isearned in the first quarter of the year – mostly in February and March.
So the timing was good. Even better, the cherry blossoms stayed
open longer than usual and this has also been very good for business.
I’ll note that the Chinese market has not yet recovered, but instead
we are seeing much higher volumes of Western and non-China Asian
tourists who have bigger budgets, and who are more interested inspending money on experiences rather than just buying things.
Although, when they do buy things, it includes crafts, which, alongwith experiences like ikebana or cooking, are a much better form ofrevenue for Japan.
Now in general the inbound travel market is quite buoyant, and mycompany has substantially recovered. If we took the last six months
and annualized the income, we are probably at a similar level to
FY2019 already. It’s a big relief after three worrying years.

Digitalization & Tourism
JS: I understand that lots of companies were indifficulty during the pandemic and started thinking
about different kinds of tourism such as digital
tourism. Have you heard of this?

Lloyd: Yes, in fact in 2019 we started offering virtual tours. My
company participated as one of 10 Japanese suppliers to Amazon in
the United States, as part of a test program. We developed andsupplied a number of tours to Amazon customers. I think we charged
between $35 to $50 per person per tour and what was unique wasthat customers could ask the guide to go shopping for them. So manyof the tours were in Shimokitazawa, Harajuku, and Shibuya. Typicallythe guide would go with the virtual customer, who was physicallylocated in New York or wherever, to a Tokyo clothing shop and view
different clothes or accessories, allowing the customer to purchase
any that they liked. We’d then pack and ship the goods back to themin the US.
We also did a number of virtual tours with universities, including
Texas A&M, where they asked us to develop specialized content
related to the core studies of their students. This content included
historical influences on Tokyo, and so we took them through the Ueno
area as well as Shibuya and Shinjuku (for contrast). We also worked
with the Ministry of Agriculture and did a number of tours on
YouTube and Zoom relating to food and food production. On one
20 Japan SPOTLIGHT • July / August 2023

particular tour I think we had up to 400 people from around the world
attending at the same time. All in all, these virtual tours were quite
successful.
JS: How about digital tourism as a business itself?

Will that continue to be affected by IT such as digital
shopping with a guide?

Lloyd: Now that physical tourism has rebounded, digital tourism has
fallen away. There is still some demand, but I think it is becoming
more of a marketing function for actual physical visits rather thanbeing a service itself. There are of course other areas of technology
which are having a huge effect on the industry. One of these is
ChatGPT.
JS: On that note how do you assess how you predictor foresee the impact of ChatGPT and other suchtechnologies upon the tourism industry in Japan inparticular?

Lloyd: Japanese SME companies are generally speaking not very
good at technology, due to lack of internal resources, and typically
only engage in technology when it leads directly to profit. It’s hard forthem to invest for two or three years into the future. There are ofcourse some exceptions, but generally speaking I would say that’s thecase. As a result, some foreign companies have been able to comeinto the Japanese market and they are doing better because they havebetter technology. We decided to build our own travel agency backoffice software, which is called “Toursoft”.
But as for ChatGPT, in November of last year I was invited to be an
early user for ChatGPT. When I tried it I quickly realized that it wasgoing to have a huge and beneficial effect on the travel industry. So,
how do we use it? Most people talk about it as being a quick way todevelop content, and while that’s true, unfortunately ChatGPT is also
programmed to prioritize natural language responses, not necessarily
to give true and accurate content. So you can’t tell if the output is themachine making it up or whether it’s actually true. Furthermore, if
there’s no data, ChatGPT is useless because it only works if there isenough data to train the model.
What I found ChatGPT to be best at, so far, is identifying top
locations in each city that we send our customers to. It has made itmuch easier for us to help customers who want to have an off-thebeaten-track experience. In essence, the customer gives us somedifferent locations that they’ve read about online, and we are able todevelop content and recommendations very quickly for them to fill
their itinerary with activities and new places to see. The reason that
ChatGPT can do this well is because there is enough basic

