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Tour intermediaries and the regional tourism economy : the case of Japanese tour distribution in British… Stubbs, Thomas E. 1984

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TOUR INTERMEDIAR IES AND THE REGIONAL TOURISM ECONOMY: THE CASE OF JAPANESE TOUR D I STR IBUT ION IN B R I T I S H COLUMBIA by THOMAS E. STUBBS B . A . , S imon F r a s e r U n i v e r s i t y A THES I S SUBMITTED IN PART IAL FULF I LMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF ARTS i n THE FACULTY OF GRADUATE STUDIES S c h o o l Of C o m m u n i t y And R e g i o n a l P l a n n i n g We a c c e p t t h i s t h e s i s a s c o n f o r m i n g t o t h e r e q u i r e d s t a n d a r d THE UN IVERS ITY OF B R I T I S H COLUMBIA May 1984 © Thomas E. S t u b b s , 1984 In presenting t h i s thesis i n p a r t i a l f u l f i l m e n t of the requirements fo r an advanced degree at the University of B r i t i s h Columbia, I agree that the Library s h a l l make i t f r e e l y a v a i l a b l e f o r reference and study. I further agree that permission f o r extensive copying of t h i s t h e s i s f o r s c h o l a r l y purposes may be granted by the head of my department or by h i s or her representatives. I t i s understood that copying or p u b l i c a t i o n of t h i s thesis for f i n a n c i a l gain s h a l l not be allowed without my written permission. Department of The University of B r i t i s h Columbia 1956 Main Mall Vancouver, Canada V6T 1Y3 Date DE-6 (3/81) i i Abstract The s p a t i a l pattern of t o u r i s t t r a v e l is of concern to regions attempting to plan for a t o u r i s t industry. Planning of the industry has generally focused on a l l o c a t i n g elements of supply such as location of hotels and entertainment f a c i l i t i e s to create a tourism space economy. Yet, planning for the tourism industry must also examine elements influencing demand such as promotion, marketing and the role of tour intermediation (travel agencies, tour wholesaling and tour operation) in order to develop a more informed tourism p o l i c y . The role of intermediary corporations is p a r t i c u l a r l y important to regional tourism economies due to their organizational control over the flow of t o u r i s t s and their impacts. Intermediaries serve to negotiate and dir e c t the flow of t o u r i s t s from market regions into and within host regions. Intermediary a b i l i t y to influence the s p a t i a l flow of t o u r i s t s necessitates their involvement in the planning process. This thesis examines the extent and significance of intermediary control over the s p a t i a l pattern of t o u r i s t t r a v e l . Because international tourism i s sold through a multinational network of intermediary firms in market and host regions, an understanding of market structure is necesary to analyze tour d i s t r i b u t i o n patterns. Techniques e l i c i t e d from the Industrial Organization Model provides methods to outline organizational and structural c h a r a c t e r i s t i c s of an industry. This model has been used to apply concepts of relevant market, industry size, s e l l e r concentration, scale economies and product 1 U d i f f e r e n t a t i o n to the Japanese organized tour market to B r i t i s h Columbia. It was found, using this analysis, that Japanese based intermediary corporations have s i g n i f i c a n t sales control over the tour d i s t r i b u t i o n process fcr Japanese organized t o u r i s t s to B r i t i s h Columbia. In 1983, over 53 per cent of these to u r i s t s are controlled by six firms which s e l l , organize, d i s t r i b u t e and guide or contract to guide. Of the remaining 47 per cent, Japanese corporations take a central role in deciding tour programmes. Japanese intermediary corporations play a dominant role in the d i s t r i b u t i o n of t o u r i s t s throughout the B.C. economy. The influence of intermediary corporations point to a number of policy implications. Tourism planning cannot stop at the a l l o c a t i o n and promotion- of tour i s t f a c i l i t i e s . Intermediaries have the a b i l i t y to s e l e c t i v e l y direct large groups of -tourists to and within regions. On a regional and l o c a l l e v e l , strategies should be developed with intermediary involvement in the planning process. Without th i s involvement, planning strategies would be less precise in their attempts to develop p o l i c i e s to influence the s p a t i a l flow of t o u r i s t s . T a b l e o f C o n t e n t s A b s t r a c t i i L i s t o f T a b l e s v i L i s t o f F i g u r e s v i i C h a p t e r I TOUR INTERMEDIAT ION AND THE REGIONAL ECONOMY 1 1 . INTRODUCTION 1 2 . PROBLEM STATEMENT 2 3 . BACKGROUND AND L ITERATURE 3 4 . METHODOLOGY 16 5. TECHNIQUES 17 5.1 R e l e v a n t M a r k e t 18 5.2 M e a s u r e m e n t Of S i z e 19 5.3 S e l l e r C o n c e n t r a t i o n 19 5.4 P r o d u c t D i f f e r e n t a t i o n 20 5.5 S c a l e E c o n o m i e s 20 6. EXPECTED RESULTS 20 7 . J U S T I F I C A T I O N FOR THE ANALYS I S 21 C h a p t e r I I AN OVERVIEW OF ORGANIZATION AND STRUCTURAL CHARACTER IST ICS OF THE INTERNATIONAL TOURISM INDUSTRY 23 1. THE TOUR PRODUCT 23 2 . THE INTERNATIONAL TOUR INDUSTRY 25 3 . THE S E L L I N G OF THE TOURISM IMAGE 26 4 . THE SALE OF TOURISM 27 5. INTERNATIONAL INTERMEDARIES : TOURIST D ISTR IBUTORS 31 C h a p t e r I I I THE BROADENING HORIZONS OF JAPANESE TOURISTS 41 1 . INTRODUCTION 41 2 . THE JAPANESE TOURIST 41 3 . JAPANESE TRAVEL HAB ITS AND PATTERNS 44 4 . J A P A N ' S L E A P INTO INTERNATIONAL TRAVEL 47 5. SUMMARY 56 C h a p t e r I V AN ANALYS I S OF JAPANESE TOUR D I STR IBUT ION I N B . C 57 1 . INTRODUCTION 57 2 . AN OVERVIEW OF B .C . AND JAPANESE INTERMEDIAR IES 57 3 . TECHNIQUES OF ANALYS I S 61 3.1 R e l e v a n t M a r k e t •• 61 3.2 F i r m S i z e And C o n c e n t r a t i o n 64 3 .3 P r o d u c t D i f f e r e n t a t i o n 69 3.4 S c a l e E c o n o m i e s 71 4 . TRENDS AND IMPL ICAT IONS OF MARKET STRUCTURE ON B . C . . . . 7 2 5. SECONDARY TRENDS OF INTEGRATION 7 4 SUMMARY 78 C h a p t e r V TOURISM IN THE PROCESS OF INTERNAT IONAL I ZAT ION : PLANNING FOR CORPORATE D I V I S I O N 79 1 . OVERVIEW 79 2 . QUESTIONS FOR ADDRESS 83 2.1 R e g i o n a l P l a n n i n g 87 2 .2 R e g i o n a l P r o m o t i o n 90 2 .3 L o c a l P l a n n i n g 91 3 . NATIONAL PLANNING 92 4 . CONCLUSIONS 94 vi L i s t of Tables I. 1.1 Interindustry Growth in B.C 5 II. 1.2 Travel Markets in B.C 6 I I I . 1.3 Select Overseas Market Growth and Change in B.C. 7 IV. 1.4 Percentage of Overseas V i s i t s , One or More Nights to Western Canada 8 V. 3.1 Changing Purposes of Japanese Travel 46 VI. 3.2 Variables of Overseas Japanese Travel Growth 1963-1983 48 VII. 3.3 Chronology of Japanese Travel Trade Development With Western Canada 50 VIII. 3.4 Japanese Overseas Travel Growth 1963-1983 54 IX. 4.1 Size and Ranking of the Top Ten Japanese Travel Service Agencies, 1975 59 X. 4.2 Functional C l a s s i f i c a t i o n of Intermediary Firms 63 XI. 4.3 Market C l a s s i f i c a t i o n , Size, D i s t r i b u t i o n and Concentration of S e l l e r Firms 66 XII. 4.4 Japanese Corporate Investment in B.C. Tourism Related Infrastructure .76 v i i L i s t of Figures 1. 2.1 The Tourist Trade D i s t r i b u t i o n Network 29 2. 2.2 Functional Breakdown of the International Tour Industry 32 $SIGNOFF 1 I. TOUR INTERMEDIATION AND THE REGIONAL ECONOMY 1. INTRODUCTION International tourism is one of the largest and fastest growing industries. The industry is just beginning to gain recognition and study as i t plays a more dominant role in the world economy. The rapid growth of tourism trade has fostered the need to understand and ra t i o n a l i s e the industry. Furthermore, touri s t trade i s going through a number of organizational and structural changes a f f e c t i n g to u r i s t patterns and their impacts. Understanding the patterns of to u r i s t travel i s essential to planners attempting to plan for a tourism economy. The forces influencing the d i s t r i b u t i o n of to u r i s t s into and within destination regions i s of increasing interest to policymakers attempting to determine elements influencing tourism impacts. An increasing interdependance of international tourism trade has grown from the ri s e of multi-national tour intermediaries. Tour intermediaries ( r e t a i l e r s , wholesalers and operators) have become key tour organizing forces in some markets influencing the d i s t r i b u t i o n patterns of tour i s t s through host regions. One d i s t r i b u t i o n system going under increasing i n d u s t r i a l i z a t i o n is the Japanese travel market. The ri s e of the P a c i f i c economy over the last three decades has been par a l l e l e d by one of the fastest overseas growth rates ever, especially to western Canada. This has fueled the growth of strong intermediary d i s t r i b u t i o n channels for the flow of Japanese t r a v e l l e r s abroad. An examination of d i s t r i b u t i o n 2 channels would allow an understanding of their influence over a host region. 2. PROBLEM STATEMENT The purpose of this thesis is to examine the nature of international tourism trade t i e s to Canada, s p e c i f i c a l l y the role of intermediary corporations negotiating the d i r e c t i o n and flow of t o u r i s t s from Japan to B.C. Research w i l l focus on intermediary organizational influence 1 on the structural dimensions 2 of the B.C. tourism economy. Changing organizational relationships and resulting structure of the tourism trade must be understood in order to d i r e c t e f f e c t i v e p o l i c i e s towards the equitable growth of tourism in B r i t i s h Columbia. Therefore, t h i s thesis w i l l attempt to delineate the organizational influences of the tour intermediary corporations handling the Japanese market. The following research questions w i l l be addressed: 1 ) To what extent do intermediary corporations influence the flow of Japanese t o u r i s t s into and within the B.C. tourism economy? This w i l l lead to two further questions relevant to planning: 2) What role do tour intermediaries play as agents for host communities and regions? And, 3) What are the broader planning implications of tour intermediation? 1 A b i l i t y to arrange the flow of t o u r i s t s 2 Overall pattern of t o u r i s t d i s t r i b u t i o n 3 3. BACKGROUND AND LITERATURE Over the l a s t few decades, trade patterns have sh i f t e d regionally and s e c t o r a l l y . Regionally, a dramatic s h i f t in trade flows from the A t l a n t i c to the P a c i f i c has altered many economies. In addition, changing forms of trade in new sectors has had further effects in many regional economies. B r i t i s h Columbia is central to both of these trends, i t s major trade partners are from the P a c i f i c region and i t s growing industries, tourism and energy, r e f l e c t changing patterns. Tourism i s rapidly becoming the world's largest industry, second only to world o i l trade. Between 1972 and 1981 international t r a v e l receipts rose 328 per cent to $106 b i l l i o n US. The number of international t r i p s increased 60 per cent to 280 m i l l i o n and the World Tourism Organization (WTO) forecasts a doubling of current s t a t i s t i c s by 1990. Nationally, Canada's real rate of i n d u s t r i a l growth at 3.7 per cent was surpassed by the 4.3 per cent increase in tourism receipts (CGOT 1983). P r o v i n c i a l l y , tourism i s becoming an increasingly important component of the.B.C. economy. Over the la s t decade, there has been a near doubling of revenues. As t r a d i t i o n a l industry sectors such as minning and logging have stagnated or declined, tourism has grown steadily to become the province's t h i r d largest (table 1.1). Excluding o i l and gas revenues from minning, tourism would be the second largest industry. Of B.C. markets, resident and American v i s i t o r s are by far the largest accounting for over 75 per cent of volume and 4 revenues (table 1.2). Overseas markets, although minor in comparison, have been experiencing the most s i g n i f i c a n t changes in the last decade (table 1.3, 1.4). Representing four per cent of volume and eight per cent of revenues, the rapid growth of international trav e l is slowly becoming evident. Of th i s growth to B.C., there has been a trend towards increasing P a c i f i c trade with an almost equal drop in A t l a n t i c t r a f f i c . Two prime markets have helped fuel t h i s trend, the Japanese and Hong Kong v i s i t o r s , which have both experienced rapid rates of growth to western Canada. The s i g n i f i c a n t changes in economic growth rates among industry and within markets point to a need to understand their e f f e c t s on the B.C. economy. One area of study which has not been thoroughly addressed globally or l o c a l l y i s the effect of international tourism trade i n d u s t r i a l i z a t i o n to regional economies. Tourism's reputation as a growing international industry, employment generator and means to d i v e r s i f y the economy has stimulated active promotion and development. However, the absolute rate and magnitude of growth potential of tourism has necessitated policy guidance. The rate and magnitude of growth have already caused widespread economic, s o c i a l and environmental effects a l t e r i n g the fabric of many regions (Krippendorf 1982, EIU 1973). Table 1.1 Inter-Industry Growth in B.C. Year Fishing 1 (Million) o Agriculture (Million) Tourism 3 (Million) if Mining (Million) Oil & Gas 5 (Million) Forestry 6 (Million) 1969 85.8 203.4 376.7 383.3 86.1 1,846 1974 220.5 407.8 869 1032.9. 231.3 3,489 1979 517.5 653.9 1,650 2128.2 738.8 7,164 ° 1982 526.9 900.4 2,010 1678.1 912.9 6,303 (1983) % Annual Growth 47.23 34.05 41.12 33.6 81.56 26.26 Wholesale marketed value, including halibut landing. Federal Dept. of Fish and Oceans. Farm cash receipts, Statistics Canada 21-001 Annual. 'Ministry of Tourism Annual Reports, N.B. 46% Resident Derived Revenue, 27% Rest of Canada, 27% Foreign. ^Copper, zinc, molybedenum, coal, others. Mining statistics usually include o i l & gas revenues but are broken down in this case. Ministry of Energy, Mines and Petroleum Resources, Annual. 'Crude o i l sales, natural gas to pipe. Ministry of Energy, Mines and Petroleum Resources, Annual. 'Principal statistics of wood industries (lumber, plywood, veneer, doors, sashes, and singles) + principal stats, of pulp and paper. Statistics Canada 25-202 Annual. Table 1.2 Travel Markets in British Columbia - Number of Visitors 1 Visitor % of (000) 1971 (000) 1982 % 1971 Volume % 1982 Volume % Annual Growth Revenue 19822 (million) V i s i t o r 2 Revenue 1982 Resident B.C. 2,630 5,550 33 48 9 910 46 Resident Canada 3,038 2,930 38 26 - 570 28 U.S.A. 2,347 2,560 29 22 - 365 18 Overseas 65 440 0.8 4 34 164 8 Total 8,080 11,480 100 4% 2,010 100 Statistics Canada 66-201 Annual Travel Between Canada and Other Countries. 2Ministry of Tourism (1983), Tourism Facts 1982. Table 1.3 Select Overseas Market Growth and Change to B.C. 1972 - 1982 1982 BC Entries as a % of 1972 1974 Number of 1976 Person Visits 1978 1980 1982 Canadian Entries Growth U.K. 27,597 46,539 55,502 65,584 92,973 85,975 17.1 310 Japan 17,763 33,291 46,280 61,302 68,200 63,907 47.1 351 Germany 7,373 12,465 17,874 24,040 37,821 43,785 20.0 600 Australia 7,914 15,724 20,463 21,448 25,237 23,769 29.0 400 Hong Kong . 7,459 10,028 12,631 11,934 13,532 18,897 48.0 220 Source: Statistics Canada 66-001 Annual Statistics Canada 66-201 Annual Table 1.4 Percentage of Overseas Visits, One.or More Nights to Canada. Select Regions. 1972 1974 1976 1978 1982 % 1972 1982 Change (1982) 1 Average Expenditure Visitor (1982) 1 Total Spending (000,000) U.K. 31.7 29.6 27.2 27.4 24.7 -5.2 337.00 160.6 Germany 8.8 9.6 9.9 10.0 10.7 +1.8 546.10 100.3 Europe 70.9 68.4 66.6 65.2 62.1 -7.8 438.30 468.2 Australia 2.6 3.4 3.6 3.6 3.5 +0.9 479.10 28.6 Japan 4.8 5.6 6.2 7.3 6.7 +1.9 607.50 69.8 Asia + Oceania 14.3 17.3 19.1 21.0 22.6 +7.3 540.00 180.7 Total 85.2 8517 86.7 86.2 84.7 -0.5 479.70 825.5 1 These are Statistics Canada estimates. Source: Statistics Canada 66-201. Statistics Canada 66-001. 9 As tourism has grown from a part time enterprise to a f u l l -fledged industry in these regions, a number of problems r e l a t i n g to the organization of the industry have stimulated government involvement. A determined e f f o r t to aid and guide tourism development in B.C. did not r e a l l y begin u n t i l a joint federal - pr o v i n c i a l $50 m i l l i o n , f i v e year Tourism Industry Development Agreement (TIDSA) was signed in 1978. This s i g n i f i e d , for example, the development of several major projects e.g.Whistler and promotional campaigns e.g. Super-Natural B r i t i s h Columbia. TIDSA's main objective came from i t s Department of Regional Economic Expansion (DREE) roots, to achieve more regionally d i v e r s i f i e d and s p a t i a l l y aggregated growth, p a r a l l e l l i n g the trend by many countries (Young 1973, OECD 1979:12). TIDSA was implemented through a series of programs which aimed to foster planning, development and organization (DREE 1978). Accompanying these actions was the establishment of a separate Ministry of Tourism in 1980 to 'promote and guide tourism development'. Since the j u r i s d i c t i o n of tourism i s the r e s p o n s i b i l i t y of the provinces, the Federal government's Tourism Canada has aided in policy d i r e c t i o n , promotion and research. These combined e f f o r t s have shown a s i g n i f i c a n t r i s e in v i s i t o r s to B.C. and Canada. As a result, there has been s p a t i a l , sectoral and structural changes in the B.C. tourism economy influencing the d i s t r i b u t i o n of tourism impacts. These e f f o r t s have a l l attempted to grasp the forces of an intangible industry. Tourism i s best understood i f i t i s viewed 10 as a tradeable commodity. Tr a d i t i o n a l export-base and c e n t r a l -place theories view tourism as t e r t i a r y and endogenous to a regional economy (Richardson 1973). As a commodity, tourism can be defined as a basic a c t i v i t y by recognizing these basic elements: 1) Tourism i s an economic good which i s constructed through the patterned consumption of a series of services creating a l i f e s t y l e experience. 2) As an experience good, tourism i s productive in i t s requirement of infrastructure and f a c i l i t i e s . 3) The consumption of tourism takes place at the point of production. It is therefore a reverse export p o t e n t i a l l y earning foreign exchange as a basic a c t i v i t y . 4) The ultimate sale of tourism 'products' is the result of a number of d i f f e r e n t methods aiming to create and manipulate the flow of t r a v e l l e r s for corporate or regional benefit. The industry i s highly competitive and multi-national. 