Tourism as a catalyst for Japan’s economic growth and the impact of overtourism

Inbound tourism is playing an increasingly important role in Japan’s economy, with spending by foreign visitors in Japan reaching an annualized JPY7.2 trillion for the period between January and March 2024. The inbound tourism industry, which is positioned as a service exporter, has now become the country’s second-largest export sector behind automobiles¹. The Japanese government has set a target of JPY15 trillion in inbound spending by 2030. If achieved, inbound tourism will grow into the nation’s largest export alongside the automobile industry.

The recent growth in inbound spending is driven not only by higher spending per trip, but also by a surge in the number of foreign tourists to Japan. According to the Japan Tourism Agency, the number of foreigners visiting Japan hit a record 3 million in March 2024 alone, and it has remained at the same high level for four consecutive months. This upward trend is expected to accelerate the growth of inbound visitors and their spending.

On the flip side, however, the blooming tourism has also shed light on the negative side effects of being a popular tourist destination. The negative aspects of a tourist influx – overtourism - are becoming apparent as the tourist numbers impact the daily lives of residents living in tourist destinations. Overtourism, however, is nothing new for top tourist destinations around the world and has always been a center of debate for local authorities and residents. Any attempt to enhance economy through tourism should be discussed in conjunction with strategies to overcome the impacts of overtourism. Just months prior to the publishing of this article, thousands of Barcelona residents took to the street to protest against overtourism. The scene of some protesters spraying tourists with water guns is still in recent memory, and is a sharp testament to how critical an issue overtourism is for the people living in tourist destinations².

This article evaluates measures taken worldwide to combat overtourism, as well as analyzing the results of a survey which gauges the reaction of local people to high levels of incoming tourism in Japanese tourist destinations.

It also examines the course of action Japan should take to enhance its tourism industry as an important driving force for continued economic growth. 

This article is based on publicly available information and press releases, as well as the results of an online survey EY conducted in June 2024. The survey was conducted onpeople living in the ten Japanese cities listed below, with approximately 200 respondents representing each city.

Outline of the online survey
Period: Late June 2024
Method: Online questionnaire survey by a research company
Participants: Approximately 2,000 people living in each of the ten cities listed below, with approximately 200 respondents representing each city. (The number of respondents was less than 200 in Gunjo-shi, Gifu Prefecture and Hamada-shi, Shimane Prefecture.)

Asahikawa-shi (Hokkaido Prefecture), Nasushiobara-shi (Tochigi Prefecture), Taito-ku (Tokyo), Shizuoka-shi (Shizuoka Prefecture), Gunjo-shi (Gifu Prefecture), Kyoto-shi (Kyoto Prefecture), Nara-shi (Nara Prefecture), Hamada-shi (Shimane Prefecture), Izumo-shi (Shimane Prefecture), Hatsukaichi-shi (Hiroshima Prefecture)

Measures taken worldwide against overtourism

The debate around overtourism is heating up faster than ever as travelers flock to popular cities in excess of their capacities.

The Italian city of Venice, which is one of the most bucket-listed places in the world, began charging day-trippers a five-euro access fee starting on 25 April 2024. While the fee was applied only to the 29 busiest days between April and July 2024, the Italian government may raise the fee to ten euros and expand the applicable period to up to 100 days from 2025. This initiative by the Venetian government raises the following question: Will foreign tourists give up on their dream trip to Venice just because they will be charged a five-euro access fee? Local authorities explain that the fee system is aimed at encouraging day-trippers from neighboring areas to avoid busy days and instead visit other locations³ . The number of people who took a day trip to Venice on any of the targeted 29 days totaled nearly 485,000, but the initiative successfully held the figure under its 2023 levels for the peak season⁴.

In Asia, Thailand decided to withdraw its highly controversial plan to charge THB300 (approximately USD8.2) tourism fee to foreign visitors entering the country by air. Thai authorities had initially explained that the purpose of the entry fee was to help ensure its high-quality tourist market, and that it would never affect local stakeholders. However, the proposal was scrapped following a backlash from concerned private businesses⁵.

In Japan, there has also been a lot of talk about introducing a lodging tax in tourist destinations, and some municipalities are discussing the introduction of a two-tier pricing system which charges higher tourist fees to international visitors. Recently, Himeji Castle, a UNESCO World Heritage site in the Hyogo Prefecture city of Himeji, attracted a great deal of public attention when, during an international conference held in the city, the mayor of Himeji proposed a plan to implement a dual pricing system for castle visitors. Under the proposed system, an entrance fee will be hiked from current JPY1,000 (approximately USD6) to around USD30 for visitors from outside of the city, while it will be slightly lowered for Himeji citizens, to USD5. Despite the controversy, the practice of charging foreigners more than local residents is not so unusual in the rest of the world. At India’s Taj Mahal and Cambodia’s Angkor Wat, for example, foreign tourists are already paying higher prices⁶.

