 Hey, we're back. We're live here. It is the one o'clock block. I'm Jay Fidel here on ThinkTec, actually looking to the east. And we are looking to the east today. We're looking to Kobe Japan with Steve Zercher, who is a professor in Japan, teaching entrepreneurship. And he's also a professor here at the Shigla School, teaching entrepreneurship. And we are honored to have him join us today because we have some very interesting entrepreneurial things to discuss. Welcome to the show, Steve. Hey, thank you very much. Jay, it's always a pleasure to be with you. I look forward to our chat this morning. Yeah, so you titled the show, The Donning of Hospitality, Hospitality Education in Japan. And if you would have asked me before I got your note about that, I would have said, oh, Japan is one of the best places to visit. Japan is so warm and comfy and friendly. Japan has great food and great things to see and do. They have a great tourism organization, tourism structure already. What do they need to go further with it? Is there a problem? Yes. Unfortunately, there is. All of what you said in your question is correct. Japan, I lived here now for many years. Japan is a beautiful place to visit. The experience that you have when you visit here, the tourist is uniformly positive. It's just wonderful to travel in. The infrastructure is well developed. It's clean. It's safe. There's always been a little bit of a complaint of it being inexpensive or a little bit expensive, but actually the dollar and other currencies are quite strong against the end right now. So that's been mitigated somewhat. So as a result, the inbound tourism has just taken off. It's been an incredible growth over the last five or six years. So exactly what you stated is true and more and more people are discovering that and they're coming here. And it's one of the few growth industries for Japan. Japan's economy, as we talked about in previous shows, has been flat to trending down for the last 20 or 30 years. But this one niche, this one industry, inbound tourism, is a tremendous business opportunity for Japan as a country and also for the hotel services and travel services and so forth. What I wanted to address in this topic is that the infrastructure does not exist. There's a lag between the popularity of Japan and this growth of inbound tourism, which is the numbers are six years ago was maybe eight million tourists. And this year 2019 will probably be mid 30s, 35 million or so. So you can see it's grown four times over that period of time. In the first few years when this is taking off in Japan, the government really didn't pay attention to it. And industry as well, that maybe this was just a fluke, and now it's been going on for so long. And these numbers are just so eye popping that the government now is beginning to pay attention to what we need to do in order to service the number of people that are coming to Japan. Expectation next year with the Olympics in 2020 in Tokyo in July and August is that in 2020 there'll be 40 million visitors to this country. It's unbelievable in comparison to what the numbers were just a few years ago. Well, you know, what are the indications that the system can't handle the tourists? I mean, what's breaking down, Steve? Well, I've read that oftentimes the Chinese tourists and other Asian tourists, most of the boom is based on Asian travel. Europeans are coming to Japan in greater numbers or so are Americans. But the biggest boom are Koreans, up until recently, and Koreans, Southeast Asians and Chinese. And you need to, in order to get a visa, you need to secure housing, launching. And in some cases, the tourists are not able to do that. So they're actually being prevented from coming to Japan because they don't have a place to stay. The numbers and the actual infrastructure. You know, you know, we need on this, we need a professor who teaches entrepreneurship, who can show us the way to establishing new entities and attracting new capital to build hotels. Right. So that is happening. There is money coming in now. And new hotels are being built. If you walk through Kyoto now, you'll see new hotel construction going on almost every block or every other block. That's true in the more tourist and areas in Tokyo too. Also, new hotels are being developed and being built. But they're still, they're still playing a kind of a catch-up game. But as a professor of entrepreneurship change you're mentioning, what I look at is who are going, who's going to be filling those managerial roles or those front desk roles at those hotels that are being developed or even going into the ones that are exist now that recognize that instead of 10% foreign visitors to their hotel, it's now 30% or in some cases 50%. And we want people who are global in their approach speak English well, have some sense of what foreigners' customer requirements are. And beyond the housing stock, which is kind of simple to explain, there's a much bigger challenge. And that is training Japanese people to move into the hospitality industry. There's two factors that play there. One is a number of Japanese people, as you know, as well as known. It's beginning to go down, the number of young people, every year the number of high school graduates go down numerically, college graduates also go down. So the general trend in terms of providing labor for these high-growth segments of Japan, like the hospitality industry, is a challenge. And then beyond that, unfortunately, the hospitality education system also is severely lagging the needs of the industry. There really isn't a hospitality management infrastructure in Japan of any sort. And one statistic, I just wrote an editorial for the ACCJ Journal. I explained that of the top 300 hospitality hotels in the world, top 300, despite what you said, Jay, at the top of the show about Japan's so well known for customer service and hospitality and so forth, top 300 is not a single Japanese university, not even one. Oh, wow. You know, one thing that strikes me though, if you look at another very successful aspect