5) Tourism, as an industry uses the community and host region as a basic resource, s e l l s i t as a commodity and, in the process, a f f e c t s the l i v e s of everyone. Tourism products are 'manufactured' through the s p a t i a l consumption of travel patterns. The sum of these patterns supports the regional tourism space economy. As regional tourism development and promotion grow, the pattern of t o u r i s t s is influenced. Resorts are b u i l t and regions are promoted to influence s p a t i a l t o u r i s t t r a v e l . Overall, a number of 11 organizational factors influence the resulting structure of the industry: 1) The t o u r i s t industry i s ultimately structured through three lev e l s of organization; through locati o n a l dynamics of individual service a t t r a c t i o n s , government planning and promotions and, industry intermediaries. These a l l serve to organize the s p a t i a l flow of t o u r i s t s through marketing, advertising, and development. 2) Tour service industries are sold through the c o l l e c t i v e promotion and sale of t o u r i s t experiences or through contracts with industry intermediaries ( r e t a i l t r a v e l agents, tour wholesalers and tour operators) who negotiate service contracts to s e l l a series of tour arrangements to customers. 3) Intermediaries are 'processors' through their formation of tour 'products'. Destination-region services (transport, accomodation, entertainment etc.) are r e l a t i v e l y dependent on the actions of intermediaries for their overseas customers. Intermediaries play two p a r t i c u l a r l y important functions: f i r s t they are the 'creators' of the tourism product through co-ordinating and marketing practices and second, they are the international brokers of the t o u r i s t destination's product. Following rapid growth in international tourism there has been a trend towards more intermediary organizational control over tourism t r a v e l trade. New more e f f i c i e n t transport and communications technologies have enabled the r i s e in mass travel (EIU 1980,1981,1982). Mass tr a v e l has been characterized by the 1 2 packaged tour which has combined the low cost and psychological security desired by t r a v e l l e r s with the corporate desire to process tourism into a more refined commodity (Cohen 1972, Burkhart and Medlik 1975). As a result of these trends, the industry has become more competitive and comprehensive (Britton 1982). Consequently, the industry has evolved through a number of s i g n i f i c a n t changes placing more control of the t o u r i s t s into the hands of industry intermediaries (IUOTO 1975). Intermediaries have altered industry structure by becoming key  organizational middlemen who negotiate the flow of t o u r i s t s from  region to region. The t o u r i s t d i s t r i b u t i o n system between regions i s susceptible to various degrees of influence, integration and concentration. Tour intermediary corporations from market regions have natural influence, through r e t a i l agents over sales to destination regions. This influence lends i t s e l f to integration of the intermediary function (wholesaling, operation) into destination regions which enables them to control, the flow of their t o u r i s t s . This complex relationship has been conceptualized as 'structural dependency' (Roxborough 1979). Destination region services are r e l a t i v e l y dependent on market region intermediaries, t h i s i s one of the r i s i n g inherent c h a r a c t e r i s t i c s of the t o u r i s t trade. As regions have grown from part-time hosts to a f u l l -fledged tourism economy, the importance of intermediaries for international, e specially overseas t o u r i s t s i s p i v o t a l . As regions s p a t i a l l y plan for and invest in tourism, they must also 13 plan with tour intermediaries to influence the flow of t o u r i s t s . However, most tourism plans are based on promotional campaigns and s p e c i f i c projects, not on industry organization or tour patterns. This gap r e f l e c t s a lack of policy and understanding of the complexities of the industry (Antonson 1983). This i s now at least p a r t i a l l y r e f l e c t e d in the r e l a t i v e erosion of B.C and Canada's competitive position in the international tourism market ( B a i l i e 1980, EIU 1981). Attempts to aid organization have faced cutbacks to enable more development (Pollock 1980, Ference 1983). One consequence i s B.C. tour corporations losing their competitive position to firms, based in market regions, which are extending their control of the t o u r i s t into and within B.C. (Sorenson 1983:2). One example i s the Japanese travel market to B.C. For more than a decade the B.C. government has spent time and energy developing this trade through promotion, language and h o s p i t a l i t y t r a i n i n g , etc. in e f f o r t s to increase Japanese travel to B.C. It has r a t i o n a l i z e d and promoted regional tourism development on the growth of such markets (Tourism B.C. 1981:17). However, changes in the organization of intermediaries handling t h i s market have led to the demise of many B.C. tour corporations (Sorenson 1983:2). As a re s u l t , tourism industries in B.C. are now more dependent on foreign controlled firms who have a more s o l i d i f i e d bargaining position and less of a propensity to d i s t r i b u t e the t o u r i s t into more than a few, set and refined i t i n e r a r i e s . If B r i t i s h Columbia i s to pursue t o u r i s t trade as a viable 1 4 development option, an understanding of i t s inherent c h a r a c t e r i s t i c s , p a r t i c u l a r l y the role of international tour intermediaries i s needed to aid development po l i c y . It follows that the planned expansion of B.C's tourism economy w i l l face the forces of strong d i s t r i b u t i o n channels. To summarize: 1 ) The organization of to u r i s t flows i s central to the successful plan for a tourism economy. It is the pattern of t o u r i s t s which influences impacts. 2) Certain markets have strong d i s t r i b u t i o n systems. Highly organized systems can become t o u r i s t 'enclaves' controlled by international intermediaries. This reduces not only revenues but also d i s t o r t s the image of the region. An understanding of the forces of these d i s t r i b u t i o n systems is essential to enable more informed tourism and regional planning. 3) E f f o r t s to develop a tourism economy in B.C. must aim to foster s p a t i a l and sectoral dimensions of the industry. Without an organized structure, tourism regions may not receive the type of tourism economy expected. The next chapter w i l l provide an in-depth overview of the nature of the international tourism industry. This serves to outline the inherent forces within the system. This is followed by a case study of the Japanese t r a v e l l e r s and corporations. A review of their r i s e into the international scene i s followed by an evaluation of the i n d u s t r i a l structure of the B.C. tourism 1 5 economy as i t re lates to th is market. 16 4. METHODOLOGY A number of methods could be used to determine the influence of international tour intermediation over the flow of t o u r i s t s through regional tourism economies. However, an understanding of intermediary influence would be incomplete without understanding the basic forces of market structure. The intermediary function of tour corporations ( r e t a i l i n g , d i s t r i b u t i n g , wholesaling , and operating tours) serve to s e l l B.C. tourism products. A st r u c t u r a l analysis of the tour intermediary sector, ( i . e . , l i m i t s of service markets, degree of integration, product d i f f e r e n t a t i o n and ultimate ownership) is needed to understand the tectonics of tourism trade. The role of foreign corporations trading tour products cannot be adequately examined without f i r s t looking at market structure. Basic foreign dir e c t investment theory t e l l s us that investment w i l l not occur in industries with pure competition. Investment occurs when a company has a comparative advantage to exploit: technical, access to c a p i t a l , management, d i s t r i b u t i o n , etc. International trade theory outlines firm behaviour as exporters (or importers) based on their r e l a t i v e advantages in the marketplace (Grubel 1981). Planning for the tourism economy would be imprecise without an analysis of the comparative advantages of competing firms in the marketplace and how thi s e f f e cts a host region. Policy prescription ultimately a f f e c t s these advantages and firm behaviour. If an industry is to be understood, f i r s t a market structure analysis must be conducted. 1 7 The Industrial Organization Model provides a number of techniques to e l i c i t information about organizational and s t r u c t u r a l c h a r a c t e r i s t i c s of an industry (Bain 1968, S t i g l e r 1968). This model w i l l be used, in part, to apply concepts of relevant market, industry si z e , s e l l e r concentration, scale economies, product d i f f e r e n t a t i o n , conduct and performance to the tour intermediary sector hosting the Japanese organized tour market to B r i t i s h Columbia. 5. TECHNIQUES To determine the parameters for t h i s analysis, observation and consultation with the Canadian Association of Travel Agents: Market Japan provided a l i s t of 22 organized tour products to B.C. This l i s t i n g was enlarged then narrowed from Tourism Canada's l i s t of 23 packages to Canada and others provided from industry o f f i c i a l s (Appendix A) (CGOT 1983b). The study l i s t represents active packages in 1983 and is estimated to represent most Japanese related tour programmes' to Western Canada. An interview schedule was set up to discuss the i n d u s t r i a l organization of industry intermediaries handling t h i s market. Firms involved with associated tour programmes were located through l i s t i n g s and discussions with industry representatives. Interviews were structured in an informal fashion to obtain the information required. A set l i s t of questions were outlined for address at each interview (Appendix B). Not a l l respondents answered nor were asked a l l questions l i s t e d . The primary information sought - s e l l e r volume and linkages with other intermediaries was received from at least one representative 18 company for each tour programme. In many cases, cross checking q u a l i f i e d the data. This analysis w i l l focus primarily on defining the relevant market and determining size and s e l l e r concentration. Information received from interviews has allowed a descriptive overview of these factors to be described. 5.1 Relevant Market .we may define the relevant market as including a l l s e l l e r s in any individual industry ( s t r i c t l y a group of s e l l e r s of close-substitute outputs who supply a common group of buyers) and a l l the buyers to whom they s e l l . . . . Bain 1968, 6-7 Buyers are defined as a l l Japanese organized (group and packaged) tour t r a v e l l e r s and s e l l e r s those corporations negotiating and arranging their flow to western Canada. S e l l e r s are further defined by function for further analysis. To achieve t h i s , a more narrowed framework must be delineated. This thesis w i l l only examine the Japanese tr a v e l market to B.C. Of this market, only organized tour t r a v e l l e r s (group and packaged) w i l l be studied. While examining the effects of intermediaries in the Japanese organized tour market, an overview of the independent Japanese t r a v e l l e r can be provided. Description of the relevant market i s an exercise in taxonomy. It provides an outline which enables the determination of other market parameters such as size and concentration. Relevant market data does provide policymakers 19 with an overview of market players. 5.2 Measurement Of Size A l i s t i n g of s e l l e r corporations would provide l i t t l e insight into the nature of trade relationships; the actual size of firms shows r e l a t i v e influence. Size of any enterprise can be calculated through a number of comparative measures such as sales, volume, labour employed, c a p i t a l employed, value added and capacity. However, selection of size measures i s determined by data a v a i l a b i l i t y . C o n f i d e n t i a l i t y l i m i t s access to most of these measures (1979 Travel Regulation Act). Interviews provided information on organized tour volume handled by each company and inter-company relationships. This measurement was then used to determine s e l l e r concentration. 5.3 Se l l e r Concentration Size and s e l l e r concentration among and between firms i s central to the purpose of t h i s thesis. This analysis outlines the forces of market structure influencing the d i s t r i b u t i o n of t o u r i s t s . Market and size data are combined to provide a more comprehensive view of industry structure. A more accurate picture of concentration can be determined by investigating enterprise and establishment concentration. Establishment concentration refers to ownership integration among enterprises. Establishment integration allows a deeper understanding of the structure of d i s t r i b u t i o n channels. 20 5 . 4 Product Differentation The variety of products served by s e l l e r s i s a function of supply and demand forces. However, due to the r e l a t i v e dependence of t o u r i s t s for advice from s e l l e r s (due to the purchase of the product sight-unseen) determination of di f f e r e n t a t i o n i s especially important to host regions dependent on intermediaries. Therefore, di f f e r e n t a t i o n w i l l be determined through s e l l e r propensity to offer a variety of products. 5 . 5 Scale Economies Optimal lev e l s of firm e f f i c i e n c y exert a natural influence over firm s i z e . The various costs of inputs (wholesale service costs- -hotel rates etc. and others- -advertising etc.) influence firm s i z e . A brief outline of influencing factors w i l l be delineated. 6. EXPECTED RESULTS Intermediaries now have the a b i l i t y to organize the flow of to u r i s t s between regions on a large scale. As a result, i t i s expected that a s i g n i f i c a n t degree of intermediary influence w i l l be found in the Japanese t r a v e l market to B.C.This w i l l point to a need to r a t i o n a l i z e the role of international tour intermediaries as part of a l l regional tourism development plans. 21 7. JUSTIFICATION FOR THE ANALYSIS Planners cannot afford to lose sight of the relationship between i n s t i t u t i o n a l i z e d economic power and regional development (Weaver 1984). This power influences the s p a t i a l economy and therefore the ultimate growth and future of a region. This analysis rests on the examination of i n s t i t u t i o n a l forces involved in the t o u r i s t industry as i t relates to regional planning. Few in-depth academic studies have covered the structure of international tour intermediaries and their e f f e c t s on host regions. Perhaps the best known outlines the nature of d i s t r i b u t i o n systems but does not apply s p e c i f i c analysis to any region and market (WTO 1978). Askari (1971) developed the f i r s t analysis on the nature of packaged tours. His contribution, however, was limited to their demand function. In conclusion, he projected that changing organization of the tour industry as a result of packaged tour growth would lead to a need to further study their e f f e c ts (Askari 1971:43,51). Recent works have shown that changing trends towards tourism i n d u s t r i a l i z a t i o n must be studied in order to more accurately develop planning strategies (Vukonic 1982, Lanfant 1980). It is recognized that t h i s study takes a selective look at a large problem. However, i t should contribute to three other general purposes. F i r s t , tourism development policy can be more accurately delineated by host regions. Second, th i s information w i l l add to studies on Canada's role in the changing P a c i f i c economy. F i n a l l y , t h i s w i l l also add to a deeper understanding 22 of the B r i t i s h Columbia economy. 2 3 11. AN OVERVIEW OF ORGANIZATION AND STRUCTURAL CHARACTERISTICS OF THE INTERNATIONAL TOURISM INDUSTRY This chapter examines the d i s t r i b u t i o n system organizing the flow of t o u r i s t s into host regions. The d i s t r i b u t i o n system involves the actors organizing, promoting and s e l l i n g t o u r i s t regions as an end product. This process requires the creation and/or stimulation of touri s t t r a v e l patterns through the host region. The pattern of to u r i s t t r a v e l is central to the planning of a tourism economy. The overall organization and structure of the tour industry influences the patterns of t o u r i s t travel and their impacts. Planners must be aware of industry structure and i t s influence over travel patterns. To understand t h i s , we must f i r s t examine what the tour product i s , how i t is organized, promoted and sold. 1. THE TOUR PRODUCT The trade of tourism products has three d i s t i n c t c h a r a c t e r i s t i c s . The product i s not i d e n t i f i a b l e using standard c r i t e r i a - - 'Super-Natural B r i t i s h Columbia' cannot be categorized in the same fashion as thermal coal- -the product only car r i e s broad geographical and c u l t u r a l images. Tourism is also geographically fixed in space. As a result, i t must be consumed in s i t u ; i t is an export in reverse. It follows that the successful export of tourism depends upon i t s successful representation and d i s t r i b u t i o n from abroad. Because the t o u r i s t industry has no tangible product, i t is a unique industry. The s t a t i c 'tourism plant' elements are 24 combined into a 'product' which are, in r e a l i t y , a series of services and images. This product is an outcome of the symbiotic practices employed in marketing and promotion through governments, industry and tour intermediaries. The uniting of a single tourism concept, conveyed through advertising and marketing, elements by which their nature alone may not be related to tourism become to u r i s t attractions once they are processed into consumer goods. This 'processing' influences the s p a t i a l flow of t o u r i s t s into and within regional economies. In most industries the supplier has r e l a t i v e control over the d i s t r i b u t i o n of his product, i t s p r i c i n g and qu a l i t y . Tourism d i f f e r s in two respects; (1) the supplier is not just one industry, i t is a whole region and, (2) industries and regions are r e l a t i v e l y dependent on an external d i s t r i b u t i o n system for the supply of the international t o u r i s t . Planning for the appropriate form of tourism development in l i g h t of these c h a r a c t e r i s t i c s i s even more complex. As a reverse export, host regions are the receptors of market region t o u r i s t s . However, the sale of the tourism product often occurs in market regions. As regional development plans are fostered, d i s t r i b u t i o n systems organizing the flow of t o u r i s t s into and within host regions must be understood to d i r e c t appropriate polic i e s . "...Overlooking t h i s e s s e n t i a l fact i s probably the basic cause for many misunderstandings, disputes and less than essential marketing and development schemes in tourism...." WTO 1978:2 25 2. THE INTERNATIONAL TOUR INDUSTRY The international t o u r i s t industry functions as a service l i n k i n g the t o u r i s t , or consumer, to the producer of those goods and services desired by consumers, the destination. It i s comprised of two d i s t i n c t but inextricably linked elements: 1) The s t a t i c element consists of the destination regions' supply sector, a combination of accommodation, restaurant, transportation and entertainment services which are a l l part of the culture, geography and image of the region. E f f o r t s to plan and develop a select tourism space economy have been common in recent years, with the building of tour service elements through destination resorts and scenic drives etc. creating a tourism 'system' (Gunn 1979). This system forms the tourism space economy. However, the pattern of each to u r i s t varies through any one to u r i s t space economy. Tour services are not automatic receptors of t o u r i s t s . 