information available on the web for the AI to function. That said,
there’s so much conflicting information on travel in Japan thatsometimes it can get confusing even for expert humans. At any rate,
ChatGPT does a good job of doing advanced searches where it not
only searches the results but also orders and prioritizes which results
it’s going to use. This ability saves a huge amount of research time formy staff and also for customers.
I think ChatGPT and general Machine Learning (ML) will merge
over the next three years once we as users can pick up small local but
disparate data sets and still be able to make sense of them. As an
example, there are many gaps in transfers data in Japan, meaning forconnecting trains, buses, and taxis. In fact, I would say that one of themain reasons that foreign tourists still use a travel agent is because
the transportation options are so confusing. Now it’s OK if you have aJapan Rail Pass and that works just fine, but as soon as you need tochoose a bus or local train because of special needs or because you
have a group, then most foreigners give up and turn to agents forhelp. With ChatGPT and ML over the next three to five years, solving
this problem will really open up regional tourism to foreign visitors.
JS: Perhaps the recovery of inbound tourism in Japan

will be robust and greatly assisted by thesetechnologies. Given this, how do you assess thepotential of Japanese inbound tourism in the future?

Lloyd: As I mentioned at the beginning, one of the biggest problems
with large volumes of travelers is that they all go to Tokyo, Osaka andKyoto. Now, Tokyo and Osaka are not so impacted because they arelarge cities and can absorb those numbers of people, but Kyoto issurely suffering from over-tourism. The answer to this problem is tosend our foreign guests to other more regional destinations. As we allknow, there are many small cities all over Japan that have beautifully
preserved areas, and we need to send foreign tourists to such places– anywhere other than Kyoto.
The problem is how to design content to get them to want to go
there. That is I think one worthy short-term goal for ChatGPT and ML.
If we were able to do that successfully, I guess that Japan could
comfortably support about 60 million tourists per year without overtourism. Instead of Kyoto, they might go somewhere else with asimilar ambience, like other locations in Kyoto-fu such as Miyazu, Ine,or Kyotango, or places further afield such as Akita or MinamiSatsuma. Anywhere that has well preserved small towns with samurai
influence.

Infrastructure for Tourism in Japan
JS: Infrastructure is very important in developing the

tourism industry. The pandemic damaged lots ofinfrastructure related to tourism, and which would
need to recover, such as souvenir shops,
restaurants, and so on. How do you assess theirprospects for recovery? Could it be easily done overa short period or will it take some time?
Lloyd: I think for major destinations like Kyoto, it’s merely a functionof market demand. Heavy visitor flows to Kyoto ensure that even as
some companies shut down, others appear to replace them. But for
more remote prefectures, the damage is greater and more long
lasting. I am a consultant for a prefecture in Shikoku and almost all
their foreign inbound marketing team was reassigned to other jobs
during Covid. It’s not an obvious infrastructure component, but aspart of the prefectural government, no marketing team means that
small companies in the prefecture no longer have a resource to attract
foreign guests.
So that prefecture needs to restart, and in so doing will need torenew their relationships with surviving service providers around theprefecture and help them to rebuild. The impact for those smaller
prefectures has been quite severe and I would guess it could takethree to five years for them to recover. I did find it interesting that theJapan Tourism Agency (JTA) announced earlier this year that it isgoing to start promoting 11 regional locations around Japan. This
hopefully demonstrates that the Japanese government itself is goingto put some serious budget and effort towards improving marketingand infrastructure. As far as I recall, the Japanese government is stillcharging a traveler departure fee within air ticket prices, so they dohave the financial means to invest. I’d like to see the departure fees
being used directly to help struggling regional areas improve theirmarketing.
JS: It’s not only infrastructure but also software.

Software requires human resources and so we would
need to invest more in human resources in order torestore the tourism business. Do you think thatwould be possible?

Lloyd: Just before I go into the software side, I’d like to comment thatthe biggest shortage in the industry right now is bilingual people who
can act as tour guides and shop staff. Many bilinguals left travel andhave already moved to other sectors. So bilingual staffing is a hugeproblem for everyone.
As far as the software side is concerned, I think for the inboundmarket such as what we are addressing, we can solve the shortage oftechnical resources by forming development teams in other countries.
Indeed, my company has teams in Hong Kong, Vietnam, Bangladesh,
Japan SPOTLIGHT • July / August 2023

21

India, Sri Lanka and the Philippines, and that is how we have coped.
But honestly speaking. I would rather nurture talent in Japanbecause when your people are abroad you have to educate them over
and over again about how things are done here and why Japan isdifferent.
JS: Your portal service must be one of the keys torestoring the development of the Japanese tourism
industry, because as you said information is the key.
Do you think that Japanese portal services in general
have been improved in recent years?