of tourism these days, it would be cruise ships. And so much so that, for example, Venice is barring cruise ships beyond a certain number at any given point in the harbor there. And that's so with a lot of places in the Mediterranean. So cruise ships are growing like tops again. And, you know, one of the points that that's all suggests, and I'll give you an example, Shangri-La. I don't know if there were Shangri-La hotels in Japan, but if there were a Shangri-La hotel in Japan, they would train their own people. Shangri-La, for example, has its own training program where they would train people and put them in the hotels. And as in the cruise ships, they're an international crowd. They come from everywhere. And they're very competent. They're very dedicated. They know about passenger service and, you know, customer service. And they can do a very creditable job. They may not be Japanese, but they know about how to run a hotel and be nice to people. And so I'm thinking that in the vacuum you've talked about, one solution might be the solution that they've come to on the cruise ships and the solution they've come to in the Shangri-La hotels, among others. Yeah, those are two. Number one, the cruise ship industry in Japan has taken off. We live, I live in Kobe. Right now I'm calling you from Kobe. And I live on a section of Kobe called Fort Island, and there's stocks here. And during the spring season, the cruise boats, we used to see maybe maybe eight to 10 a year. Now it's 30 easily. So it's crippled, the number of boats that have come in. Wow. So the cruise industry in Asia with the growth of the middle class in China and other locations is really booming. And Japanese people also love to cruise. There's some cruise boats that come in here, and they're basically condominiums. So wealthy, rich people buy their cabin within the boat, and then they cruise it constantly. So they're on the water. So these boats also come and visit. Wow. So that's taking off. Yeah, it's remarkable. I have some friends that are in that industry and they tell me about the growth of this and the employment demands and so forth. And they have international crowds. See, there are staffs on those cruise ships. I'll bet you they're not so Japanese at all. They're from everywhere in the world. And people like that. That's true. And it's just a cruise boat, and it's traveling throughout Asia, then to have that kind of mix of people who are providing service to the customers is fine. But for the hotels that are here, we're in Japan. If the hotels were 90% non-Japanese in terms of the employees, in a sense or sense of the wrong message, you want the Japanese clientele is still going to be at most of these major hotels, 50% or so. And in Japan, and even the foreign international GMs, they feel a personal sense of responsibility from having a diversity of their own workforce and also a sense of responding to the Japanese clientele to have more Japanese people in forward facing customer facing. So the complaint I hear from the GM is that we can do our own training. Ritz is famous for this and Shangri-La and other hotels like this. But where do we find the people to begin with? It's just not there. So what I've been doing for the last couple of years at my school, the Kansai Guide, I have created a hotel management program. And we're one of the few schools in Japan right now that have such a program. And I've taken a very practical approach that involves visits by GMs to our campus or our marketing managers or operation managers and also for the students to go to hotels. So this semester we have four visitors coming to our campus to explain about what they've done, how they've built their career and why they like what they're doing, and then we have the students visiting. The thing I wanted to talk about, I can go on Jay, is something that I've gotten involved with with the U.S. consulate. So we came up with a plan to try and fill this vacuum that exists here in Japan in terms of hospitality education and bring in universities from America to explain how they develop their programs and to share best practices with Japanese universities that are interested either have a few of them but not many or are interested in setting up their own hospitality program. So we work on this together and then one of the collaborators on this, he is from Cornell. He has his PhD from Cornell and he graduated from Cornell with an existing diet member. He's from Chushu. His name is Yamamoto. Yamamoto within the Japanese diet is the key proponent of the hospitality industry, promoting it, supporting it, developing it. So obviously he's very interested in this challenge that Japan has on education. So he learned about this. He visited us with Kansai Gaide about a month ago and he seized on this as a way to show Japanese universities that here are the American Chamber of Commerce, here is the U.S. consulate and U.S. embassy bringing in American universities to try and help you guys understand that hospitality education should be taken seriously because right now among most schools in Japan it's not taken seriously. So a small event that we were planning to do on a local basis in Kansai now has become a major conference and it's just astounded me the reaction, the Ministry of Trade, the Ministry of Education, the Ministry of Land and Infrastructure. These are three key ministries within the Japanese government have all endorsed this event and are promoting it within their ministries and trying to get diet members to support this effort. So on October 28th we're running this event at my school Kansai Gaidex and on October 30th we're actually doing it on the diet ground. This will be the first time the U.S. Embassy or the American Chamber of Commerce has been allowed in there. Usually you know we're for a bot and we can't go in there but for this event they want to hold it right where the diet members are. So they're holding a reception after the event on the 30th and they're inviting diet members and then the following morning this will be on October 31st the