2) These tour services are r e l a t i v e l y dependent upon the dynamic  elements influencing demand; marketing, promotion and international sales which influence the di r e c t i o n and flow of to u r i s t s within the physically planned space economy of a host region. Although a pre-planned space economy may be developed, a duality of the industry influences the actual s p a t i a l flow of the t o u r i s t . This duality is the contrast between what exists, the s t a t i c elements, and what i s promoted, the dynamic elements. 26 Dynamic elements have particular influence because international t o u r i s t products are often bought sight-unseen. The tou r i s t purchases an image in search of an experience. As a res u l t , the marketing and sale of tourism i s as important to the region as the s p a t i a l planning of the industry. 3. THE SELLING OF THE TOURISM IMAGE A key element in the 'processing' of tourism for sale depends on stimulating t o u r i s t motivation through images (Dann 1981). Images are created by private agencies and public associations to induce the to u r i s t to v i s i t s p e c i f i c areas. Tourists are subject to the 'social engineering' of their expectations influencing t r a v e l patterns. As LeFebvre (1972:45) notes, "forms of r e a l i t y are contrived on the pr i n c i p l e s of r a t i o n a l i t y , organization and planning". The d e f i n i t i o n and construction of these r e a l i t i e s by government and private enterprise a l t e r s the sp a t i a l patterns and actions of the to u r i s t . . . . i t i s possible that images, as perceived by individuals in the travel market, may have as much to do with an area's tourism development success as the more tangible recreation and tourism resources... Hunt 1975:7 Tourists seek ' r e a l i t y ' in their travels but are inhibited by impenetrable layers of contrived r e a l i t y . The experience of tourism i s l i k e the experience of society; society has been at least p a r t i a l l y created by and is an extension of media tools (McLuhan 1964). Tourists seek to get away from i t a l l but, in so doing, are manipulated by planners and organizers of the 27 to u r i s t trade (McCannell 1976). This, according to Boorstien (1961) i s the 'cultural doping' of the t o u r i s t . The to u r i s t never leaves the environmental bubble contrived for him: he is a victim of a series of staged pseudo-events that together form the product and sale of tourism. Planning for tourism must coincide with the appropriate creation and sale of tour images. Without this t i e , planning would be d i s f u n c t i o n a l . 4. THE SALE OF TOURISM Many enterprises providing t o u r i s t services do not s e l l d i r e c t l y to the customer. Consequently, t o u r i s t service enterprises must rely on the influences of the d i s t r i b u t i o n system and sales intermediaries such as travel agents, tour operators, reservation services and charter brokers. Their success and p r o f i t a b i l i t y does not t o t a l l y depend upon tour d i s t r i b u t i o n agents, but for international tour customers i t is a l l but mandatory. Intermediaries are thus in a pi v o t a l position to negotiate and direc t the flow of the t o u r i s t . The development, promotion and sale of tourism takes place within a multi-tiered framework. Host region federal, p r o v i n c i a l , and municipal governments, and private concerns s e l l tourism. A l l levels of government become involved in constructing tour images to promote sales enhancing the economic well-being of i t s region and in organizing the flow of to u r i s t s to minimize adverse e f f e c t s . The tourism sector includes small business, transport companies, accommodation services, etc. Private corporations also construct images to s e l l tourism to enhance their own economic well-being. These a l l serve to 28 influence the d i s t r i b u t i o n system for the tour product. The tour d i s t r i b u t i o n system i s schematically outlined in the accompanying figure ( f i g 2.1). Tourists purchase tourism services with the aid or influence of the forces of the tour d i s t r i b u t i o n system (intermediaries, travel associations, national organizations and sales representatives). While the associations and organizations are primarily promotional, intermediaries play an active role in the actual sale. It is in the intermediaries interest to p r o f i t from each sale while i t i s in the associations interest to produce an o v e r a l l tour image. A conceptual view of d i s t r i b u t i o n systems can only be obtained i f three basic facts are recognized: 1) National and Regional Tourist Organizations become involved to maximise regional benefit. They tend to focus on: -Expanding business and employment opportunities, -Earning foreign exchange, -Increasing tax revenues, -Encouraging higher u t i l i z a t i o n of f a c i l i t i e s and, -Minimizing adverse e f f e c t s . 2v F i g u r e 1 - 2 . 1 The T o u r i s t T r a d e D i s t r i b u t i o n N e t w o r k PRODUCERS OF TOURISM SERVICES TRANSPORT; Air, Car, Land,Sea, Rental,etc. I ACCOMODATE ATTRACTION; OTHER; I ION; Museums, Retail, ; Hotels, parks,etc. , Banking, i I Motels, etc. etc. f \1/ DISTRIBUTION AND SALES INTERMEDIARIES Tour Inter-mediaries Traeel Associat-ions Government Tourism Organizat-j ions Sales Representatives of Tourism Services. (Advertising, Promot i on,Mar ket i ng) Tourists-Visitors-Customers 30 2) Tour i n t e r m e d i a r i e s become i n v o l v e d to serve as commission b roker s fo r h o s t - r e g i o n s e r v i c e s . However, i t i s of secondary i n t e r e s t to them: -Which d e s t i n a t i o n they s e l l , -Which s e r v i c e s they send t o u r i s t s t o , and -Whether t h e i r p r a c t i c e s of tour d i s t r i b u t i o n f o l l o w n a t i o n a l nour o r g a n i z a t i o n p l a n s . 3) In order to reach the i n t e r n a t i o n a l marketp lace h o s t - r e g i o n s e r v i c e s depend upon the d i s t r i b u t i o n system to s e l l t h e i r p r o d u c t s : - N a t i o n a l t our i sm o r g a n i z a t i o n s deve lop p romot iona l a c t i v i t i e s in market r e g i o n s . - R e p r e s e n t a t i v e o f f i c e s and t r ade m i s s i on s serve to l i n k d e s t i n a t i o n s e r v i c e s wi th the market. - I n t e r m e d i a r i e s c o n t r a c t wi th tour s e r v i c e s to s e l l t h e i r product f o r commiss ion. Recogn i z ing the nature of t h i s system i s c r i t i c a l f o r p l anne r s of a t ou r i sm economy. As shown, d i f f e r e n t i a l a c t o r s i n f l u e n c e the s p a t i a l d i s t r i b u t i o n of t o u r i s t s . W i th in i n t e r n a t i o n a l markets i n t e r m e d i a r i e s p l a y a more s i g n i f i c a n t r o l e in the s a l e and d i s t r i b u t i o n of t o u r i s t s . I f r eg ions aim to i n c r e a s e t h e i r t ou r i sm e x p o r t s , they must unders tand the r o l e of the i n t e r m e d i a r y . 31 5. INTERNATIONAL INTERMEDARIES: TOURIST DISTRIBUTORS Industry intermediaries act as brokers of destination-region, services processing the tourism product. These brokers form d i s t r i b u t i o n channels to smooth the trade between the to u r i s t and hosts. E s s e n t i a l l y three main functions of intermediation occur ( f i g . 2 . 2 ) . These can be broken down l i k e an i n d u s t r i a l enterprise, there are r e t a i l i n g / d i s t r i b u t i o n , wholesaling and operating components. Tour wholesaling is the most important aspect. It involves both the negotiation of service contracts in destination regions and the marketing and d i s t r i b u t i o n of. products they have 'created' to r e t a i l t r a v e l agents in originating countries. R e t a i l agents work on a commission basis for tour wholesalers, a i r l i n e s and hotel companies. Tour operators handle the i n t r i c a c i e s of the tour such as booking arrangements for hotels, ground transport, etc. for tour wholesalers. Intermediary functions are by no means d i s t i n c t , they integrate with each other and with t o u r i s t related industries to provide a wide variety of tourism firms. However, the multi-faceted nature of this integration does not detract from the inherent c h a r a c t e r i s t i c s of each component. The f i r s t of these relates to function. Component services can be divided into those essential for touring (transport and accommodation) and those which are peripheral (tours, a c t i v i t i e s ) . Figure 2.2 Functional Structure of the Tourism Industry TOURISM MARKET (Generating Region) Potential Travellers Group tours •uniforms •specialized •flexible Independent traveller I N T E R M E D I A R I E S Retail Travel Agents Tour Distributors Tour Wholesalers Tour Operators TOURISM DESTINATION (Supply Region) Service-Supply Sector •transportation •accommodations •restaurant •gift stores •attractions •entertainment •services 33 An agency can act primarily-as a ti c k e t i n g agent for outbound t r a v e l l e r s , as well as a l o c a l ground operator for inbound t r a f f i c . The second c h a r a c t e r i s t i c relates to s p a t i a l aggregation. Companies can carry out a number of intermediary functions (operating, wholesaling, etc.) s p a t i a l l y connecting t o u r i s t s across borders. The t h i r d relates to organizational t r a i t s . Often a m u l t i p l i c i t y of functional and sp a t i a l aggregation occurs. For example, intermediary corporations can become involved in international trading as well as being l o c a l contract agents for others. The organization of intermediary corporate networks in both the o r i g i n a t i n g countries (where tours are sold) and destination countries (where tours are negotiated) influences the d i s t r i b u t i o n of t o u r i s t s into host regions. The nature of these enterprises has been changing, characterized by increasing levels of integration, which has been the key force in their r i s e in the international t o u r i s t industry (Hudson, n.d.). These trends, as we w i l l see, p a r a l l e l trends in the r e t a i l merchandising industry except on a global scale. Organizational and structural changes in the r e t a i l sector caused by integration, chain stores, systematizing and conglomeration have sent planners scurrying to r a t i o n a l i z e plans for commercial centres. International intermediaries have evolved into systems of "large corporations capable of organizing, co-ordinating, creating, and marketing the diverse elements which constitute the various t o u r i s t products available" (Britton 1982a:253-4). 34 These are structured d i s t r i b u t i o n channels. Three trends of corporate organization have led to the increasing role and influence of tour intermediaries through these channels. The f i r s t is the growth in firm size and their eventual amalgamation as they sought greater scale economies. These large companies develop a marked advantage in establishing favourable bargaining positions due to the number of t o u r i s t s they have a r e l a t i v e degree of control over. They can afford large marketing and promotional campaigns and gain access to many r e t a i l e r s . These firms become established i n t e r n a t i o n a l l y through a "system of international tour operations" (Lanfant 1980:22). Such systems (organized channels) are groups of agencies and co-ordinators linked to form networks of action leading to the structuring of the international tourism product. This trend has been followed by a number of international hotel corporations (e.g., Hyatt International) in addition to international intermediaries (e.g., Thomas Cook and Sons). This change in the organization and structure of the industry has been f a c i l i t a t e d by new, more e f f i c i e n t transport and communications technologies (EIU 1979a,1981b ,1983). On one hand new transport mediums such as the jumbo jet opened the p o s s i b i l i t i e s of mass t r a v e l , but on the other i t caused a s i g n i f i c a n t restructuring of the industry. Mass travel has been characterized by the packaged tour which brought together low cost and the psychological security desired by t r a v e l l e r s (Cohen 1972) and f u l f i l l e d the corporate'desire to process tourism into a refined commodity (Burkhart and Medlik 1974:187). 35 Integrated corporations processing t o u r i s t resources are in pi v o t a l positions because of their points of connection within various destination regions and sale of tourism in originating regions. Their real power l i e s in duality; attuned to both supply and demand, they are able to negotiate the flow of t o u r i s t s into a select set of destinations and related services. They are attuned to supply through bulk or long term service contracts with host industries (obtained at discounts) and demand through their creation of marketing and promotion of select destinations. This lends i t s e l f to the second organizational trend, that of horizontal and v e r t i c a l integration. V e r t i c a l integration has occurred between service industries, such as an a i r l i n e and a hotel corporation, and between intermediaries and services such as a tour operator and accommodation services. Horizontal integration has occurred primarily amongst tour intermediaries. This leads to the integration of r e t a i l agents with tour wholesalers and tour operators. The rapid r i s e of these corporations has also been f a c i l i t a t e d by the penetration of non - tourism c a p i t a l into the system. For example, Barclay's Bank i s now the largest shareholder in Thomas Cook and Sons, ITT owns the Sheraton Hotel Group and Budget Car rental, the largest Japanese tour corporations are integrated with soqo soshas or general trading houses. These organizational changes within the industry centring 36 around the r i s e of the tour intermediary corporation have important implications for destination regions hoping to export their t o u r i s t resources abroad. Intermediaries, in essence, can control the i n d u s t r i a l process of tour sables, influencing the d i s t r i b u t i o n of benefits and impacts. The t r a d i t i o n a l role of government promotion and development need re-evaluation in l i g h t of the forces of the power of these new organizations. Such changes in the r e t a i l sector have caused a s i g n i f i c a n t change in the form and structure of urban commercial centres (Davies 1976). A re-assessment of tourism planning i s needed in order to address the changing roles of tour d i s t r i b u t i o n . The role of these corporations as multinational intermediaries has been described as one of serious host region dependence (IUOTO 1976, H i l l s and Lundgren 1977, Britton 1980, UNCTAD 1982). In a more c r i t i c a l analysis, H i l l s and Lundgren have outlined the basic trend of multinational integration of the tour industry as a t y p i c a l core-periphery syndrome. This model follows intermediary and service integration of market region corporations into destination regions creating 'export enclaves' for these companies. Britton (1980) shows that t h i s integration leaves destination regions as substitutable commodities dependent on external forces. As l o c a l service industries vie for the sale of their services, they can become a substitutable commodity to other destinations i f the price is not s i m i l a r . The d i s t r i b u t i o n of benefits from tourism i s determined by the organization and structure of the industry between market 37 and destination regions. It follows that the pattern of income d i s t r i b u t i o n and impacts derived from various markets is a function of three variables: the organization and structure of the d i s t r i b u t i o n system, the costs of that system to host regions, and the volume of t o u r i s t s served from that particular market. The s p e c i f i c organization and structure of the d i s t r i b u t i o n system depends upon the l e v e l of trade i n d u s t r i a l i z a t i o n between regions (Lanfant 1980:21). The l e v e l of trade i n d u s t r i a l i z a t i o n can be related to the degree of intra and in t e r - f i r m organization and structuring of t o u r i s t flows. The more processed the flows (packages etc.) the more developed the d i s t r i b u t i o n channels. The trend towards 'channeling' of tourism as an i n d u s t r i a l i z e d process has happened between many regions (especially t r o p i c a l 'sun,sand and surf' destinations). The export behaviour of tour intermediaries ultimately influences the d i s t r i b u t i o n system. As described e a r l i e r , tour corporations have the a b i l i t y to grow and d i v e r s i f y their operations globally, enabling them in some cases to d i r e c t l y influence the pattern of t o u r i s t s through their d i s t r i b u t i o n channels. This a b i l i t y and behaviour evolves out of a development process i n t r i n s i c a l l y related to the inter-regional and international growth of firms. In theory, foreign corporations export to or invest in a host region when the environment for conducting business has entry or competitive advantages to compensate for various s p a t i a l barriers to entry (see Caves 1971, Hirsch 1976). 