Foreign Tourists and Capacity Utilization in the Accommodation Industry

Services have distinct characteristics of simultaneous production and consumption. As a result, capacity utilization is an important measure for evaluating the productivity of service industries. This study quantitatively analyzes the effect of foreign tourists on the occupancy rate of the accommodation industry. The major findings of the analysis are as follows. First, recent depreciation of the yen has contributed significantly to the increase in the number of overseas visitors. Second, the increase in visitors from foreign countries has a positive impact on the occupancy rate of accommodation facilities through temporal smoothing of demand. Third, solely from this demand-smoothing channel, the total factor productivity of the accommodation industry has improved by around one percentage point. These results suggest that policies to increase the number of visitors from foreign countries are effective for improving service sector productivity, as well as boosting external demand.

This is the English version of the Japanese Discussion Paper (15-J-049) with some additional information and changes.