"Tourism is an essential factor for the growth of our country,” affirms Yoshifumi Kato Kato, President of Keihan Holdings, which boasts a portfolio of 50 companies with a solid diversification strategy that includes railway industry, tourism, and real estate. Moreover, the company is undertaking an aggressive global expansion that spans from China to real estate investments in famous buildings in New York and Boston. Keihan Holdings has been able to leverage on Japan’s tourism boom in the area that stands for the epicenter of Japan’s culture, namely Kyoto and Osaka. From Kyoto’s 17 World Heritage Sites to Osaka’s world's famous culinary tradition, when asked about the main reasons why tourists should come to the area, President Kato says, "to sum it up in one single word: culture.”
Trains are naturally associated with the image of Japan. Today, when we look at urban areas it is clear that there are tremendous challenges and opportunities for the future arising from infrastructure development. In this context, what is the genesis of Keihan Holdings and its contribution to the socio-economic development in the prefectures of Kyoto, Shiga, and Osaka?
The foundation of our company dates back to 1906. Our first train started to run in 1910. The following history of our company can easily be explained by the life of a very famous Japanese person, Mr. Shibusawa, who is known as the father of capitalism as he founded over 500 companies. In his book, “Rongo and Soroban”, he said that morality and economy must match. He, therefore, founded many companies in several sectors, especially in the banking sector and the steel industry, because at that time he was of the opinion that it was needed by society. Nevertheless, he never kept his companies for himself. He always passed them on to somebody else who knew about the business and could keep them profitable. Eventually, towards the end of his life, as times and the society’s needs were changing, he started focusing on building public schools and hospitals.
At the moment, we have a portfolio of 50 companies; all related to the railway industry, tourism, and logistics. What makes us special and successful is our unique reach, which covers especially the Kyoto and Osaka area. Due to this, we are catering to two types of customers. On the one hand, we have visitors from all over the world that travel to the main tourism destinations; on the other, we have residents in the Kyoto area that travel to Osaka for professional and business reasons. Being able to serve these two groups at the same time is our advantage.
Looking at the domestic challenges of the Japanese market, what is the plan to face the increasing competition in the railway sector particularly in connection with the upcoming Tokyo 2020 Olympic Games and considering the aging and shrinking population?
I agree that there is a problem of a declining population in Japan. However, in 2014 and 2015 the area connected by the Keihan Line was named as the best tourism spot by “Travel and Leisure” and together with our efforts, the region was therefore revitalized. This is one of our major strategies that also reflects what Japan wants to achieve. Focusing on the areas where we are based has become the cornerstone for our income. Obviously, we do feel an impact of the ever-aging population, however, we are able to fill in this gap with the increasing figures in tourism.
Abenomics has introduced an economic jolt in the country. However, despite the expansionary monetary policy and the fiscal stimulus the country’s economic growth won’t be sustainable unless the private sector takes the lead and taps into new high growth business segments with innovative solutions and services. In this context, what is Keihan Holdings’ diversification strategy?
Concerning the expansion to the different business areas, we focus mainly on hotels, tourism and transport. Nevertheless, our real estate division accounts now to around 30 to 40% of our profit. Since we are located in Kansai, we have always had the necessity to expand into other areas of Japan. However, there is a realistic chance that the Japanese market will not expand any further in future.
Therefore, we are looking at doing business overseas. One market we are currently working on is China. There, we are involved with one of China’s biggest real estate companies. We participate in their operations as investors. Two of our future strategies include expanding into developing countries and in South East Asia. Moreover, we are currently also operating in America, by investing in famous buildings in New York and Boston.
What are the financial highlights for 2016? And looking into the future, what are the expectations in terms of main growth drivers towards 2020?
About 20 years ago, we witnessed the peak of Japan’s economic bubble, which brought to a hike in the number of people using our train services. Nevertheless, until around two years ago, the Kansai area has seen a 30% reduction in customers. The inflow of tourists has contributed to the reinvigoration of profits. From our side, we also have made notable efforts to improve the business. For instance, taking advantage of the beginning of high season in tourism in October, we are planning to introduce the new “Premium Car” this summer. We are thinking to introduce a reservation fee for these new cars that boast of a more comfortable interior and make the travel experience more special. This is also what sets Keihan apart from other train lines that are operating the Kyoto-Osaka connection.
On another note, Kyoto Tower of which Keihan Holdings is the owner, was built around 50 years ago. It includes many shops and restaurants; and from the top floor visitors can enjoy a unique 36O-degree view of Kyoto. In order to keep the area interesting for tourists, we are investing in refurbishments to be able to offer an even better experience.
Just as you are following the strategy to capitalize on tourism, Prime Minister Abe identified tourism as a strategic sector for the future growth of Japan. What is your personal opinion about the opportunities stemming from a boost in incoming tourists that should reach 40 million by 2020? And what can American tourists expect from Keihan Holdings when visiting Japan?
Tourism is an essential factor for the growth of our country. Foreigners can get to know the Japanese culture better. Especially after 200 years of isolation, there is something hard to understand or even mysterious for tourists in Japan. Tourism will lead to the true globalization of Japan, as it is trying to achieve higher openness in the present.
This is something that Americans but also other nations can expect when coming here. In the aftermath of World War II, Japanese used to relate the word “foreigner” to American citizens. Nevertheless, nowadays we can see a much broader customer base, even from Asia. Therefore, tourists from America, Asia and also the rest of the world are welcome to visit Japan.
What would you say are the key reasons for tourists to visit Osaka and Kyoto in 2017?
If you were to ask me to sum it up in one single word, I would say: culture. Kyoto has 17 World Heritage sights. In other words, the whole town is a World Cultural Heritage sight. On the other hand, Osaka is well known for its particular Japanese culinary tradition, which is another interesting way of getting to know the Japanese culture.
Being the expert on the beauty that Japan offers, what would be your personal suggestion to the American tourists in terms of sights that cannot be missed?
There is a saying in Japan that tourists coming to the country must not miss two things. One is Mount Fuji, the other is visiting a Geisha. I never really understood this and even disliked the idea. Nevertheless, over the years, I recognized the significance of these two things to Japanese culture. Still, it has to be added that tourists should best come in the season of the cherry blossom and the Koyo. In addition, I would like to recommend Lake Biwa canal in spring and fall; and Mt. Hiei in summer, especially when doing sightseeing in Kyoto.