3 8 As tourism trade evolves, firms learn more about s p a t i a l and competitive barriers to entry and may then wish to export or invest further in the trading re l a t i o n s h i p . Tour intermediaries are naturally multinational, as travel patterns evolve tour corporations from host and market regions attempt to control more aspects of t o u r i s t flow to reap further benefit. This leads to various levels of integration which c h a r a c t e r i s t i c a l l y stems from market region countries (IUOTO 1975:46). The influence of these evolutionary trends of corporate action to control the flow of t o u r i s t s is perhaps one of the most serious questions needing to be addressed. Markets with highly structured d i s t r i b u t i o n channels create select patterns of t o u r i s t flows through host regions. Each market has a dif f e r e n t set of channels. These channels each have their own form of economic leakage, s o c i a l impact and environmental impact depending on the behaviour and organization of c o n t r o l l i n g firms. Regions without the control over the co-ordinating function are increasingly subject to such pressures. The costs of structured channels to host regions i s a two-sided issue. On one side intermediaries serve to bring the tou r i s t and his revenue into the host region, but intermediaries manipulate and control the flow of t o u r i s t s , p o t e n t i a l l y without concern for the region's in t e r e s t . The central question in international tourism planning thus revolves around the role that intermediaries play in the host region's economy. Tradi t i o n a l planning approaches r e l a t i n g to the tourism industry have used i t as a 'tool for regional development' (see 39 Clarke 1981, Pearce 1981, Gunn 1979 or, s p e c i f i c a l l y , Marshall Macklin, Monaghan 1979). These approaches have followed systems theory in attempt to s p a t i a l l y define a tourism industry within a region by taking inventories of services and attractions in e f f o r t s to outline a tour product. Their major deficiency i s that they have not examined the i n d u s t r i a l process of tourism,  that i s how the services are organized and sold, thus  influencing the s p a t i a l pattern of t o u r i s t t r a v e l . Planners in general have assumed a somewhat predictable demand. They have taken market p r o f i l e studies to determine desired products but they have not examined the influence of intermediaries as industry 'manufacturing agents'. It follows that B r i t i s h Columbia is not an automatic tour destination for a l l international v i s i t o r s ; i t only becomes so through a complex d i s t r i b u t i o n system influencing the flow of t o u r i s t s . This i s only created by advertising, plant investment and transport linkages. This, in turn, lends i t s e l f to integration within the international d i s t r i b u t i o n system. Several points emerge from th i s discussion. 1) Social engineering of the t o u r i s t is as important to host regions as the s p a t i a l planning of the tourist plant. Without control over the s o c i a l engineering, the s p a t i a l flow of t o u r i s t s w i l l be outside the hands of host regions. 2) D i s t r i b u t i o n systems are the key l i n k s in d i r e c t i n g the way B r i t i s h Columbia's touri s t industry receives international 40 v i s i t o r s . Marketing strategies, product development and to u r i s t expectations are primarily determined through d i s t r i b u t i o n systems which dire c t the t o u r i s t into the pre-planned tourism space economy. 3) As tourism trade r relationships evolve there is a tendency for a d i s t i n c t set of d i s t r i b u t i o n channels to be created as a result of firm behaviour. This can result in a di f f e r e n t s p a t i a l flow of t o u r i s t s than previously planned for. 4) The tour industry is subject to a certian degree of foreign control and ownership because of the inherent nature of d i s t r i b u t i o n channels having to be located in both market and destination regions. In the following chapters, these points w i l l be discussed i n -depth. Their significance and relevance to the B.C. tour economy w i l l be tested through a case of the Japanese travel market and the organization and structure of the d i s t r i b u t i o n channels handling t h i s market. 41 III. THE BROADENING HORIZONS OF JAPANESE TOURISTS 1. INTRODUCTION It i s important to understand the nature of to u r i s t markets in order to aid in the planning of a tourism economy. Each t o u r i s t region is supported by a number of di f f e r e n t markets each having their own s p e c i f i c e f f e c t on the economy. This chapter primarily aims at outl i n i n g the h i s t o r i c a l factors which have influenced the Japanese t r a v e l l e r to v i s i t Western Canada. 2. THE JAPANESE TOURIST Trends of seeking recreation through t r a v e l , along with Japan's r i s i n g l i v i n g standards and economic integration with the rest of the world, have contributed to the special appeal of international tourism. Japan now generates over 4 m i l l i o n overseas v i s i t s per year, representing a t o t a l export value of $4.81 b i l l i o n (US) to receiving nations (OECD, 1982). Canada now receives approximately 140,000 v i s i t o r s annually, representing about one per cent of international v i s i t o r s or seven per cent of overseas t r a v e l l e r s . Americans are by far the most frequent v i s i t o r s accounting for over 90 per cent of international t r a v e l to Canada. Of overseas t r a v e l , the Japanese are t h i r d behind B r i t i a n (26.4 per cent) and Germany (10.4 per cent). The Japanese are the second largest group of overseas v i s i t o r s to B.C. (14 per cent) behind the B r i t i s h (24 per cent) accounting for about two per cent of a l l international t r a v e l . However, Japanese travel expenditure accounts for about five per 42 cent of international v i s i t o r s to B.C. ($26.7 m i l l i o n ) , ($69.8 mill i o n ) nationally (StatsCanada 66-201, 66-001). Japanese fondness for tr a v e l dates back to the Edo period (1600-1867), when a newly constructed network of roads designed to allow communication between provinces opened up the p o s s i b i l i t y of public t r a v e l . Today, the Japanese are a nation of t r a v e l l e r s . The domestic travel industry must accommodate over 140 m i l l i o n t r i p s per year. Travel i s a l i f e l o n g habit; from early school years to business l i f e groups of people traverse their country l i k e no other. Pilgrimages to Shinto shrines and Buddhist temples, as well as v i s i t s to home regions and family have fueled much of t h i s demand. But i t i s only recently that the Japanese have begun to trav e l internationally or to consider travel in terms of a leisure a c t i v i t y . The concept of l e i s u r e i s a f a i r l y recent phenomenon in Japanese culture. Traditional Confucianist ethics tended to discourage the pursuit of l e i s u r e . During the M e i j i Restoration (1868 - 1912) emphasis on the workplace li m i t e d individuals' conceptualization and p a r t i c i p a t i o n in free-time a c t i v i t i e s . Enjoyment for i t s own sake was frowned upon; the general s o c i a l consensus was that free time should be used for shigoto or work (Tokuhisa, 1980:129). The work ethic was so pervasive that the Japanese have had to adopt a French equivalent for vacation, " bakesion ". Social and economic transformations of post-war Japan have fostered new attitudes towards l e i s u r e . There has been a growing appreciation for the virtues of s e l f - f u l f i l l m e n t away 43 from the pressures of urban l i f e and a routinized workplace. Japan's f i r s t White Paper on Leisure defined the term as ". . . the opportunity for the human being to give expression to his individual f a c u l t i e s in an age when so c i a l systemization i s robbing him of his i n d i v i d u a l i t y " (Financial Times, 1973 quoted in ITQ #2, 1973, p. 36). The desire to seek mental, s p i r i t u a l and physical forms of recreation outside the confines of everyday l i f e has led to an increase in travel geared s p e c i f i c a l l y to l e i s u r e , causing some to conclude that the Japanese may take " . . . their l e i s u r e as seriously as their work" (ITQ #2, 1973, p. 36) . Although tourism as a l e i s u r e pursuit i s playing an ever more s i g n i f i c a n t role in Japanese society, t r a d i t i o n a l l y strong attachment to the workplace remains the primary factor in l i m i t i n g the amount of travel time available to Japanese workers. While vacation time is increasing i t does not come close to North American standards. For example, in 1981 the average Japanese worker took only 8.3 vacation days a year out of the 16.3 days available, and even t h i s was an increase over the 1973 average of 4 vacation days annually. The use of days off has been limited not only by a strong work ethic, but also by a corporate employee evaluation system that tends to give higher ranking to those who put in more hours on the job. This is changing, however. Japanese corporations are now becoming d i r e c t l y involved in encouraging employees to take advantage of their vacation time. Many companies have begun to provide resorts for employee use or organize company 44 group tours during holiday periods. This i s often part of the employee's pay compensation package, they are given holidays as part of their pay. The 1978 Study of L i f e Awareness (cited in Tokuhisa, 1980, p. 128) indicated that overseas travel is the most preferred use of l e i s u r e time, although t h i s reported desire is f u l f i l l e d by only three per cent of the population. In the same year the Survey of Free Time Expenditure showed that the rate of increase in l e i s u r e expenditures was higher than that of o v e r a l l consumer expenditures. According to a 1980 survey on the d a i l y l i f e of Japanese people conducted by the Prime Minister's Office ( Tourism in Japan 1982 ,1983, pp.2-3), 23 per cent of the respondents wished to enrich their "leisure l i f e " , second only to the 27 per cent wishing to enrich their "housing l i f e " . Those who desired to pursue lei s u r e as a p r i o r i t y were predominantly the "youth" age group (18 to 30 years old). 3. JAPANESE TRAVEL HABITS AND PATTERNS As the desire to travel abroad became a r e a l i t y , the quest for certain t o u r i s t products lead them to various regions. This was, of course, limited by the travel infrastructure and d i s t r i b u t i o n channels necessary to create and negotiate trade patterns. A major determinant of any trade pattern i s the c u l t u r a l c h a r a c t e r i s t i c s of the t o u r i s t and there i s not a more extreme example than the Japanese. I n i t i a l l y , Japanese travel abroad was primarily for technical v i s i t s to examine industry and commercial technology and organization. As tourism evolved their naivete, nature of 45 travel and attachments to groups characterized them as group  t o u r i s t s . It was not uncommon to see busloads of uniformed t o u r i s t s v i s i t i n g a l l of the ' c l a s s i c s ' - the Vatican, Athens or London in the early years. Group travel i s no longer proportionately as important as i t was in the mid 1960's (see table 3.1). There is an increasing preference for example, for direc t experience of the l o c a l culture, through recreational a c t i v i t i e s and testing l o c a l cuisine (Moeran, 1983, p.96). As Japanese travel for group comradery decreased more active forms of travel became the norm. Today sport and health are becoming increasingly popular reasons to t r a v e l . As Japanese integration into the international economy broadened, changing habits and more adventurous forms of tr a v e l has led Japanese t o u r i s t s to new regions l i k e western Canada. The att r a c t i o n of western Canada, p a r t i c u l a r l y 'supernatural' B.C. and the Rockies has been to absorb a more 'exotic' travel experience. If the exis t i n g surveys are indi c a t i v e of future travel patterns, B.C. may experience an increasing number of v i s i t o r s in coming years. Because Japanese l e i s u r e travel to foreign countries is geared primarily to sightseeing, famous landmarks such as the Rockies and Niagara F a l l s hold a special appeal. Table 3.1 Changes in the Purpose of Japanese Tourism Travel Year Group Relaxation Sports Sightseeing, Pleasure Visits to Shrines, Temples .. Hobbies or Studies Health and Recouperation 1964 60.3 2.8 19.0 4.0 7.2 5.2 1966 63.6 4.5 14.4 4.6 5.3 5.6 1970 39.2 6.7 32.0 3.0 9.8 7.3 1972 41.1 4.5 34.5 2.7 4.2 8.4 1974 42.5 7.5 29.4 3.3 4.0 7.6 1976 31.3 10.3 26.3 4.3 4.1 15.1 (Cited in Tokuhisa, 1980, p. 133). 47 According to recent surveys Canada now ranks as a top country of destination choice for Japanese t o u r i s t s (External A f f a i r s 1983, Nippon Research 1980). There i s a certain status value associated with v i s i t i n g various locales and the Canadian Rockies have p a r t i c u l a r prestige as one of the places currently in vogue. Scenic grandeur and natural settings, with which B r i t i s h Columbia i s well endowed, are becoming a p r i o r i t y for many Japanese t r a v e l l e r s ( V i s i t o r '79; Nippon Research, 1980). This desire to escape to the outdoors has been attributed by some analysts to the increased pressures of urbanization, crowding and p o l l u t i o n (Moeran, 1983, pp. 96-7). 4. JAPAN'S LEAP INTO INTERNATIONAL TRAVEL In 1964, Japan accepted the IMF recommendation to l i f t foreign exchange regulations on imports. As a general phasing of currency l i b e r a t i o n began, r e s t r i c t i o n s on the purchase of foreign exchange for l e i s u r e purposes were gradually l i f t e d . In 1964, overseas tourism t r a v e l was limited to a single t r i p passport with a $500 (U.S.) currency exchange l i m i t . As l i f t i n g continued, the industry serving t h i s market had to work within, these constraints. As a r e s u l t , a highly structured industry evolved s e l l i n g organized tours to obtain volume discounts to meet r i g i d exchange l i m i t a t i o n s (table 3.2). As the value of the Yen strengthened and more funds were allowed for overseas t r i p s , the Japanese travel d e f i c i t grew rapidly. This was strengthened by an intense desire of Japan's people to t r a v e l . As we s h a l l see l a t e r , Japan experienced one of the fastest growth rates ever. 48 Table 3.2 Variables of Japanese Travel Growth Value of Japanese Limit of Balance of Yen to Foreign Travel Payments Canadian Exchange Deficit Year Dollar Funds ($US) (millions) Events 1963 0.002996 - - -1964 0.002996 500 - 4/1/64 Tourism Begins 1965 0.002995 500 17 -1966 0.002975 500 40 -1967 0.002979 500 55 Expo '67 1968 0.002989 500 41 -1969 0.003005 700 93 -1970 0.002916 1000 83 Jumbo Jet, Osaka Worlds Fair 1971 0.002912 1000 337 Multi-Trip Passports 1972 0.003270 1000 573 -1973 0.003696 3000 1043 -1974 0.003354 1500 1123 Oil Crisis 1975 0.003430 1500 1115 -' 1976 0.003327 3000 1351 Montreal Olympics 1977 0.003980 3000 1727 -1978 0.005480 No limit 3247 -1979 0.005375 No limit 4256 Second Oil Crisis 1980 0.005183 No limit 3949 -1981 0.005450 No limit 3883 -1982 0.004966 No limit 3362 -1983 . 0.005190 ^ank of Canada Review, Jan. 1984, Table 65. 20ECD. International Tourism in OECD Countries (Annual). 49 Organized tours had a special appeal for novice t r a v e l l e r s ; they helped to reduce fear of the unknown by keeping the t r a v e l l e r in familiar group si t u a t i o n s . Slow integration into the international scene, in response to the gradual easing of government regulations, has allowed the Japanese tourism industry to maintain i t s tight control over the market. As the industry became more systematized, t r a v e l and tour prices f e l l and sales expanded at unprecedented rates. Before travel was f i r s t 'Liberated', major travel agencies in Japan and elsewhere began targeting new opportunities. They promoted saving for travel and introduced potential destinations. However, travel was o r i g i n a l l y an expensive commodity and agents had a tough time s e l l i n g tours. It was the a i r l i n e s which f i r s t gained a grasp on the industry. Carriers, aiming to increase capacity, strengthened their marketing a c t i v i t i e s and organized t i e s with agencies in Japan and abroad to develop markets. In July 1964 Swiss Air was the f i r s t to launch an inclusive tour to Europe. This was quickly copied and by 1969 most c a r r i e r s had introduced brand name tours in conjunction with a consortia of travel agenc ies. The Japanese-British Columbia travel connection dates back to 1955 when Canada and Japan reached a b i l a t e r a l commercial a i r l i n e s agreement and waived visa fees for v i s i t o r s not seeking permanent employment (see table 3.3 for a chronology of Japanese trade development with Canada). In that year CP Air began i t s f i r s t return 50 Table 3.3 Chronology of Trade Events 1952 First Technical Visits to B.C. 1955 Bi-lateral Air Treaty Signed 1955 CP Air Flies to Tokyo 1961 J.A.L. Flies to Vancouver 1964 Travel Liberation Sapporo Winter Olympics 1964 Annual Trade Missions 1965 Canadian Trade and Travel Office 1968 J.A.L. and CP. Direct Flights Montreal Expo 1968 1970 Osaka World's Fair 1974 Widebody Flights 1976 Montreal Olympics 1985 Expo '85 Japan 1986 Expo '86 Vancouver 1988 Calgary Winter Olympics 51 f l i g h t s from Vancouver to Tokyo and on to Hong Kong. It was not u n t i l 1961 that Japan A i r l i n e s began landing in Vancouver and 1968 before i t flew Tokyo-Vancouver d i r e c t . Early v i s i t s were primarily technical and were arranged by lo c a l Vancouver intermediaries such as Bob Iwata who began th i s trade in 1952. Other travel existed, one notable t r i p being the 1925 f i r s t ascent of Mt. Robson by Japanese climbers. Mt. Robson was not climbed by a Canadian party u n t i l 1950, two years after a successful American expedition. Interestingly, the Canadian Rockies remain as the primary tourism draw today. The f i r s t active campaign to develop t i e s began with the Vancouver V i s i t o r ' s Bureau in 1963, lead in part by another pioneer of thi s trade, Gordon Kadota. This t r i p was followed the next year by the now almost annual trade missions led by the B.C. p r o v i n c i a l government's Ken Woodward. As these pioneers quickly learned, the American-style 21 day it i n e r a r y agents provided them with did not meet Japanese requirements. I n i t i a l trade agreements were made through the direc t organization of travel packages