In an attempt to take a more direct approach towards controlling the number of inbound tourists, the Dutch capital of Amsterdam announced on 26 June 2024 its plan to start cutting the number of ships that can stop at its main port terminals over the coming years - a move to prevent mass tourism caused by cruise ships⁷. The Amsterdam government already announced in April that it had decided to ban the construction of new hotel buildings in the city to limit annual overnight stays to 20 million. The city hosted 20,665 thousand overnight stays in 2023⁸.

Similarly, the Spanish tourist hot spot of Barcelona announced on 21 June 2024 its intention to ban all short-term rentals to tourists as it seeks to control soaring housing costs and provide locals with affordable housing options again. The city of Barcelona plans to stop issuing new short-term rental licenses, with all the 10,101 holiday apartments currently registered with the city poised to be outlawed by November 2028⁹.

In the US, national parks now require visitors to make advance entry reservations in a bid to control daily entries and prevent overcrowding. In most cases, reservations are only required during the peak seasons¹⁰. In 2024, Yosemite National Park reinstated its reservation policy¹¹, which was once removed due to the opposition from local businesses and other stakeholders.

Lessons from the battle against overtourism 

Tourist destinations worldwide are experimenting with methods to combat overtourism by controlling the number of visitors primarily through the following three approaches.

First, there is a move to discourage visitors by imposing additional fees on tourists, such as the entry tax in Venice and the two-tier pricing systems being proposed throughout Japan. Secondly, municipalities like Amsterdam and Barcelona have moved to limit overnight tourists by imposing physical restrictions such as capping the number of accommodation facilities, banning tourist apartment rentals or limiting the number of cruise ships entering into nearby ports. Thirdly, Barcelona’s Sagrada Familia, US national parks and other popular tourist attractions are trying to avoid overcrowding by requiring visitors to make timed entry reservations.

However, these three approaches have been met with mixed reactions from local stakeholders, and there are ongoing discussions on how to accommodate their diverse needs. It is not unusual for a government to be forced into retracting its decisions, as is shown with the example of Thailand provided above. Even Yosemite National Park was once driven to remove its advance booking policy due to opposition from local businesses claiming that it would result in the loss of business opportunities during peak seasons. Likewise, a restriction on the construction of new hotels can trigger imbalanced supply and demand in the accommodation market, leading eventually to a steep rise in rooms rates, as can the elimination or restriction of short-term rentals. Such decisions have the potential to cause downturns in tourism numbers that far exceed the desired outcome.

To prevent this, there must be opportunities for local business owners, authorities and residents to engage in exhaustive discussions and build consensus. Without consensus, any initiative will only lead to stakeholder conflicts, leaving both tourists and locals frustrated. 

How can destinations ensure local residents feel invested in economic growth?

Here, we examine how overtourism is perceived by Japanese residents, as well as the actions to be taken to resolve the conflict between economic growth through tourism and the livelihoods of local residents.

In this article, we identified a total of 20 Japanese tourist destinations that are most likely to be experiencing overtourism by comparing the following indices against their pre-COVID-19 pandemic levels as measured in 2019: 1. The growth of inbound tourists (via the increase in the number of overnight tourists), 2. The impact of tourism on the lives of local residents (via the increase in the number of overnight tourists per capita), and 3. Labor shortages (via the increase in the number of overnight tourists per hotel/restaurant service worker).

From those 20 destinations, we selected the following ten cities (highlighted in yellow) and conducted a random questionnaire survey with their residents. In selecting these ten cities, we prioritized the locations where all of the above indices increased but also applied additional criteria such as a minimum of 200 residents participating in the survey, and the exclusion of several cities within Tokyo prefecture.

We combined the survey results with other insights to paint a broad outline of overtourism in Japan.

① Local residents' perceptions of overtourism

The results collected from the residents of the ten Japanese cities with a noticeable increase in tourists have revealed that approximately 40 percent of the respondents are in favor of the recent surge in inbound tourism. When including those who responded that they are “not particularly concerned,” nearly 70 percent indicated that a neutral or positive view of the increasing tourist numbers.

Asked if tourism is playing an important role in maintaining the quality of life of local residents, a slightly less than 60 percent of respondents agreed, while only 15 percent expressed negative opinions.