Lloyd: If you don’t have a portal you can’t do effective marketing, andif you can’t do effective marketing you don’t have customers. So what
I’m seeing in most big Japanese travel companies is that they areleaving the marketing and brand building to foreign partners andbasically giving up a large margin to foreign partners who are good atthese things. That is not healthy for Japanese travel companies,
because firstly it means that by abdicating responsibility formarketing they are removing any incentive for their own staff to build
their own capabilities, ever. Secondly, because they earn such small
margins, they can’t reinvest in solutions even if they wanted them.
Thirdly, because they’re not the ones doing the marketing, theirbrands in foreign markets are unknown, allowing foreign online travel
agency (OTA) brands to dominate.
When I created japantravel.com basically I saw my competition as
not being Japanese travel agencies but rather foreign OTAs. It’s ashame we don’t see more Japanese companies making decent
websites with strong functionality and up-to-date information. It istrue that the JNTO and JTA are producing websites, but they aregovernment and so there is kind of a disconnect between theirprojects and actual market needs. I personally feel that instead ofinvesting money in their websites, the government should makesubsidies available or create funds for Japanese travel companies todevelop their own websites. At the end of the day, the travel agentsand travel services companies know and understand what the foreign
tourists need and if they have the budget and the marketing power to
do it, it’s going to be better for Japan because right now all the profits
are going to the foreign OTAs.

Team of Non-Japanese & JapaneseWorking Well
JS: Perhaps the best way might be to have a goodteam of non-Japanese like yourself, who know theattractions of Japanese tourism spots very well, andJapanese people whose travel industry success is

22 Japan SPOTLIGHT • July / August 2023

the key to economic success. Such a team mightachieve greater success, would you agree?
Lloyd: In 2013 I was invited by the JTA, which was founded not long
before, along with a number of other foreign experts, to give a fiveyear forward-looking analysis of what foreign visitors wanted fromJapan in the way of tourism. At that time Japan was number 33 or 34
in terms of preference for foreign destinations. At that time there wereperhaps five or six foreigners in the advisory panel, and we wereinterviewed and did a number of roundtables in Kasumigaseki at the
Ministry of Land, Infrastructure, and Transport (MLIT). I thought it
was a very good panel and one of the interesting things to come out
was that the JTA folks were expecting us to say that “cherry
blossoms” or “temples” were the main attraction point for foreigners.
But actually, as foreigners we told them that the main attraction pointof Japan is the people. So there’s a very big difference in opinion
between Japanese and foreign viewpoints. As a result, when the JTA
started its marketing planning it did indeed focus on people, and I feelthat was a very good thing to happen.
I find it strange that there hasn’t been the same level of foreign
advisory interaction since then and it’s definitely needed. As I
mentioned, I am helping one prefecture in Shikoku in particular, and I
sit on their tourism advisory committee as the only foreigner. It’s very
important for local Japanese government teams to understand how
foreigners think. After all, the foreign inbound market is double thesize of the Japanese outbound market and so it’s a big net earner ofrevenue for the country. This is a huge benefit for the country
because the profit margins on inbound travel are very good.

More Tourism Means Greater Market Entry
JS: You also provide a market entry service into

Japan. This also had a downturn during the
pandemic but may be picking up again now. What do
you think would be key to increasing market entry toJapan? More tourism will lead to more investment
but are there any other policies to encourage market
entry in general?

