Designing a Tourism Stimulus During the COVID-19 Pandemic in Japan

The spread of coronavirus disease 2019 (COVID-19) has significantly reduced tourism demand worldwide. Travel subsidies have been implemented to stimulate demand, but their effectiveness is yet to be evaluated rigorously. This study examines the determinants of the weekly tourist flow between Japanese regions during the COVID-19 pandemic and evaluates the effectiveness of different types of travel subsidies in mitigating economic damage to the accommodation sector. The results show that the pandemic decreases both outbound and inbound tourism demand, deteriorating tourism businesses even in areas not severely affected by the disease. We also find that tourists shift their destination from distant to neighboring regions, but a travel subsidy by the Japanese government effectively creates tourism demand for distant regions. Moreover, it induces tourists to stay in luxury accommodation, further augmenting hotel sales.