With regard to the degree to which they feel the impact of overtourism in their region, nearly half of respondents agreed, with ”strongly feel it” and “strongly feel it in certain areas” accounting for approximately 20 percent, and “slightly feel it” and “slightly feel it in certain areas” hovering around 30 percent. The largest number of residents feeling the impact of overtourism were from Kyoto City, followed by Tokyo’s Taito Ward, which is home to the popular Asakusa district, Nara City, and Hatsukaichi City, where the historic Miyajima Island is located. The results indicated that more residents in these cities perceive the impacts of overtourism than the residents of other destinations that are also experiencing a rapid increase in inbound tourists.

With regard to the perceived sources of overtourism, nearly 60% of respondents indicated an increase in the number of foreign tourists, while 24% cited both Japanese and foreign tourists. The results suggest that an increase of visibly foreign individuals acts a major cue for the surveyed individuals in the perception of overtourism.

② What are the pros and cons of tourism for local residents?

As mentioned earlier, approximately 60% of respondents have a positive view of tourism as they think it helps improve their quality of life. When asked about what positive impacts tourism has created in their communities, the largest number of respondents (excluding those who selected “I’m happy but for no particular reason” and “Other”) indicated its economic benefits, citing “Overall local economy/cash flow has improved,” followed by “New stores/restaurants have opened so I have more choice.” The third most frequent answer was that they “became interested/more interested in local attractions such as nature, history, culture and cuisine,” indicating that inbound tourism has served as a catalyst for rediscovering and taking pride in local attractions.

Even when limited to those who feel the impact of overtourism, the results showed no significant difference. The only notable difference, however, was that the number of people appreciating the economic benefits of tourism as its positive impact to their communities (“Overall local economy/cash flow has improved”) in this population was slightly larger than the average of all respondents.

With regard to the negative impacts of tourism, “Bad manners of tourists” topped the list, as might be expected, followed by issues related to transportation (“Buses, trains and other public transportation services, as well as roads, are more crowded and less convenient than before”) and difficulty accessing local attractions and facilities (“Local residents have trouble accessing tourist attractions, facilities and neighboring areas due to overcrowding”). It is worth noting that public transportation was by far the biggest negative impact noted among those who feel the impact of overtourism. 

In addition to crowded transportation services and other negative influences on the daily lives of local residents, increases in the cost of living, the entry of non-local businesses into the local marketplace, as well as the large gap in economic benefits received by tourist-facing businesses and local business owners operating outside of the tourism industry are also viewed as negative impacts of inbound tourism.

The responses of individuals who feel the impact of overtourism are particularly intriguing. “Bad manners” was ousted into second place, falling behind issues related to transportation (“Buses, trains and other public transportation services, as well as roads, are more crowded and less convenient than before”), while the third most frequent answer was “Public services have deteriorated, and the needs of local citizens are neglected.” These results suggest that this population is notably concerned about the quality of public services being affected by overtourism.

We asked respondents what they think can be done to solve the frustrations and issues caused by excessive tourists. The largest number of respondents called for the improvement of manners among tourists. This is primarily associated with unruly tourists who enter private properties and obstruct photo spots or roads to take photos for social media. Enhancing transportation infrastructure ranked second, indicating that access to public transportation has a substantial impact on their day-to-day lives. It is also worth noting that collecting tourist taxes and feeling the economic benefits of tourism also ranked highly in the results. There also were many respondents who expressed their expectations for monetary compensation to offset higher living expenses caused by tourism, highlighting a negative side effect of leveraging tourism for the revitalization of local economy.

Leveraging nudges as a tool to improve tourist manners

Recently, the Yamanashi Prefecture town of Fujikawaguchi made headlines when it decided to set up a barrier to block views of Mt. Fuji to prevent unruly tourists from disturbing local residents¹². News reports suggest that local authorities were forced to make such an extreme move as the behavior of tourists escalated to the extent that it required a decisive intervention. Meanwhile, tourism authorities can take advantage of a technique called nudging¹³ - a subtle intervention that aims to steer people towards making desirable decisions - to remind visitors of local rules and influence their behavior. A nudge can encourage tourists to make better choices on their own initiative without offending their feelings. 

Nudge 1: Encourage desirable actions - Installing a special photo taking platform

Instead of asking visitors to refrain from taking photos, we can introduce an alternative photo taking platform to keep them out of restricted areas. By convincing photo takers that they can capture better views from this new platform, and when the new platform disrupts the view from the original photo spot, the value of the old place will decline, leading target individuals to change their behavior or choice.

Nudge 2: Attract target attention - Installing innovative voting ashtrays

UK’s “Ballot Bin” voting ashtray is a fun gimmick that prevents smokers from littering their cigarettes. It attracts smokers’ attention with a catchy question, and encourages them to vote using their cigarette butts, instead of dropping them on the ground. According to a British environmental conservation organization, the initiative has successfully engaged smokers and reduced cigarette litter by up to 73%¹⁴.