from B.C. intermediaries. These companies made agreements with a i r l i n e s and tour d i s t r i b u t i n g agents in Japan to take their product to market through networks of r e t a i l agents. This system of B.C. intermediaries processing the tour product for Japanese tour d i s t r i b u t o r s lasted only as long as i t took for those d i s t r i b u t o r s to grow and learn about the i n t r i c a c i e s of the business. In 1968 the Japan Travel Bureau (J.T.B.) introduced their 52 own short-haul "Mini" and honeymoon "Honey" packages to s e l l through their own outlets. Later J.T.B. and Nippon Express (NEC) combined to produce "Look" tours, travel packages .marketed worldwide. Concentrating on mass packaged production these agencies found i t i n i t i a l l y d i f f i c u l t to convince other outlets to s e l l their packages. Eventually, due to their popularity however, package tours became a common commodity sold out of most r e t a i l outlets on commission. This s i g n i f i e d the beginning of two important trends. F i r s t , the industry changed from a dual system of c a r r i e r s and agencies to a t r i l o g y of c a r r i e r s , wholesalers and r e t a i l e r s . Second, a s h i f t in the. decision making locus of tour programing from host region "inbound" operators to market region "outbound" wholesalers. In 1969 Contract Bulk Inclusive Tour fares (CBIT) motivated travel agencies to practice wholesaling and this fostered the success of independent wholesalers. S t r i c t requirements on large minimum group fares favoured larger agencies which had the a b i l i t y to meet the standard and thus control a i r seats through their stronger purchasing and r e t a i l i n g powers. After t h i s wholesaling and brand-name tours became standards in the holiday industry. Smaller agencies wishing to wholesale had to become a dependent s i s t e r to the larger agencies or form consortia to gain access to supply channels. Fierce competition to have one's tour brochure on display weeded out the weak. The combination of increased a v a i l a b i l i t y of foreign currency for tourism as well as the introduction of m u l t i - t r i p passports the following year (1971) helped to broaden travel 53 opportunities. These developments were a l l but overshadowed, however, by the appearance of the jumbo jet (1970). The increased passenger capacity of these wide-body jets opened up a whole new market, namely middle income groups who otherwise could not have afforded international t r a v e l . More s p e c i f i c a l l y t h i s new form of transport allowed the Japanese to travel farther on what funds were av a i l a b l e . For the next three years the average annual increase in tourism was over 50 per cent (see table 3.4). The number of overseas t r a v e l l e r s rose from 500,000 to 2.3 m i l l i o n (1969-1973), with tourism accounting for most of this increase. After 1971 the r a t i o of t o u r i s t t r a v e l never dropped below 80 per cent of a l l overseas t r i p s . It should be noted, however, that the Japanese tourism market has been extremely vulnerable to worldwide macro-economic conditions. Perhaps the most t e l l i n g years were 1973/74. A r i s e in foreign and domestic currency l i m i t s in 1973 stimulated a 64 per cent growth in tourism for that year, resulting in a near doubling of the balance of payments travel d e f i c i t (refer back to table 3.2). This was almost stopped cold by the impact of the f i r s t " O i l Shock" late in 1973, however. By 1974 the overseas travel growth rate had been reduced to a mere 2 per cent. Rising travel costs and a reduction in foreign currency allotments for tourism had once again reduced travel options for the Japanese t o u r i s t . 54 Table 3.4 Japanese Overseas Travel Growth (thousands of trips) Year International (000) % Growth1 Canadian % Growth2 British Columbia % Growth3 1963 - - 1403 - - -1964 - - 1981 41.2 - -1965 158.8 24.3 3206 61.8 -1966 212.4 33.7 2799 -12.7 - -1967 267.5 26.0 18979 166.6 - -1968 343.5 28.4 12515 -34.1 - -1969 492.9 43.6 18525 48.0 -1970 663.5 34.6 22011 18.8 9688 -1971 961.1 44.9 25855 17.5 12164 25.6 1972 1392.0 44.8 52438 102.8 17763 46.0 1973 2288.9 64.4 71095 35.7 24400 37.4 1974 2335.5 2.0 77543 9.0 33200 36.0 1975 2466.0 5.6 90411 16.6 46500 40.0 1976 2852.6 15.6 106783 18.1 46200 -1977 3151.4 10.5 97532 -8.7 45500 -.02 1978 3525.1 11.9 127827 31.1 61500 35.2 1979 4038.3 14.6 158582 24.1 70500 14.6 1980 3909.3 -3.2 162253 2.3 68200 -.3 1981 4006.4 2.5 146461 -9.7 62800 -.8 1982 4086.1 2.0 139447 63907 • 1983 138716 ^International Tourism Quarterly, 1983, V. 29. S t a t i s t i c s Canada. 66 - 201. S t a t i s t i c s Canada. 66 - 001. 55 As Japan adjusted to increased o i l prices tourism began to r i s e again. By this time a decade of t o u r i s t travel had established a far-reaching, integrated industry d i r e c t i n g the Japanese t o u r i s t through many foreign destinations. A sustained term of economic growth, r i s i n g levels of disposable income, and a strong Japanese currency helped to stimulate t r a v e l demand. By 1976 foreign currency l i m i t s were back to the 1973 levels and again the travel d e f i c i t had almost doubled. By this time Japan represented one of Canada's fastest growing to u r i s t export markets and Canada Japan's fastest growing t r a v e l destination (OECD, 1978, p. 411); a trend that was fueled by a 72 per cent increase in the Yen's buying power over the Canadian d o l l a r . In 1978 a l l foreign currency r e s t r i c t i o n s were l i f t e d , and in 1979 four m i l l i o n overseas t r a v e l l e r s l e f t Japan's shores, with over 150,000 v i s i t i n g Canada. A further round of o i l price increases in 1980 and 1981, and the recent worldwide economic recession, have limited the rate of growth in Japanese tourism to Canada. This time, however, i t i s economic conditions rather than government regulations that have limited international t r a v e l . The Japanese Government has continued to allow unrestricted overseas tr a v e l for two reasons. F i r s t to promote understanding and goodwill among nations, and second, to allow countries to recoup a part of their balance of trade d e f i c i t s with Japan ( F a r r e l l , 1982). This l a s t point does not apply to Canada, however, since we have a trade surplus with Japan. 56 5. SUMMARY The short, rapid growth of the Japanese overseas tourism market is an outcome of Japan's rapid entry into the western world. As c u l t u r a l , economic and industry barriers to travel were removed, Japanese t r a v e l l e r s began v i s i t i n g countries further a f i e l d . As t o u r i s t market expands i t s horizons into other regions, t h i s playground becomes their 'pleasure periphery' (Turner and Ash 1976). B r i t i s h Columbia i s now part of the Japanese playground. Industry has become established to integrate and accomodate the Japanese v i s i t o r within B.C. This manner in which industry develops to host the Japanese i s of p a r t i c u l a r concern to B.C. tourism policymakers attempting to determine the significance of this trade. The next chapter looks at t h i s in d e t a i l . 57 IV. AN ANALYSIS OF JAPANESE TOUR DISTRIBUTION IN B.C. 1. INTRODUCTION The purpose of t h i s chapter i s to present the results of a more in-depth analysis of the tour intermediary corporations handling Japanese organized tours to B r i t i s h Columbia. To achieve t h i s , methods derived from Industrial Organization Theory (IOT) have been used as a general guide to describe organizational influences over the structure of the Japanese travel industry to B.C. Rigorous application of the IOT model was not attempted primarily due to data, cost and time l i m i t a t i o n s . We have just observed the process of Japanese touri s t integration into western Canada. This integration i s p a r t i a l l y influenced by corporate intermediaries. This chapter undertakes a more s p e c i f i c analysis of the e f f e c t s of corporate integration into evolving regional tourism economies. 2. AN OVERVIEW OF B.C. AND JAPANESE INTERMEDIARIES The Japanese market i s primarily a group travel market,and the intermediary sector of their t r a v e l industry has grown in response to l o c a l demands for i t s services. Eighty percent of overseas t r a v e l l e r s use the services of intermediaries (Tokuhisa, 1980). It must also be remembered that because of Japan's s p a t i a l and c u l t u r a l i s o l a t i o n , any international travel takes on an exotic flavour. Therefore, when travel opportunities opened up, there was almost capacity demand for services of t r a v e l agents and other service intermediaries abroad to handle the d e t a i l s of overseas t r i p s . 58 Trade li n k s connecting Japanese t o u r i s t s to B.C. are concentrated in Japan, where Japanese intermediaries control almost a l l aspects of their c l i e n t s ' t r i p abroad. This is evident by examining the dominance of Japanese firms with multi-functional roles. Most B.C. firms operate as ground operators. What few intermediary services that exist in B.C. are faced with s t i f f competition from the highly organized Japanese tour handlers. Japanese based travel service industries have evolved from di f f e r e n t roots, each influencing t h e i r ultimate status. These can be divided into three general areas; t r a f f i c corporations, r e t a i l service corporations and other industry groups. Twenty-six of the top 50 agencies are wholly or partly owned by t r a f f i c corporations. J.T.B. and Nippon Travel have relations with Japan National Railways; Japan Creative Tours i s controlled by Japan A i r l i n e s and Nippon Express, Kinki-Nippon, Tokyo Tourist and Meititsu World Travel also have railway a f f i l i a t i o n s . Most large r e t a i l outlets now operate t r a v e l service agencies using their l o c a t i o n a l advantages and c r e d i t networks to aid in sales. Other industry groups include newspaper enterprises, co-operative associations and in-house systems. In general, the t r a f f i c - related agencies control the largest share of the industry. Broken down by employment, the size and dominance of these enterprises are evident (see table 4.1). 59 Table IX - 4.1 S i z e and Ranking of the Top Ten Japanese T r a v e l S e r v i c e Agencies, 1975 (As of July. 197S) Rank Company Overseas Travel Staff Number of Certified Travel Reps. Ratio1 (B) Number Ratio (A) 1 Japan Travel Bureau 2,290 19.4% 3,431 1.49 2 Meitetsu World Travel 1.406 93.4% 382 0.27 3 Nippon Express Co. 963 12.5% 575 0.60 4 Nippon Travel Agency 883 65.5% 1,104 1.25 5 Tokyu Tourist Corp. 676 18.7% 648 0.96 6 Kinki Nippon Tourist 542 30.0% 1.323 2.44 7 Hankyu Express Intn'l. 513 73.8% 262 0.51 8 Japan Creative Tours 331 87.3% 99 0.30 9 Yusen Air/Sea Service 304 87.1% 119 0.39 10 Nishitetsu Travel 204 56.8% 139 O.60 Ratio (A) Number of overseas travel staff against total number of employees. Ratio (B) Number of overseas travel staff divided by number of certified representatives. p.56, Japan Travel Blue Book. (1975), Moritani Travel Enterprises: Tokyo. 60 The B.C. t r a v e l i n d u s t r y i s a s t r i k i n g c o n t r a s t to i t s Japanese c o u n t e r p a r t . Most B r i t i s h Columbian t o u r i s t s are independent t r a v e l l e r s who do not r e q u i r e the e x t e n s i v e s e r v i c e s of t r a v e l i n t e r m e d i a r i e s . The same holds true f o r the m a j o r i t y of i n t e r n a t i o n a l v i s i t o r s to the p r o v i n c e . Except for the Japanese, most f o r e i g n t o u r i s t s to B.C. tend to be s e l f -d i r e c t e d and independent, r e q u i r i n g l i t t l e i n the way of i n t e r m e d i a r y s e r v i c e s . As . a consequence the B.C. tourism i n d u s t r y i s geared to the independent r a t h e r than the group t r a v e l l e r ; only a small p r o p o r t i o n of the i n d u s t r y i s i n v o l v e d i n i n t e r m e d i a r y a c t i v i t i e s . Over 800 agents capable of h a n d l i n g i n t e r n a t i o n a l t r a v e l are r e g i s t e r e d i n B.C., whereas only 467 agents i n Japan have an i n t e r n a t i o n a l g e n e r a l t r a v e l agent l i c e n s e . The Japanese p o l i c y of keeping c l o s e ranks amongst i t s t r a v e l s e r v i c e agents in order to ensure a h i g h l y organized i n d u s t r y and to l i m i t adverse e f f e c t s of fragmentation maintains a secure t r a v e l i n d u s t r y f o r i t s n a t i o n a l s (see JATA 1983a,b, R e g i s t r a r of T r a v e l S e r v i c e s , 1983). In a d d i t i o n , e f f o r t s to develop the tourism i n d u s t r y i n B r i t i s h Columbia can be d e s c r i b e d , at best, as incremental and uncoordinated compared to i t s Japanese c o u n t e r p a r t . For example, Japan promulgated i t s t r a v e l agency law o r g a n i z i n g the t r a v e l s e r v i c e i n d u s t r y i n 1952, B.C. i n 1979. Japanese agencies a l l belong to a general p u b l i c - p r i v a t e a s s o c i a t i o n of t r a v e l agents whereas membership i n B.C.'s tourism i n d u s t r y a s s o c i a t i o n i s o p t i o n a l . 61 3. TECHNIQUES OF ANALYSIS The actual nature of corporate trade relationships are best shown through a market structure analysis. The behaviour of firms in the trade of any product int e r n a t i o n a l l y is influenced by a number of factors including firm size, concentration, scale economies and type of products offered. Firm's decision to invest and export depends on their r e l a t i v e advantages. This analysis outlines the basic structure of the firms involved with the Japanese organised t r a v e l l e r to western Canada in 1983. 3.1 Relevant Market Determination and d e f i n i t i o n of the relevant market i s c r i t i c a l for the application of other market structure analysis. To achieve t h i s s e l l e r firms were categorized by function ( r e t a i l i n g , distribution/marketing, package development and promotion, tour organization and, tour operation see appendix C for d e f i n i t i o n s ) . This c l a s s i f i c a t i o n enables a more in-depth numbering and size d i s t r i b u t i o n of s e l l e r s (table 4.2) As the acccompanying figure shows, there i s a d i v e r s i t y of firm types handling certain intermediary functions. Firms are categorized by function forming part of the o v e r a l l market of s e l l e r firms. Tour d i s t r i b u t i o n channels are formed through inter-company agreement amongst these firms. Firm s e l l e r typologies can be divided into outbound and inbound s e l l e r s . Outbound corporations are ones based in Japan ' s e l l i n g ' western Canada wereas inbound corporations are B.C. based receiving the Japanese. These corporations are primarily d i f f e r e n t i a t e d by the type of intermediary involvement that they 62 have over the flow of the Japanese t o u r i s t . (see appendix C for d e f i n i t i o n s ) Type A firms have the a b i l i t y to both s e l l tour packages and guide the t o u r i s t through foreign lands. These firms'-have d i r e c t control of a l l aspects essential to touring- -package development and organization, tour operation and booking and, 63 Table X - 4.2 Funct ional C l a s s i f i c a t i o n of Intermediary Firms \ \ FIRM TYPE FIRM A B C D E F FUNCTION \ . RETAILING ** ** ** DISTRIBUTING AND ** ** ** MARKETING PACKAGE i DEVELOPMENT & NEGOTIATION i ** ** ** ** TOUR i ORGANIZATION & BOOKING ** ** ** ** ': TOUR i OPERATION !.. , ** ** I ** ** 64 r e t a i l i n g . Type B firms are similar to A firms except they lack the ground operation component. This involves last minute booking arrangements and guide servicing. Type C firms are less diverse contracting with inbound firms to s e l l and d i s t r i b u t e various packages or to create special t r i p s . Of inbound firms, a complementary structure can be delineated. There is a hierarchy of firm involvement ranging from type D firms who create their own packages for sale abroad. Type D firms create and organize tour packages for d i s t r i b u t i o n in Japan. Type E and F firms act primarily as ground servicing agents for other firms, the difference being a guide service versus a booking and service agency. 3.2 Firm Size And Concentration The size and concentration of firms gives a more accurate picture of market structure. Volume of grouped and packaged tours handled by each firm was obtained through interviews. The overal l results of this analysis i s detailed extensively in Appendix D with a complete l i s t i n g of firms, their function and volume handled for 1983. The most e f f i c i e n t way to present this data for the purposes of t h i s study is by o u t l i n i n g corporate involvement in the d i s t r i b u t i o n network, f i r s t on an o v e r a l l scale and then with sub-market breakdowns. On the aggregate l e v e l , the Japanese t o u r i s t can be patterned into three d i f f e r e n t markets by firm type. Three d i s t r i b u t i o n channels are delineated from type A,B&C firms as previously c l a s s i f i e d (see appendix D, table 4.3). This categorisation shows the structure and dominance of firms. 65 Of group and packaged Japanese t o u r i s t s to western Canada in 1983, i t i s estimated that 33 per cent were handled through type A'integrated firms. These three firms a l l have o f f i c e s in Vancouver (JTB 1982, NEC 1983 and JAL 1974). With the exception of JTB, these firms organize, d i s t r i b u t e and guide almost a l l of the t o u r i s t s under their control. The exceptions are a special arrangement between a .. 66 Table XI - 4.3 Market C l a s s i f i c a t i o n , Size, D i s t r i b u t i o n and Concentration of S e l l e r Firms JAPANESE FIRMS B.C. FIRMS FIRM TYPE Number of Companies By Type. Total Volume Handled By Classified Firms. Average Size By Volume. Share of Volume By Firm By Region. 