Issues faced by tourist destinations in securing financial resources

Beppu Onsen, located in Beppu City, Oita, consists of eight hot springs known as Beppu Hatto, and it boasts the largest number of hot springs in Japan in terms of both volume and the number of sources, attracting many tourists from both Japan and abroad. However, the region suffered a prolonged period of stagnation leading up to the present day. It was not until the 1990s, when community development activities were stepped up in an effort to revitalize the hot spring resort, that the area regained its vitality. The Beppu Hatto Walk, the Beppu Hatto Onpaku, and art projects are just a few of the measures through which the city revitalized itself by tapping into its local resources.

Makita, who specializes in accounting and service management, has supported community business revitalization and urban development in Beppu through both research and practice. Based on his experience, Makita raises the following issue: “When managing a region, the first issue you have to face is how to secure financial resources. In Japan in particular, there is no well-established system for making the tourism business viable in rural regions.”

For example, tourists visit a place for “rarity,” that is, something that cannot be found anywhere else, such as hot springs, food, beautiful scenery, and famous or historic sites. Local governments and businesses, ordinarily, should receive higher compensation, or excess profit (i.e. rent), from tourists for the added value created by the rarity of their products. The profits brought to the community are then fed back into to the conservation and utilization of tourism resources, thus establishing a sustainable tourism business. “In Japan, however, free tourism services are taken for granted, and the idea of paying for rare local resources is not widely accepted,” says Makita.

Improving tourism services with the taxes paid by businesses and visitors

Makita is currently conducting field research in Switzerland to study progressive cases of how to successfully run a tourism business. One example of this is Zermatt, a ski resort located at the foot of the Matterhorn in the Alps.

According to Makita, the gemeinde (municipalitiy) collects two types of taxes related to tourism: a tourism promotion tax and a lodging tax (overnight stay tax). The tourism promotion tax is levied on all businesses involved in the tourism industry in Zermatt, and this covers all sectors from lodging to food and beverage, and even finance. On the other hand, tourists and other visitors to Zermatt pay a lodging tax that is collected by the lodging facility where they stay. “What is interesting is that these taxes are not collected by the gemeinde, but go directly to a DMO: the Zermatt Tourist Office,” says Makita. In Japan, DMOs (which stands for Destination Marketing/Management Organization) are called "tourist destination development corporations," and these refer to organizations that work to promote and attract visitors to tourist destinations. “In Zermatt, a system has been established whereby the DMO is responsible for improving various tourism services and tourism promotion by collecting fees from tourists who make best use of tourism services and from businesses that benefit from tourism resources, and then using these fees as financial resources,” explains Makita.

The role of DMOs, which are expected to build consensus in the region

In Japan, local governments have introduced onsen and lodging taxes in some regions. In addition to this, Makita points out that it is also important to ensure the effective functioning of DMOs. “How can we preserve local tourism resources or what efforts are needed to enhance the attractiveness of tourist attractions and to ensure visitor satisfaction? This requires discussions and consensus building with various stakeholders involved in tourism, including the hotel and inn industry, transportation providers, and the food, beverage, and retail industries, and this is the role that DMOs are expected to play,” says Makita.

Makita cites Yufuin Onsen, one of Japan's leading hot spring tourist destinations along with Beppu, as a model case in Japan. Yufuin here refers to the Yufuin basin, one of the three hot spring areas of the former Yufuin Town: Yunohira, Yufuin, and Tsukahara. “In the postwar period, the town itself was threatened with extinction when the Yufuin Basin Dam project, which would have submerged the entire basin into the bottom of a lake, was suddenly proposed. Since then, for over 50 years, informal forums have been organized for local people to think about and discuss how to develop their own community,” says Makita. From the late 1960s onward, the concept of creating a stay-oriented health and recreation resort started to emerge, and the community began making its own attempts through activities such as those of the Association for the Yufuin of Tomorrow. Through this process, Yufuin has taken shape as a stay-oriented tourist destination that takes advantage of the region's natural environment and landscape.

“That being said, it is no easy task to implement the same practices in tourist destinations in other regions of Japan. In rural areas, local residents and businesses are stuck in a situation where they cannot make decisions about their own community,” says Makita. As rural areas lost their vitality after the collapse of the bubble economy, large amounts of capital from outside these regions, including foreign funds, flowed in in rapid succession. Consequently, Makita says, it has become difficult for local stakeholders to discuss and reach consensus with everyone on the same page. He expounds: “DMOs can serve as bases where a diverse array of stakeholders come together to think about and create their own policy directions and visions for a region.”

Inbound tourism is on the rise again since the end of the COVID-19 pandemic. “In order for every nook and cranny of Japan to benefit from this trend, it is essential to develop a system to make the tourism business viable,” emphasizes Makita. He concluded the interview by saying, “I will continue my research to identify reference cases, including those in other countries, and to apply the knowledge and lessons learned from those cases to regional development in Japan.”