Nudge 3: Visualize social norms - Streaming rule violations live on YouTube

We can also leverage a message attached to surveillance cameras to remind tourists of social rules without spoiling the landscape with warning signs. A warning message, such as “All tourist bad behavior is live-streamed globally,” is expected to demonstrate a deterrent effect. At the same time, real-time video streaming can inform viewers of the current crowd density at each site.

As stated above, a nudge can be a clever solution to reduce rule violations - it does not require that the morals of individuals improve, but instead subtly steers them into a particular type of behavioral change without them noticing it.

What actions will turn tourism into a driver of the Japanese economy?

Our questionnaire survey has revealed that despite recognizing the impact of overtourism, nearly 60% of local residents welcome the recent influx of visitors as they believe that the travel industry plays an essential role in enriching their quality of life, while only 15% of respondents expressed negative views of inbound tourism. Another noteworthy result was that many people answered that growing inbound tourism has helped them to recognize the growth of their local economy and rediscover nearby local attractions. These reactions underscore the fact that, at least for the time being, local residents' perceptions of tourism remain positive, and that they see tourism as helping them maintain a high quality of life.

Meanwhile, the survey also highlighted various challenges of overtourism. People who feel the impact of overtourism are more concerned about issues related to their daily lives than bad manners of tourists, with many of them citing increased difficulty accessing public transportation services and a deterioration in administrative services via the deprioritization of the needs of local citizens as their major issues. This suggests that people’s favorable view of inbound tourism shifts to the perception of overtourism when there are disruptions to the services they utilize in their daily lives.

While expectations are high for tourism as a driver of Japan’s economic prosperity, it raises concerns over its coexistence with local residents. To mitigate the frustration of local communities, many respondents indicated the need to improve tourist manners, enhance transportation infrastructure, introduce tourist taxes and ensure that the economic benefits of tourism pass to locals, as well as the expectation for monetary compensation to offset price increases caused by tourist influxes.

Among such measures, however, imposing tourist taxes seems less likely to eliminate the public dissatisfaction caused by overtourism. It may be effective to some extent in discouraging tourists from visiting tourist spots, but the collection of tourist tax should be discussed in the context of raising funds for marketing activities or initiatives to address tourism issues, rather than as the solution to alleviate the frustrations of local residents. Tourist tax revenues can support administrative efforts to maintain and improve residents’ quality of life by funding campaigns to raise awareness of local rules, or development projects to improve local transportation infrastructure. Meanwhile, we hear a lot of talk about the deteriorating living conditions across different tourist destinations. Blooming tourism is driving price increases, resulting in higher living costs for local residents. While the expansion of inbound tourism can benefit local communities in the form of increased investments, residents’ frustration will build up once their livelihoods are threatened by rising commodity prices. This very principle, however, could explain the desire respondents expressed to share in the tangible benefits of economic growth as the means to mitigate the frustrations inherent in overtourism. 

All these reactions of local residents highlight the fact that any attempt to enhance economic growth through tourism can be a double-edged sword unless a proper tourism management system is in place. They will never be able to feel the economic benefits of inbound tourism under a system that is designed to only drive profits to certain businesses. In order to ensure that the financial benefits of tourism are enjoyed by all stakeholders in the community, it is essential to establish a proper framework to manage local tourism. A Destination Management Organization (DMO) is expected to lead the management of the local tourism industry. In tourism destinations outside of Japan, DMOs are already assuming a leadership role in guiding the healthy development of tourism.

Revitalization of the local economy through tourism must be achieved in parallel with efforts to extend its benefits to local residents, and to ensure transparency and accountability in these processes.

In our previous article on tourism, we discussed the need for “re-generation” - initiatives that seek to not merely neutralize negatives but instead transform them into positives. We consider sustainability initiatives which focus on maintaining the status quo or neutralizing negatives to no longer be sufficient to keep up with the ever-accelerating destruction and deterioration of our natural environment and social systems¹⁵. Most public discussions around sustainable tourism have been structured in a way that made it easy to lack a sense of ownership and perceive it as somebody else’s business. Our inability to relate to the concept is a major factor that has thus far prevented the affected communities from taking any concrete actions. In addressing these consequences, it is essential that all stakeholders residing in a local community (including their DMOs) feel a sense of ownership as they debate and navigate the challenges of achieving healthy economic growth and development through community-level tourism while attempting to address or ward off the potential negatives of tourism: emergent issues with the potential to drastically affect the livelihoods of local residents and the social infrastructure that they rely on. DMOs that successfully consult and engage all such local stakeholders in the management of tourist destination, will lead their local communities in overcoming the challenges of overtourism and achieving a balance between the healthy development of their community and economic growth through tourism.