14,0.00 4,630 21,300 3,040 69% 8,700 2,900 28% 6 7 long-time Vancouver pioneer, Bob Iwata and JTB. Iwata travel handles about 2000 t o u r i s t s under contract to JTB every year. In addition some small specialty tour contracts such as fis h i n g contracts are l e t to l o c a l firms. Approximately 20 per cent of the organized t o u r i s t s were directed through type B firms which have an appointed o f f i c e in Vancouver. These o f f i c e s work under exclusive contract to their d i s t r i b u t i o n partner and perform functions as directed. The only real difference between these three firms i s the licensed o f f i c e the integrated firms have. Representative o f f i c e s contribute l i t t l e to the B.C economy. Combined, six Japanese firms have near t o t a l control of one half of the market. The t h i r d 'channel' consists of a series of inte r - f i r m arrangements between l o c a l inbound firms o f f e r i n g to provide a tour program and outbound d i s t r i b u t o r s looking for a se l l a b l e idea. Often these arrangements are for special groups. Forty-seven per cent of Japanese t r a v e l l e r s were estimated to travel t h i s way. One Japanese firm that dominates i s Fellow Travel's arrangement with Canapak tours, an old Vancouver company. Other arrangements are best described as specialized inter-market service aggrements. Most l o c a l firms have only limited input into the ov e r a l l decision on how a l l the tours are sold and developed. They wait for decisions from their Japanese partner. B.C. firms operate primarily on the periphery picking up service contracts when they can. A few have long-established relations with s e l l e r firms but most, as one operator noted, 'wait for a phone c a l l to be to l d what to do'. However, a 68 larger portion of the tour d o l l a r stays in western Canada due to the greater amount of service put i n . Of inbound firms three play a dominant role as tour operators one of which i s American. These firms average close to 5,000 t o u r i s t s per year contracting their services to a number of firms. Transpacific tours (TPT), C P A i r ' s subsidiary handled about 4900 organized Japanese t o u r i s t s l a s t year for four companies. TAC, the American company dealt with three firms. Canapak deals primarily with Fellow Travel, previously i t used to deal with JTB and other firms but have since lost the contracts. In the past, B.C. firms took a more active role in tour packaged development u n t i l Japanese firms began to open up l o c a l o f f i c e s . Only one firm, Skyland, can be c l a s s i f i e d as a tour packager today. Skyland has i t s own o f f i c e in Tokyo to d i s t r i b u t e i t s ' packages to r e t a i l e r s and organized groups. Ten Years ago there were at least f i v e B.C. firms in t h i s position. For example, TPT, Iwata Travel and Cantour a l l had o f f i c e s in Tokyo to f a c i l i t a t e the trade of their tour programmes. In l i g h t of the recent moves by Japanese corporations, a l l of these companies have closed their o f f i c e s and Cantour has gone out of business. Japanese based corporations have dire c t input and p r o f i t from a l l organized t r a v e l l e r s leaving Japan for western Canada. B.C.-based inbound companies only handle approximately three-quarters of the market. When discounting the ' s h e l l ' nature of the type 'F' ground operators who receive l i t t l e return, the 69 American 'E' corporation, and Iwata's deal with J.T.B.as a ground operator, B.C. based intermediaries are involved with approximately one-half of the d i s t r i b u t i o n of Japanese t o u r i s t s , then only as service agents. 3.3 Product Differentation Seller size and concentration d i f f e r among products sold. A series of sub-markets make up the ove r a l l product market. As was outlined e a r l i e r , there is d i f f e r e n t a t i o n in price and qua l i t y . However, there i s r e l a t i v e l y l i t t l e product d i f f e r e n t a t i o n in terms of s p a t i a l t o u r i s t flow. S p a t i a l l y , the d i s t r i b u t i o n of to u r i s t s into Canada i s handled through two d i f f e r e n t systems. For Western Canada, seperate negotiations are made but for Eastern Canada, arrangements are primarily made through American and Japanese intermediaries based in San Fransisco or Los Angeles. Over 80 per cent of packaged and group tours to Western Canada follow the c l a s s i c golden t r i a n g l e route to Banff. The t y p i c a l seven to ten day t r i p includes two nights in Vancouver, one in V i c t o r i a , two to five in the Rockies and possibly one in Calgary before f l y i n g home. In discussions with industry representatives, there was l i t t l e desire to explore new tour dest inat ions. The three integrated type A companies a l l s e l l a similar range of products over similar prices. These firms are l i k e supermarkets of f e r i n g just about every alternative s e l l i n g their brand-name ahead of the product. Two firms, J.T.B. and NEC s e l l Look tours j o i n t l y . 70 The three type B firms operate on a similar brand-name concept but are known for their s p e c i a l t i e s . For example, Kintetsu primarily deals with grouped t o u r i s t s and the others, Playguide and Vivre are known for quality tours. These six firms a l l l i s t the c l a s s i c Banff triangle as their main s e l l i n g point. From there, they offer a number of options in quality, length and d i r e c t i o n . A l l options are f a i r l y standard and are a l l duplicated by each other. The main difference exists in Kintetsu s e l l i n g the product most often to specialised groups while Vivre focuses on the same routes but for q u a l i t y . Vivre does play a s i g n i f i c a n t role in ski packaging occupying close to t h i r t y per cent of the market on i t s own. Japanese type C firms which are not f u l l y integrated are much smaller in contrast except for one, Fellow Travel. These firms search out a number of potential agents in B.C. to conduct and develop tours with. It is mostly through these firms that a more diverse array of tour programmes are offered spreading the Japanese touri s t farther a f i e l d . It i s in t h i s form of corporate structure that a more diverse array of tour programmes e x i s t . There is a higher propensity to offer d i f f e r e n t packages to gain access into the market. However, as we w i l l see below in scale economies, the smaller firms have a hard time of f e r i n g their small programmes. By defining the relevant market in more precise terms, i t is evident that some firms have 100 per cent control of their specialty product market. This analysis did not go into this l e v e l of d e t a i l but i t has been shown that the top six firms 71 control the packaged or common tour market. B.C. firms, with the exception of Skyland, deal primarily with more specialised group tour programmes. 3.4 Scale Economies Structural advantages to firm size influence the propensity for foreign based firms to take a more active role in d i s t r i b u t i n g t o u r i s t s throughout B.C. B.C. firms have been loosing their t r a d i t i o n a l functional role as type 'D' or 'E' firms. A number of reasons l i m i t B.C. firm a b i l i t y to compete in this market, one being the lack of a large market to gain scale economies over. In general, service supply industries give preferance to bulk purchasing. For example, hotels give up to 30 per cent of standard room rates for a large enough volume. The advantages here ly with the large integrated corporations who have the a b i l i t y to take advantage of t h i s discounting. In addition, such practices also direct the intermediary to the larger services, who can offer a larger and more convenient product for tour programming. As a r e s u l t , large intermediaries deal with large services l i m i t i n g smaller industry access. For example, firms with a large supply of buyers deal dir e c t with tour services for two reasons. F i r s t , they are in a better position to bargain for a better rate and, second, they are able to develop a refined, cost e f f i c i e n t program l i m i t i n g the s p a t i a l pattern of t r a v e l . Advertising and marketing costs also play central roles in tour programming and the type of product s e l l a b l e . Packaged and .72 group tours may offer similar products, they are sold in-a very d i f f e r e n t manner. To s e l l group tours one must have contacts with organisations whereas package tours must be made accessible to the public. The top six firms s e l l both, while the others focus on one or the other. 4. TRENDS AND IMPLICATIONS OF MARKET STRUCTURE ON B.C. Based on the above analysis, the performance of the Japanese organized tour market to B r i t i s h Columbia can be understood in terms of the conduct of s e l l e r firms. O r i g i n a l l y B.C. tour companies acted as inbound operators packaging tours for marketing and sales in Japan. This has gradually changed as B.C. companies now act primarily as ground operators. In many cases the l o c a l tour operator has been relegated to a tour guide service whose function i s limited to contracting buses and staff to Japanese representatives (Canadian Travel News, 7, June,1983,pp.1-2.). H i s t o r i c a l l y , three trends can be observed since the tou r i s t trade relations began after World War two. F i r s t , four of the larger companies opened San Fransisco o f f i c e s and directed operations from there with the help of l o c a l intermediaries. At thi s time, B.C. firms worked act i v e l y to organize and develop a wide array of tour programmes for sale to Japanese d i s t r i b u t o r s . Second, in the mid-1970's C P . and J.A.L. opened wholesaling o f f i c e s in Vancouver. And, t h i r d , in recent years, major wholesalers have also been opening Vancouver o f f i c e s notably J.T.B. (the world's largest) and Nippon Express. B.C. firms are now primarily ground operating agents 73 having l i t t l e to do with the more lucrative packaging elements. From recent discussions with industry o f f i c i a l s i t seems that other agencies are watching these moves c a r e f u l l y with the possible intention of following s u i t . The trend to integrated o f f i c e s w i l l only continue the demise of l o c a l operators. In a series of interviews with l o c a l intermediaries involved in this market, a number of reasons were sighted for their i n a b i l i t y to survive. These include (1) the carrying costs of service bookings aggrevated by delays in payment and uncertaianties in commitments from Japanese intermediaries; (2) a strategy of s e l l i n g one region, tour or supplier against another making p r o f i t margins minimal; and, (3) the absolute size of competing firms. Tour intermediary corporations s e l l regions to achieve certain p r o f i t margins. This frustrates the situation of inbound operators who must deal with outbound intermediaries to gain access to markets. In general, inbound operators only have one type of product to s e l l to d i f f e r e n t markets. Outbound operators s e l l d i f f e r e n t porducts to one market. Two factors l i m i t B.C. corporate access to the Japanese market; f i r s t , the market i s t i g h t l y controlled by a r e l a t i v e l y few companies, and, second, to enter t h i s market B.C. firms must atta i n the low costs of Japanese competitors who have s i g n i f i c a n t economies of scale and integrated d i s t r i b u t i o n channels. The degree of influence that Japanese tour intermediary corporations have over the flow of their t o u r i s t s to B.C. i s indisputable. The Japanese style of business, highly organized 74 and integrated, has enabled them to secure volume contracts and services at net-net wholesale prices and s e l l them at r e t a i l . In order to further refine their operations they have also focused on s e l l i n g a very narrow 'image' of Canada. With a t i g h t l y controlled d i s t r i b u t i o n system, propensity to innovate new tour 'products' for the Japanese in Canada is low. The costs of developing a new product are expensive, most of which e n t a i l s advertising and image creating to stimulate demand. It is far easier to allow r e t a i l agents to s e l l the most best known destinations l i m i t i n g costs and maximizing p r o f i t s due to increased economies of scale. 5. SECONDARY TRENDS OF INTEGRATION Japanese ownership and control also extends into the tourism service supply-sector (Table 4.4). This is evident by the number of Japanese owned or controlled g i f t shops which cater to their t o u r i s t s . In the g i f t shop trade, often arrangements are made in Japan with tour intermediaries to steer the t o u r i s t to s p e c i f i c stores. This is secured by granting the intermediary a 15-20% per cent commission on sales. G i f t exchanges are an important part of travel for the Japanese. Before departure the t r a v e l l e r i s presented with g i f t s , senbetsu , which are usually in the form of cash. This money is then used to purchase g i f t s during his or her overseas tour. These are know as omiage and are usually representative items or symbols from the country that i s v i s i t e d . When v i s i t i n g Canada omiage tend to be natural jade, fur, salmon, or Indian art. These purchases account for approximately 35 per 75 cent of overseas travel expenditure ( V i s i t o r '79). In B.C. one of the most popular g i f t items is the Cowichan sweater, which i s considered to be a functional example of West Coast native a r t . The demand for these home-spun, hand-knit sweaters has surpassed the supply capacity of the native Cowichan Indians (Meikle, 1983, p.4) and a number of commercial firms, some located in Japan, are now producing an imitation under the brand name "Cowichan" ( Vancouver Sun , March 1979). Although these i n d u s t r i a l l y produced sweaters are of i n f e r i o r quality the brand-name serves as a status symbol for the souvenir c o l l e c t o r . Further integration into the production of g i f t s for t h i s market existed through jade manufacturing when the Continental Jade Corporation was operational. Japanese ownership in the accommodation sector i s believed to be l i m i t e d . The Prince Hotel in Toronto is a joint venture between two Japanese companies, a railway and a hotel chain. Canada Harbour Place, a $130 m i l l i o n investment, is being developed by Toyku Hotels International, a subsidiary of Tokyu Corporation, which is a major in the l e i s u r e and tourism industry. At least three Vancouver restaurants are owned by Japanese corporations. One of these is a JAL Hotel Systems subsidiary which caters i n - f l i g h t meals as well as serving some of i t s packaged tour customers. Two of these were part of JTB tour i t i n e r a r i e s last year. 76 Table 4.1 Summary of Incorporated Companies Involving Japanese Corporate Interests in the Tourism Industry 1974 - September 1983 i n Western Canada Hotels (Canada) Prince Hotel, Toronto 22% Seibu Rwy, 88% Prince Hotels Corp., Japan Canada Harbour Place Hotel, Hotel and Convention Centre Tokyu Hotels Corporation, Japan Souveniers . F u j i Food Brain Company - G i f t Shop R e t a i l Asami Trading Company - G i f t Shop R e t a i l Yokohama Okaddaya Corp. - G i f t Shop R e t a i l B.B. & K Leasing Corp. - G i f t Shop R e t a i l ( 2 stores) O.K. G i f t Shops - G i f t Shop R e t a i l Joint Venure (3 stores) The Continental Jade Inc. - Jade & Souvenier Manufacturing (now out of business) Food Sakae Iwamato Restraurant - Japanese Food Papa Chin's Restaurant - Chinese Food - Joint Venure International Foods Inc. owns: 1. Kaede Restaurant - Japanese Food Restaurant 2. Aero Int. Enterprises - Serves JAL I n - f l i g h t Meals The P a c i f i c Inc. - Japanese Food & Culinary Nintendo of America Inc. - Pizza Time Theatre Restaurants Sources: FIRA data f i l e s , Annual Reports, Cross Referenced Interviews 77 Patterns of ownership and control over l o c a l tourism plant by Japanese corporations is more extensive in other regions. In Hawaii, i t i s estimated that the Japanese owned 17 per cent of the hotels and had a combined investment of over $600 m i l l i o n in 1978 ( F a r r e l l 1982:330). Negative public reaction to this l e v e l of ownership caused the Japanese government to place guidelines on foreign investment in the leisure industry because of their v i s i b i l i t y and costs to foreign reserves. They subsequently l i f t e d these administrative guidelines after the last o i l shock passed. Since then Japanese investment has been away from the physical plant and towards less v i s i b l e intermediary sectors. In C a l i f o r n i a a v i r t u a l bus war occurred over the intermediary corporations ' t e l l i n g ' which bus lines to patronize. The feelings at t h i s time were summed up by a San Fransisco tour bus operator: ". . . What we want to break through i s a multinational monopoly that keeps a grip on the Japanese t o u r i s t and his money from the time he leaves Tokyo to the time he returns... " The New York Times, 7,Dec.1980:9 A subsequent court ruling disallowed t h i s practice. However, similar practices exist in B.C. but not in a monopolistic fashion. Japanese intermediary corporations hand out vouchers, coupons and cre d i t c h i t s for various services such as restaurants, g i f t stores etc. This in turn influences the s p a t i a l flow and purchasing pattern of their customers. 78 SUMMARY The recent opening and integration of Japanese tour intermediary o f f i c e s in Vancouver follows similar trends in Hawaii, London, San Fransisco and New York. While the primary reason to open these o f f i c e s i s to host nationals their role needs examination. It could also be argued that these are just l o g i c a l steps in the export and investment behaviour of the firm, one must ask what thei r ultimate effect w i l l be and how p o l i c i e s could be structured to deal with them. The interdepandancy of Japanese corporate o f f i c e s among c i t i e s allows not only for arrangements of Japanese t r a v e l l e r s but also for others. For example, JALPAK now s e l l s tours, based in B r i t i s h Columbia, to Mexico taking advantage of the weaker intermediary structure in B.C. This chapter has outlined the general trends of integration and control of the Japanese corporation over the Japanese travel market. The next chapter w i l l provide an overview and outline implications for Canadian tourism related planning. 79 V. TOURISM IN THE PROCESS OF INTERNATIONALIZATION: PLANNING FOR CORPORATE DIVISION 1. OVERVIEW The purpose of this chapter i s to summarize the impact of international tour intermediaries on regional tourism economies such as B r i t i s h Columbia. Regional tourism economies are considered to be both the physical resources and services plus the organizational network aiding the development, promotion and sale of tourism. It has been shown that a number of large, private organizational forces external to the tourism plant play a s i g n i f i c a n t role in determining i t s use. Firm's desire to i n d u s t r i a l i z e and manipulate public demand i s seen as part of the evolutionary process of tourism development. This process can be s i m p l i f i e d into a number of steps st a r t i n g from i n i t i a l , unaided t o u r i s t exploration to mass produced, highly organized to u r i s t flows. This process, a result of incremental changes towards i n d u s t r i a l i z a t i o n of trade patterns i s problematic for planners because of i t s gradual and r e l a t i v e l y uncontrollable e f f e c t s . Machlis and Birch (1983) in their attempts to formulate an integrated theory of tourism outlined t h i s 'phenomenon' as a series of natural steps towards i n d u s t r i a l i z a t i o n . As travel t i e s evolve the corporate relationship between host and guest region changes from a high r a t i o of locally-based decision making over the flow of to u r i s t s to a high r a t i o of foreign-controlled decisions. 