Lloyd: One of my other companies, Japan Inc. Holding (JIH), does
market entry in general, versus travel, and we are seeing a recent
surge of trade interest in the Japanese market. We are expecting avery strong next two years in that space.
Just a side note on the economic impact of inbound travel: it was
about 0.8% of GDP in FY2019 and this fiscal year maybe it’ll be 1%.
This sounds like a very small figure, but we need to remember thatthe cost of this particular slice of GDP is almost nothing. With

inbound tourists the government doesn’t need to invest in any extra
infrastructure or social services. No extra aged care facilities, no extra
hospitals, no extra childcare or schools. No extra anything. Those
tourists just come in, use existing infrastructure, consume high-value
sustainables (food, services, etc.), then they go home again.
Back to market entry, though. When inbound travel is robust, major
Japanese corporations have more discretionary income. A good
example is Japan Railways. I think JR will announce later this fiscal
year that it had a very good year because so many people are buying
the Japan Rail Pass – which is surplus seats that they would notnormally sell. As a result, such Japanese companies have more cash,
which according to trickledown theory means consumers will also
have more cash, which means that those foreign companies wanting
to do market entry will have a better market to sell their goods andservices. It’s a virtuous circle, and I think there is a connection
between inbound travel and the health of the economy overall. Thus, I
think market entry will have a very strong next two years at least even
if there is a global recession.
Another comment is that successful market entry to Japan follows
certain themes and channels. Those channels which are really popular
at the moment are mostly based around demand in Japan that can’t
be filled locally – such as food and technology. I’m a technology guy,
so one of the hottest spaces I’m seeing right now is security, such as
cybersecurity. Japanese cybersecurity is not very good and as a result
hackers from various nearby countries are attacking Japanese
corporates non-stop. You never hear about it because suchcompanies don’t want people to know their vulnerabilities, but I cantell you that there are some serious security problems going on. Thatmeans there is a very good opportunity for foreign companies in that
sector. If I were the Japanese government, I would spend more time
identifying other key sectors that have future potential, but
unfortunately usually we see them focusing on the same things over
and over again.
That said, one constant import is food, and people need to eat. I’m
pleased to see that FoodEx this year was very successful, and many
foreign companies came to Japan. The trend in food is that
consumers are feeling a little more relaxed, so consumption of
specialty and health items is increasing, and foreign companies inthose spaces are responding accordingly.

working for large companies. How do you assess
these young Japanese entrepreneurs as a wellknown entrepreneur yourself in Japan?
Lloyd: I’m quite involved in an organization called EO (Entrepreneur
Organization, or Entrepreneur Kyokai) which has about 850 members
here in Japan. I belong to a chapter called EOTM, an abbreviation of“Entrepreneur Organization Tokyo Metropolitan”, and which is abilingual chapter. The EO is focused on helping entrepreneurs to copewith all the issues that occur as a startup, so I’m happy to say that
actually they offer a great set of resources for those young
entrepreneurs nowadays.
But even with such resources, unfortunately, one of the biggest
hurdles for a young person to start a company is the fact that if theircompany fails the founder is personally held responsible for the
failure. Such conflation of liability can wreck the founder’s career andfinancial future. Even though Japan has limited liability laws forcompanies, the reality is that the system is set up so that the founder
doesn’t have limited liability. Indeed, they usually have an extremely
heavy liability, for any loans, leases, and employee well-being issues.
So if the company goes under for whatever reason, then that young
founder’s life can be ruined as a result. It’s very harsh. I think young
Japanese are generally very receptive to the idea of starting acompany until they find out that they’re going to be held responsible if
things do not go well. Of course, this puts them off and I think that’s
entirely understandable.
Since the Japanese economy needs new startups, the government
should introduce legislation that allows limited liability companies towork as originally intended. This means that even if the company may
go bankrupt, the founder should not have to go bankrupt as wellunless there was some malfeasance. Tying the two is such an
unreasonable, strict and old-fashioned idea that needs to go away. If
the law is changed, then I believe that there will be many young
Japanese who will want to set up their own companies. Already wecan see rising confidence in the young people of today. They’recertainly moving around a lot more and switching jobs, so a certain
number of them will become entrepreneurs if the right environment isthere for them.

Japanese Youth & Rising Entrepreneurship
JS: In terms of entrepreneurship, one factor limiting

foreign direct investment and market entry into Japanmight be bureaucracy, including in large companies.
However, today young Japanese people seem to be
more interested in starting up businesses than

Written with the cooperation of Joel Challender who is a translator, interpreter,
researcher and writer specializing in Japanese disaster preparedness.

Japan SPOTLIGHT • July / August 2023

23