80 At the community l e v e l a similar pattern was described as the natural cycle of tourism development by Butler (1980). To Butler a community involved in tourism trading evolves from hosting exploratory v i s i t o r s to negotiating with external t o u r i s t intermediaries to bargain for the flow of t o u r i s t s . Taken to an international l e v e l the hypothesis that "Tourism i n d i r e c t l y causes the di f f e r e n t national s o c i e t i e s to become gradually interlinked in economic, s o c i a l and c u l t u r a l networks that are organized i n t e r n a t i o n a l l y on the basis of a central decision making body"... Lanfant 1980:22 p a r a l l e l s other theories of tourism i n d u s t r i a l i z a t i o n . Unfortunately none of the above theorists set out to empirically analyze the process of integration. In analyzing the process of Japanese corporate integration into the B.C. tourism economy i t can be explained as an evolutionary process related to the behaviour of exporting firms. As tourism trade evolves firms become active in the pursuit of new opportunities. Two strategies exist for intermediary corporations; becoming involved in trading relationships with other regional firms to export, or to invest and set up o f f i c e s in receiving regions to f a c i l i t a t e the flow of t o u r i s t s . These decisions are generally based on marketing ( d i s t r i b u t i o n , c l i e n t base, promotional or monopoly advantages) and technical superiority. International tour intermediaries acting as outbound agencies seek to 'export their nations imports' by keeping as much of the touring value at home as possible. This is actualized through the integration of their tour agencies 81 worldwide. However, a primary reason that multinational firms in a l l sectors open up trading o f f i c e s abroad i s to gain access to foreign markets. In tourism, regions are negotiated and traded abroad. As firms learn to overcome barriers to entry their a b i l i t y to integrate supply and demand factors to a certain l e v e l of interdependence allows them to manipulate the flow of tour i s t s to their advantage. This flow becomes the firms i n d u s t r i a l process forming the product that they s e l l , which a l t e r s the form and d i s t r i b u t i o n of tourism in host regions. There are similar p a r a l l e l s and policy concerns over a number of international service industries. A ce n t r a l , common argument over foreign service agencies i s to enable foreign firms easier access to their home market. In the international banking industry, the maintainence of access to multinational firms i s important to that firm's operation. It i s evident from recent debate that policy analysis has undergone deeper treatment in service industries such as banking. For tourism policy to be relevant, i t must recognise the firm's a b i l i t y to control tourism supply and demand factors stemming from the c h a r a c t e r i s t i c s of multinational intermediary integration. It must be recognised that as ". . .the industry expands, there are s t i l l some underlying economic r e a l i t i e s that cannot be dismissed. The existing d i v i s i o n of power between tourist-generating economies and host ones w i l l continue simply because marketing elements are c r u c i a l to the industry: whoever has the most e f f e c t i v e access to the ultimate market w i l l dominate, even i f not control the international industry..." 82 Turner 1975:21 S p e c i f i c a l l y , even i f regions have development control over  the creation of i t s tourism plant, intermediary interdependence  of supply and demand factors may l i m i t host region control over  the flow of t o u r i s t s into and within their region. Clearly a similar process has been evolving in B r i t i s h Columbia with reference to the corporations organizing the Japanese t o u r i s t . To summarize, f i v e steps can be outlined; exploration, promotion, i n d u s t r i a l i z a t i o n , integration ans systemization. 1) I n i t i a l exploration throughout western Canada by Japanese v i s i t o r s began as early explorers and traders, later adventurist mountain climbers, then technical v i s i t o r s in the mid-1950's. 2) When tourism travel was l i b e r a t e d in Japan, various promotional missions l e f t western Canada to develop this trade. 3) As the results from the promotion and i n i t i a l sales t r i c k l e d in, corporate i n d u s t r i a l i z a t i o n of t h i s trade began. 4) As i n d u s t r i a l i z a t i o n occurred, corporate integration followed. 5) Corporate systemization of the t o u r i s t flow to encompass more aspects of the t r a v e l l e r s consumption i s the l a s t potential step of integration. 83 2. QUESTIONS FOR ADDRESS There are p o t e n t i a l l y three areas of concern that host region planners should address for the role of transnational intermediat ion: 1) To what extent do foreign intermediary corporations influence the flow of t o u r i s t s into and within the tourism economy? Due to the nature of the Japanese t o u r i s t and Japanese corporation, tourism trade t i e s have evolved to a stage where Japanese based corporations now dir e c t the flow of t o u r i s t s in their i n t e r e s t s . Western Canada i s now part of the Japanese pleasure periphery. Japanese corporations now have the a b i l i t y to manipulate the flow of t o u r i s t s into and within various destinations. At f i r s t sight i t would seem that the role of regional t o u r i s t organizations is s i m p l i f i e d and made more direc t as a result of integration. If the aim of tourism i s , "to promote and encourage the t o u r i s t industry in B r i t i s h Columbia.' (Min.of Tourism Act 1980), equal concern must be given to understand the external forces which effect B.C's tourism economy. With the transformation of travel to a s e l l e r s market as a result of integration, multi-national groups may begin to demand concessions from host governments to f a c i l i t a t e the flow of t o u r i s t s (UNCTAD 1982, IUOTO 1976,1972, WTO 1976). I n i t i a l examples are already evident on two fronts regarding the Japanese to u r i s t in B.C. Japanese tour operators are asking for 84 more assistance aid promoting their tour plans even though they only wish to s e l l a very narrow image of the region. Secondly, Tokyu Hotels Corporation is now looking for an opportunity to re-negotiate their contract for a joint-partner and may ask for concessions. 2 ) What ef f e c t s do these intermediaries have on the host region and i t s tourism economy? The d i s t r i b u t i o n of benefits associated with the trade and flow of Japanese t o u r i s t s is in the interests of the Japanese corporations. The change in trade flows from a number of smaller intermediaries to a few large, integrated corporations based out of Japan a l t e r s the pattern of trade not only geographically but also s t r u c t u r a l l y . Large intermediary corporations a l t e r trade preferences towards larger, c a p i t a l intensive services destroying the notion that tourism, in this case, is a small, labour intensive enterprise. Host region services are r e l a t i v e l y dependant on intermediaries for international t o u r i s t s . Intermediaries are in a position to bargain and s e l e c t i v e l y a l l o c a t e the d i s t r i b u t i o n of t o u r i s t s . On a micro scale, practices such as g i f t store commissions and special bulk-rate hotel prices influence d i s t r i b u t i o n patterns and reduce net regional benefit. On a macro-scale, the d i s t r i b u t i o n of t o u r i s t s to and within a host region is subject to intermediaries who can divert the to u r i s t s to other regions, an a b i l i t y they may have i f their control over t o u r i s t flows is as extensive as in the Japanese 85 market. 3) What are the broader planning implications and policy issues? In a broader perspective there are three issues needing discussion; the economic effects of these enterprises, their s o c i a l implications and associated environmental problems they may cause. From an economic perspective the leakages and opportunity cost of lost linkages associated with foreign enterprise needs more examination than was given here. Central to economic leakage is the extent of investment and integration of foreign firms. With the Japanese travel market valued at $26.7 m i l l i o n i t generates about 2,300 jobs to the B.C. tourism economy i f the market is representative of a l l markets. In a study of tourism m u l t i p l i e r s in two B.C. regions, i t was shown that approximately one job was created for every $10,000 in travel spending (Liu,Quayson and Var 1982). However, with such highly structured t r a v e l patterns, i t would lead one to believe that these net benefits would be somewhat le s s . Highly structured t r a v e l flows raise at least two s o c i a l issues. Local reception of a series of large, externally controlled groups of t o u r i s t s would need negotiation. The impact of large groups on a community can be intimidating. Firm size and d i s t r i b u t i o n practices (differentation) are central here. Secondly, the image of the country projected to the t o u r i s t through these intermediaries i s important. In discussions with Japanese consulate o f f i c i a l s in Vancouver they 86 expressed problems associated with the 'feeling that the Japanese t o u r i s t s receive a very narrowed and controlled image of t h i s region and that the tour i s t feels he is being somewhat control l e d ' . Third, patterned t o u r i s t flows have environmental implications. For example, Parks Canada o f f i c i a l s are just beginning to recognise the problems associated with large, highly controlled groups on the natural environment (pers.comm Parks Canada). They are just now undertaking a study to determine the extent and best ways to deal with the flow as controlled by tour operators. It i s the s o c i a l , economic and environmental effects of tour intermediary control which need further study. This thesis has outlined their a b i l i t y to have impacts on a region as a cause. Past analysis of the tourism industry has examined what ef f e c t s tourism has on the region and not the deeper structural questions of how these e f f e c t s come about. It is clear that further reseach in these areas i s needed. Planning for a tourism economy that i s aiding the organization and res u l t i n g structure of the industry is ess e n t i a l to l o c a l communities, regional economies and national systems aiming to foster an agreed upon development strategy. Because tourism, formulated as an industry, uses host regions and communities as a resource, s e l l s i t as a product, and in the process a f f e c t s the l i f e of everyone in those areas, the i n d u s t r i a l form of tourism created through i t s organized parts is of p a r t i c u l a r interest. 87 To foster tourism planning, a more comprehensive development strategy would be based on public, private and external inputs into the organization of the tourism industry and how i t i s processed. Policy d i r e c t i v e s could investigate methods of integrating smaller enterprises into the larger intermediary system, aim to control leakages and foster l i n k s , address the o v e r a l l structure of the industry, and, in the end, help f a c i l i t a t e more self - directed community - enterprise. These could a l l lead to a better organization enabling a l l players to be involved in the process of s e l l i n g tourism. Such policy d i r e c t i v e s are outlined below. 2.1 Regional Planning At the regional l e v e l e f f o r t s to integrate the tourism industry into the economy have generally taken a systems approach. The main goal of these approaches has been to 'develop the industry' without any true d e f i n i t i o n of what type of industry they desire or at what costs. Unfortunately, most tourism planning approaches have examined the a l l o c a t i o n of infrastructure and industry services without investigating the forces influencing the ultimate use of the f a c i l i t i e s . A common goal would be to integrate tourism into a viable regional product which complements exi s t i n g economic a c t i v i t i e s without s i g n i f i c a n t l y a l t e r i n g s o c i a l or environmental concerns. In B r i t i s h Columbia, ". . . i t i s apparent that there was a lack of an appropriate industry image, in i n i t i a t i n g and implementing plans and programs; in the past several years, the Tourism branch has been located in several m i n i s t r i e s , generally understaffed and primarily 8 8 involved in research, marketing and promotion with l i t t l e or no comprehensive planning or development act i v i ty..." Marshall,Macklin,Monoghan 1979 p22 The B.C. government has h i s t o r i c a l l y l e f t the organization of industry sectors to industry i t s e l f . The government's main role in resource sectors has been as a f a c i l i t a t o r in the disposal of public resources such as timber, mineral and water rights. The tourism industry has followed a very similar role, i t has been involved in the promotion of the tour service resources through marketing campaigns, etc. As the other resource sectors have evolved into a more mature state, the tourism industry has just begun the process of industry organization, policy and r a t i o n a l i s a t i o n . Directions lent the industry by the p r o v i n c i a l government through the TIDSA agreement r e f l e c t the lack of organisation and poli c y . The focus has been towards project- - s t y l e development and away from comprehensive planning and policy (Antonson 1983). Policy development i s c r u c i a l not only due to the infancy, growth and disorganized state of the industry but also to guide i t through the number of potential c o n f l i c t s of interest that i t confronts- -inter-industry, resource, host-guest and corporate interest/regional growth problems. It can be observed by examining the process of administering the TIDSA programme that government p r i o r i t i e s have been away from r a t i o n a l i t y and organisation and towards larger scale project-oriented developments. This process has f a c i l i t a t e d large business vs small enterprise and increased the 89 rate of incremental change tourism stimulates. A major study of the process of TIDSA implementation was shown that ". . . The rush to develop project construction ahead of planning and the attempt to co-ordinate numerous sectors revealed delays and f r u s t r a t i o n over the ultimate goals and methods to achieve them..." Montgomery and Murphy 1984 In a systematic study of the programme objectives, i t can be shown that l i t t l e attention was paid to the items considered most c r u c i a l to the tourism industry, organisation and policy d i r e c t i o n , while e f f o r t s were channeled b l i n d l y into development (see Ference 1982). The TIDSA programme had spent 80 per cent of i t s ' funds before the regional tourism strategies were released even then without public consultation. The objectives outlined were not followed and, according to industry o f f i c i a l s 'expenditure continued to be allocated to various projects without r a t i o n a l i t y ' (Ference 1982). As can be observed, funding was allocated away from organization and towards development. While aiming to foster l o c a l and small development, TIDSA has generally adopted a mega-project strategy which ultimately plays into the hands of the larger corporate i n t e r e s t s . Without an organized structure, l o c a l and small enterprises have a harder time gaining access to the large, integrated tour intermediaries. In addition, the tourism region could have r e l a t i v e l y l i t t l e control over the flow of organized t o u r i s t s and their impacts. 90 It i s clear that regional tourism strategies must place inter-industry and industry-community communication and organization high on their task l i s t . Organizational i n i t i a t i v e s enable regions and communities to help shape the pattern of t o u r i s t travel and therefore the impacts. The tourism industry is made up of organization and promotion. Without regional input, benefits could be less than costs. 2.2 Regional Promotion The international sale of regional tourism economies can take on a number of d i f f e r e n t promotional forms, each influencing t o u r i s t behaviour. These include di r e c t marketing and advertising, marketing-trade missions, hosting tour agents and press, and establishing overseas o f f i c e s . The effect of any of these strategies changes when intermediaries play a dominant role. E f f o r t s to control the image of tour regions make host region promotion more d i f f i c u l t to be equitable and e f f i c i e n t to the entire industry. In B.C. strategies of hosting press and operators as well as having d i r e c t promotional missions have been adopted. While these methods are e f f e c t i v e , they do not allow the same type of representation a trade o f f i c e does. Small enterprises and backward regions do not have the same opportunity for representat ion. In discussions with industry o f f i c i a l s , they f e l t i t easier to deal with the o f f i c e s of the Alberta Government located in Tokyo. There argument was that more enterprises and regions could be represented more e f f e c t i v e l y . As a r e s u l t , the smaller 91 enterprise has more input. 2 . 3 Local Planning Communities must learn to deal with tour intermediaries to develop an agreed upon image and method of representation. Intermediaries can manipulate volume, pattern and costs of to u r i s t flows, a l l of which are important. On a l o c a l scale, community tourism planning has mostly been based on promotion and not organization. Communities are often planned to accomodate residents and not v i s i t o r s . V i s i t o r s , l i k e residents impact the community especially when they are channeled through a select programme by intermediaries. Organization of v i s i t o r flows within a community would aid in the successful acceptance of the industry by residents. The effects of an unorganized tourism industry on the s o c i a l , economic and environmental fabric of the community are well documented (Wall 1983, Murphy 1 983) . Strategies to aid in the planned development of to u r i s t communities have expressed "a number of common points which have similar application in l i g h t of the above findings: (1) Communities must define their role in the tourism process. They have a number of choices r e l a t i n g to the degree of a c t i v i t y and l e v e l of integration they desire within the tourism system. (2) Local organization is c r i t i c a l to the successful sale of a community abroad. An unorganized flow of v i s i t o r t r a f f i c through the community can raise a number of c o n f l i c t s . (3) Promotion of the community as a community is essential to co n t r o l l i n g the image of the community. This makes the 92 c o m m u n i t y a s a l e a b l e p r o d u c t t h a t c a n be n e g o t i a t e d w i t h t o u r o r g a n i z e r s . (4) L o c a l l y d e f i n e d t o l e r a n c e l i m i t s o r c a r r y i n g c a p a c i t y e n a b l e s t h e c o m m u n i t y t o a t t e m p t t o d e f i n e t h e e x t e n t o f i n v o l v e m e n t i t w a n t s i n t h e i n d u s t r y . (5) C l o s e r e l a t i o n s h i p s w i t h e i t h e r p u b l i c a g e n c i e s i s e s s e n t i a l t o e n s u r e t h e p r o p e r r e p r e s e n t a t i o n a n d s a l e o f t h e c o m m u n i t y a b r o a d . 3. NATIONAL PLANNING N a t i o n a l c o n c e r n s h a v e b e e n d i r e c t e d t o w a r d s a i d i n g r e g i o n a l e c o n o m i c d e v e l o p m e n t . The s t r a t e g i e s e m p l o y e d c a n be s p l i t i n t o two c a m p s , d e v e l o p m e n t a n d p r o m o t i o n . T o u r i s m d e v e l o p m e n t , a s d e s c r i b e d i n c h a p t e r o n e , h a s b e e n f o s t e r e d t h r o u g h r e g i o n a l i n c e n t i v e g r a n t s t o a i d i n i n f r a s t r u c t u r e . The f e d e r a l g o v e r n m e n t h a s a l s o a i d e d i n r e g i o n a l p l a n n i n g s t r a t e g i e s . T o u r i s m p r o m o t i o n h a s been f u e l e d by t h r e e p r o g r a m m e s w h i c h a i m t o i n t e g r a t e t h e d i s t r i b u t i o n o f t o u r i s t s w i t h t h e p r e -p l a n n e d t o u r i s m s p a c e e c o n o m y . R e n d e z - v o u s C a n a d a i s a b u y e r / s u p p l i e r m a r k e t p l a c e w h i c h b r i n g s t o g e t h e r p r o s p e c t i v e f i r m s d e v e l o p i n g a n d o f f e r i n g s e r v i c e s f o r t o u r i n t e r m e d i a r i e s . F a m t o u r s i s a p rog ramme d e v e l o p e d t o e d u c a t e a n d f a m i l i a r i s e f o r e i g n i n t e r m e d i a r i e s a n d p r e s s by e s c o r t i n g them t h r o u g h d i f f e r e n t a r e a s . Canmap p r o v i d e s a s s i s t a n c e t o C a n a d i a n t o u r i n t e r m e d i a r i e s t o d e v e l o p t o u r p r o g r ammes f o r f o r e i g n c u s t o m e r s . The l a s t p r og r amme i s b e i n g d i s c o n t i n u e d a t t h e e n d o f t h i s y e a r . T h e s e p r o g r a m m e s e x i s t i n s p i t e o f t h e v i e w t h a t 93 " . . . Much of the p romot iona l e f f o r t of the i n d u s t r y and government has been on vague a d v e r t i s i n g campaigns e x t o l l i n g the s c e n i c and c u l t u r a l v i r t u e s of Canada or some p a r t i c u l a r p r o v i n c e . Whi le t h i s was v i r t u a l l y the on ly a v a i l a b l e avenue of encourag ing the f o o t l o o s e American t o u r i s t , the overseas v i s i t o r r e q u i r e s not on ly the p o t e n t i a l a t t r a c t i o n s but a l s o s p e c i f i c formulas f o r v i s i t i n g C a n a d a . . . " ITQ #2,1981:37 It i s c l e a r that programmes and p o l i c i e s must be deve loped to b e t t e r i n t e g r a t e the tour i n t e r m e d i a r y i n t o the p l ann ing p r o c e s s . However, f e d e r a l r e s p o n s i b i l i t y f o r the i n d u s t r y i s l i m i t e d to a na t i on -w ide p e r s p e c t i v e and i t i s up to the reg ions to deve lop s p e c i f i c , c o - o r d i n a t e d formulas to d i s t r i b u t e the t o u r i s t to and w i t h i n t h e i r r e g i o n . There are th ree areas of n a t i o n a l p o l i c y which need f u r t h e r addres s . R e g u l a t i o n p o l i c y in the domestic a i r l i n e i ndu s t r y i s c u r r e n t l y be ing r a t i o n a l i s e d . T h i s may soon be c a r r i e d i n t o the i n t e r n a t i o n a l sphere where b i - l a t e r a l t r e a t i e s d i c t a t e f l i g h t agreements. The e f f e c t s of U.S. d e r e g u l a t i o n on U.S. -Japan f l i g h t s was d r a m a t i c . W i th in 18 months th ree a i r l i n e s opened new routes to Japan. T h i s has two consequences of re levance to t h i s t h e s i s . F i r s t , due to the l i m i t e d c a p a c i t y of Japanese a i r p o r t s , i t seems that the p o s s i b i l i t y of a d d i t i o n a l Canadian routes to tha t count ry are l i m i t e d . Fur thermore , as demand fo r t r a v e l r i s e s , i n t e r m e d i a r i e s w i th a s s o c i a t i o n with these American a i r l i n e s are l i k e l y to jump i n to the Japanese tour market to B.C. f u r t h e r d i s e n f r a n c h i s i n g r e g i o n a l c o n t r o l over the f low of t o u r i s t s . Second, the r o l e of Canadian o f f i c e s abroad needs deeper 94 study i n l i g h t of the r o l e of intermediary i n f l u e n c e . The more aware and educated a f o r e i g n p u b l i c are about a country, the more l i k e l y they are to use a Canadian tour o p e r a t o r . T h i r d , d e c i s i o n s handed down by the F o r e i g n Investment Review Agency (FIRA) have allowed Japanese intermediary f i r m the a b i l i t y to d i s t r i b u t e t h e i r n a t i o n a l s w i t h i n Canada but not to develop secondary Canadian markets to other n a t i o n s . S i m i l a r p o l i c y e x i s t s i n the banking i n d u s t r y to e l i m i n a t e the p o s s i b i l i t y of f o r e i g n s e r v i c e i n d u s t r i e s from c o n t r o l l i n g the i n d u s t r y . S i m i l a r p o l i c y would maintain s i m i l a r o b j e c t i v e s . 4. CONCLUSIONS The trade of i n t e r n a t i o n a l t o u r i s t s from market regions to host regions i s h i g h l y complex. I t has been shown that i n t e r n a t i o n a l i n t e r m e d i a r i e s a ct as the o r g a n i z e r s of the t o u r i s t flow f o r Japanese t o u r i s t t r a v e l l e r s to B.C. I n t e r m e d i a r i e s are a r c h i t e c t s of the i n d u s t r i a l tourism p r o c e s s . T h i s r o l e makes them c e n t r a l to the d i s t r i b u t i o n of t o u r i s t s and t h e i r impacts. Regional tourism development p o l i c y has focused on p r o j e c t developments to c r e a t e a l a r g e r t o u r i s t p l a n t i n ignorance of market o r g a n i z e r s and t h e i r r o l e i n the d i s t r i b u t i o n p r o c e s s . While the m e r i t s of development cannot be dismissed, the u l t i m a t e consequences of a mismatched p o l i c y can cause e i t h e r an excess or dependent c a p a c i t y of t o u r i s t p l a n t and workers. I t i s imperative that tourism planning move beyond the p r o j e c t i n i t i a t i v e stage and i n t o the the heart that forms the i n d u s t r y --the o r g a n i z a t i o n of a s e r i e s of s e r v i c e s that forms the tourism experience and, e v e n t u a l l y serves to d i s t r i b u t e i t s impacts. As 95 t h i s t h e s i s has shown, e x t e r n a l f o r c e s of o r g a n i z a t i o n have the a b i l i t y to organize the flow of t o u r i s t s p o t e n t i a l l y beyond r e g i o n a l i n t e r e s t . 96 APPENDIX A - JAPANESE TOUR PACKAGES TO BRITISH COLUMBIA Tour brand name - Company a f f i l i a t i o n 1. Greening Tour - Hankyu Express International, Tokyo. 2. Jetour/Kanata - World Tour Operators, Tokyo. 3. Jalpack - Japan Creative Tours, Tokyo. 4. Diamond Tour - Mitsubishi Co., Tokyo. * 5. Happy Tour - NNR-Nishitetsu Travel, Tokyo. 6. Hello Young - Yamashin Travel Service, Tokyo. * 7. Value Tour - Vivre International, Tokyo. 8. Super Tour - Vivre International, Tokyo. 9. Holiday/Silver Tour - Kintetsu Int., Tokyo. 10. Mach - Nippon Travel, Tokyo. * 11. Maple Valance - Naigai Travel, Tokyo. 12. Look - Japan Travel Bureau, Nippon Express, Tokyo. 13. Elk/Dynamic Tours - Nippon Express, Tokyo. 14. Playguide Tour - Playguide Tours Inc., Tokyo. 15. Top Tours - Tokyu Tourist Corp., Tokyo. * 16. Leisure Tours - Funi Tour Int., Tokyo. * 17. Blue Guide - Hitachi Travel, Tokyo. * 18. Yomiuri Tours - Yomiuri Travel, Tokyo. * 19. Groovy Tour - TEC Air Service, Tokyo. * 20. Let's Go Tours - Lets Go Tours, Tokyo. * 21. Good Luck Tours - Good Luck Co., Tokyo. * 22. Sun & Sun - Sun &Sun Co., Tokyo. * 23. Alpine Tour - Alpine Tour Service, Tokyo. * 24. Smile Tour - Seiko Travel, Tokyo. 25. Fellow Tour - Fellow Travel, Japan. 97 26. Orange Tours - Universal Tours, Japan. 27. Worldgate Tours - Worldgate Tours, Japan. 28. Youth Tours - Global Youth Bureau, Japan. 29. Skyland Tours - Skyland Travel, Vancouver. 31. Viva Tours - Japan Travel Bureau. 32. Canada Tour - Nikko Travel, Japan. 33. Elk Tours - Nippon Express, Japan. 34. Dynamic Canada - Nippon Express. 35. UBC Tours - Nippon Express. * Tour Packages not handled in t h i s study. 98 APPENDIX B - INTERVIEW OUTLINE The following information was sought from each interview. The following information was sought: 1. Corporate history - Length of business with the Japanese touris t trade. 2. A f f i l i a t i o n - Connections with other industry intermediaries, length of a f f i l i a t i o n and nature of a f f i l i a t i o n . 3. Tour packages handled - Which packages they serviced, with which firms, estimated annual volume per package. 4 . Projections on future changes - Growth, decline, assimilation, integration. 5. Economics of operation - Costs of conducting business, advantages of scale and/or a f i l l i a t i o n s , opportunities, constraints. 6. D i s t r i b u t i o n of t o u r i s t flows - The macro (to what areas of western Canada) and micro (using what services) aspects of their tour plans. This information was then used to conduct an i n d u s t r i a l organization analysis. 99 APPENDIX C - DEFINITIONS Ground operator: A company or individual providing such services as hotel accomodation, sightseeing transfers etc. exclusive of transportaion to and from the destination. Receiving Agent: A tour operator or tr a v e l agent who specializes in services for incoming v i s i t o r s . Tour Operator: A company which creates and/or markets inclusive tours and/or subcontracts their performance. Functions generally include advertising, f l y e r d i s t r i b u t i o n and reservation operations of a tour. Organized Tour: The development by tour intermediaries of a packaged, group or inclusive tour. Package Tour: A saleable travel product which o f f e r s , at an inclusive price, several or more travel elements which would otherwise be purchased seperatly by the t r a v e l l e r . Conducted Tour: 1) A prearranged t r a v e l program, usually for a group, escorted by a courier. In a f u l l y conducted tour, escort and/or guide service i s provided throughout. 2) A sightseeing program conducted by a guide, such as a c i t y tour. D i s t r i b u t i o n Channels: The system of negotiations and aggrements and negotiations between market and destination intermediaries to create the flow of tou r i s t s into and within destination regions. Land Arrangements: A l l services provided to a c l i e n t once he has reached the destination. Net Net rate: A wholesale rate offered to tour wholesalers from tour service industries. Net Rate: A wholesale rate provided to r e t a i l travel agents from tour wholesalers. Supplier: The actual producer of a unit of the tour system; a c a r r i e r , hotel, sightseeing tour etc. 100 Market Region: The home country of the t o u r i s t s . Also known as the Originating or Generating country. Destination Country: The country in which the tra v e l product i s experienced. Also known as the Host or Receiving country. Tourist: Any v i s i t o r who stays in a host country for more than 24 hours. Industry Intermediaries: Those agents, operators, wholesalers, and brokers forming part of the d i s t r i b u t i o n channel. Inbound Travel: The negotiation of travel from foreign countries into home nations. Outbound Travel; The negotiation of tra v e l from home countries 101 4' A F u n c t i o n a l Breakdown o f Tour I n te rmed ia ry C , _ . j — -R e t a I I / D i s t r i b u t i o n W h o l e s a l i n g " Tour Packages /Groups SBsnsBssnsuBsssniiansinsnaBBnsBsaaiBiBBaawanxnasnssnflsasnsinvaaBUsdaniasasnssssasssnassssaaU-t. STAGE 1. CORPORATE INTEGRATION - INTEGRATED FUNCT. -< 1. Japan T r a v e l Bureau (JTB) 376 O u t l e t s ( JTB , Japan) JTB I n t e r n a t i o n a l 'LOOK' (25? NEC) •VIVA' 2 . JTB R e t a i l P a c l f l c o C r e a t i v e S e r v i c e s (PCS) JCT S u b s i d i a r y (West c o a s t o n l y ) (Japan A i r l i n e s S u b s i d i a r y ) ' JALPAK ' 0 4, -t> -t _1 (' 3 . N ippon E x p r e s s (NEC) (NEC F r e i g h t F o r w a r d i n g , Japan) NEC J a p a n , San F r a n c i s c o •ELK TOURS' •DYNAMIC CANADA' 'UBC TOURS' (25$ Look Tour s ) 4,0', --a. T o t a % o f G rand T o t a l / STAGE II. APPOINTED OFFICE - •SHELL' COMPANIES ACT INT 1. Many A g e n c i e s PI a ygu ide T o u r s Inc . (Japan) 'PLAYGU1DE CANADA' 3.7 2 . Many A g e n c i e s V I v r e I n t e r n a t i o n a l (Japan) 'SUPER TOURS' 'VALUE TOURS' 3 . K l n t e t s u Int . Tour Co . (K Ink l -N Ippon , Ra i lway Japan) K l n t e t s u In t . Tour O p e r a t i o n s C e n t r e (San F r a n c i s c o ) My Tour (Vancouver ) •HOLIDAY' Tour Group T o u r s 2 7 C T o t a l % of Grand T o t a l 8.7C I I I . REPRESENTATIVE OFFICE • 4v-> - MON JAPANESE COMPANIES SELL THEIR TOUR UPERAT - o -ION SERVICES TO MAJOR WHOLESALERS (Conpany Type s " A - C " N e g o t i a t i n g w i th " D - F " ) . 1 . F e l l o w T r a v e l L t d . ( J a p a n ) F e l low T r a v e l • FELLOW TOURS' 5 ,000 < Cana-Pak Cana-Pak -2 . U n i v e r s a l T o u r s ( J a p a n ) U n i v e r s a l T o u r s •ORANGE TOURS' 900 - * Cana-Pak ( T o t a l 5,900) Cana-Pak (600 f o r J . T . B . no t I n c l u d e d ) -3 . N a l g a t T r a v e l ( C . I t o h , Japan) N a g a l T r a v e l 'MAPLE VALANCE 1 950 , C"-»,-T r a n s - P a c l f I c T o u r s I n c . TPT (1974) (100? C P . A i r V a n c o u v e r ) (40? C . I toh 1974-1979) TPT 4 . Hankyu E x p r e s s (Hankyu R a i l w a y , J a p a n ) Hankyu T r a v e l 'GREENING' T o u r s 35p . > j *• . ' n 1 -/ II It _ 5 . J e t o u r s ; J o l n t - N a f g a t , H a n k y u , Tokyu T r a v e l - •KANATA' T o u r s 1 , 6 0 0 * t l t l -6. - - O t h e r s 2 ,000 1 -f <-""' " ( T o t a l 4,900) (900 UBC T o u r s f o r NEC no t I n c l u d e d ) 7 . W o r l d g a t e T o u r s ( J a p a n ) W o r l d g a t e T o u r s 'WORLDGATE * T o u r s f T . A . C . H o l i d a y s V a n c o u v e r (100? T . A . C . S e a t t l e ) T . A . C . 8 . G l o b a l Y o u t h B u r e a u ( J a p a n ) G l o b a l Youth B u r e a u (GYB) 'YOUTH' T o u r s 1 ,500L *- II n _ 9 . - N i p p o n T r a v e l and O t h e r s . • • O t h e r s i,4ee»'>- " ( T o t a l 4 ,000) i t — 1 0 . Odakyu T o u r s Odakyu t o u r s 1 ,000^ ' Japan T r a v e l C o r p o r a t i o n (JTC V a n c o u v e r ) JTC 1 1 . Yamaudf T o u r s (Newspaper Company) YamaudI T o u r s 1 , 0 0 © ^ - JTC (Vancouver ) JTC 1 2 . S e i k o Watch ( J a p a n ) S e i k o T r a v e l •SMILE TOURS' _^ 1,800 Maple Fun T o u r s (Vancouver ) Map le Fun 1 3 . N l k k o T r a v e l ( J a p a n ) N l k k o T r a v e l 'CANADA TOUR' 700^* "* C a n a d i a n Odyssey ( V a n c o u v e r , T o r o n t o ) O f f i c e C a n a d i a n Odyssey 1 4 . Many S k y l a n d H o l i d a y s ( V a n c o u v e r ) ' SKYLAND' T o u r s i ,ooe -<• S k y l a n d T o u r s (Vancouver ) S k y l a n d T o u r s Forms 4 D i s t r i b u t e s own p a c k a g e s T o t a l ? o f G r a n d T o t a l 20,300 GRAND TOTAL % OF ESTIMATED TOURS TO WESTERN CANADA 1 43,0<5o' j BCC.:-' C . P . A i r group p a s s e n g e r d a t a e x t r a p o l a t e d f o r t h e e n t i r e m a r k e t . CP and JAL occupy a p p r o x i m a t e l y equal marked j jhares . F o r I n d i v i d u a l J a p a n e s e v i s i t o r s , a g roup e s t i m a t e can be made by m u l t i p l y i n g C P ' s a v e r a g e load f a c t o r ( .80) x g e a t > ( 3 7 0 ) c a p a c i t y x number of f l i g h t s (270) x a v e r a g e r a t i o of Japanese p a s s e n g e r s ( .32) f o r an e s t i m a t e of a l l J a p a n e s e v i s i t o r s on C . P . f l i g h t s T o k y o - V a n c o u v e r ( 2 5 , 5 7 5 ) . A rough e s t i m a t i o n can be made t h a t 90? o r 46,000 o f d i r e c t a i r passengers on T o k y o - V a n c o u v e r f l i g h t s t r a v e l In g r o u p s . I < % | In I n t e r v i e w s wi th t o u r I n t e r m e d i a r i e s , 90? of t h e i r c l i e n t e l e came from t h e s e d i r e c t f l i g h t s . The remainder fnam^the Western U . S . A . A t o t a l e s t i m a t e f o r grouped t o u r s Into B . C . can then be c a l c u l a t e d a t 46 ,000 + [46,000 - ( .90) (46,000)1 o r 5 0 , 4 0 0 . T o d o u b l e check t h i s f i g u r e r o u g h l y matches t h e r a t i o o f Japanese group t o I n d i v i d u a l o v e r s e a s t r a v e l a t 50 ,400 •: 63 ,907 o r 79? J u s t below 83? d e t e r m i n e d by JNT0 f o r 1983. T h i s assumes a l l g roup packages were s u r v e y e d . If a n y t h i n g , t h e p r o p o r t i o n of group t r a v e l e r s would be g r e a t e r . 1 ) A p p e n d i x D S r p o r a t l o n s H a n d l i n g J a p a n e s e P a c k a g e d G r o u p HOURS t o B . C . 1983 Vo lume 1983 1983 V a n c o u v e r T o u r O p e r a t i o n HS LI HUNG TOKYO-VANCOUVER (Company T y p e A & B w i t h 1983 G r o u n d O p e r a t i o n some S u b c o n t r a c t 1 n g ) . P a s t A r r a n g e m e n t s 00 ( T o t a l ) JTB V a n c o u v e r ( 1 9 8 3 ) I n c . JTB V a n c o u v e r and O t h e r s 1964 - 1984 J T B , San F r a n c i s c o ( 1 0 0 ? JTB J a p a n ) ( B . IWATA 2 0 0 0 , 1 983 ) 1968 - 1 982 C a n t o u r V a n c o u v e r 1976 - 1983 C a n a p a k . 1964 - p r e s e n t 1964 - p r e s e n t o n 4 o f f CP IWATA t r a v e l 00 PCS V a n c o u v e r ( 1 9 7 5 - ) P CS V a n c o u v e r 1975 - C a n t o u r , B . IWATA a n d o t h e r s ( 1 0 0 * JCT J a p a n ) 1 9 6 4 - 1 9 7 5 1 9 6 4 - 1 9 7 5 San F r a n c i s c o O f f i c e D t r e c t t v e s '0 ( T o t a l ) N o m u t a E x p r e s s ( 1 9 7 7 ) Nomura E x p r e s s V a n c o u v e r 1975 - NEC San F r a n c i s c o 1 9 6 4 - 1 9 8 4 ( A p p o i n t e d S h e l l O f f i c e ) TPT UBC T o u r s , 9 0 0 1 9 8 4 . N . E . C . V a n c o u v e r ,ooo 33 DIRECTLY FOR A JAPANESE PARENT (Company Type " B " w i t h a S h e l l Type " E " O f f i c e ) 00 P l a y g u i d e T o u r s I n c . ( 1 9 8 3 ) P l a y g u i d e - V a n c o u v e r J o i n t - V e n t u r e P l a y g u i d e T o u r s I n c . 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