U.S. schools are having an open breakfast with the members of the LDP to explain to them about hospitality management and how important it is within the United States. The schools that are coming Jay are some of the best in the world. It's University of Nevada, Las Vegas and Cornell I think is coming, University of Central Florida, University of Wisconsin, Stout and Michigan, University of Michigan. Those are four schools that are all rated in the top 25 worldwide. Why this awakening Steve? I mean it's been dormant as you say for a long time and all of a sudden what happened? What drives the government to want to do this? What drives the universities to want to do this? So I think I did it with the Japan Travel Agency. They're the group within the Ministry of Land and Infrastructure and Tourism that's responsible for hospitality education within Japan and they've been promoting hospitality management, hospitality education to Japanese universities for 10 to 12 years with very very up to small results. Let me briefly explain why Japanese universities tend not to be interested in hospitality education. It's not considered to be a Class A or even a Class B industry. Tourism is kind of viewed in a negative way here. It's not manufacturing. That's the gold standard right for Japan. So services below manufacturing and within service hospitality is probably on the lower side again. So it's considered to be a vocational education. You go to a community college to learn about hospitality because no one really takes it seriously. So there's been a resistance on the part of universities to endorse hospitality education because they don't really think it's worthy of them to do it. So because of this long frustration and long failure actually that the government has experienced in trying to get Japanese universities to focus on this, they see some R events. I honestly say it's kind of like the Black Ships with Kamano Perry. It's like the foreigners are coming in and we don't get it in new Japanese universities. We've been telling you for years now that this is important. Now the American Chamber of Commerce and the U.S. Embassy and all these famous schools are coming to Japan and they're going to tell you the same thing we've been telling you. But now you have to listen because it's foreigners who are coming in. So I think with this event we accidentally hit the seed of kind of pent up desire on the part of the Japanese government to promote hospitality education. They realize it hasn't worked. Whatever approach they've been taking. So now they want us as outsiders as foreigners who are interested in developing Japan to promote this event, which is I think what's made this thing just boom. It's just been amazing. You find yourself right in the middle of it. That's pretty good. But let me ask you this though. I can imagine that while manufacturing is a gold standard, which is ironic because that's an emulation of the United States manufacturing culture that has existed from before the war and all. And so they've seen manufacturing as the most important thing and they've seen hospitality perhaps as a domestic service, as making hospital corners, serving food in a restaurant, doing cleanup in the room. And so they see that as below the standard and below. It doesn't have a lot of pride and doesn't have a lot of social benefit to it. So those factors are going to continue to exist. You can have the conference. You can have all these guys come in from prestigious American schools. You're going to have the program at the Empress Palace and all that. But how are you going to change the views of all these kids and would be managers from all over Japan and so as to establish a new and more sophisticated hospital or rather hotel workforce? Yeah, I think the blockage is not from the students. At my school, about 20% of our graduates go into the service industry. No, we're a language school. We're teaching English and Spanish. So maybe the students that we draw to our university are more inclined to be open-minded about being in the hospitality industry. I think the real problem is at the university level. These students are probably distributed to all Japanese universities, but the Japanese universities, administrators, the people, the deans, the presidents, when they think about hospitality education, they don't get excited about it. That's not really our charger. That belongs to a similar doctor. They call it in Japan, the vocational level. So it's really convincing the universities to take a different approach and recognize that in Europe and in the United States, you know, with Cornell and all these other high level schools, this is a very legitimate and well-regarded and highly respected area of study and an industry to be a participant in. Well strikes me that. So Kansai Gadai University in Kobe, you know, that you're pioneering on this and you're establishing something of note, of note in the U.S., of note, you know, to the government in Japan, for that matter, to the emperor. Right. And so it seems to me like this is an opportunity for you, Steve, and for Kansai Gadai to spread the word to every university in all of Japan and have them, you know, excite students in the same way that you're exciting students in your university. Are you thinking of that? Are you going to do that? Yeah, that's what we're hoping. So we have 30 or 40 Japanese universities now that will be attending the event in Osaka, Tokyo. And that's a significant number. We didn't know if we get any actually responses. This is just a whole thing. It's been something we've created with the expectation that we'll have an impact. And the response from the Japanese universities has been above what we expected. And also as a part of the conference at the last section, we're sitting on one on one meetings between the five American universities, again, the University of the West Vegas, Michigan and others, and the Japanese schools themselves. So they will have a chance to talk with each other and potentially form partnerships. If that happens, then maybe we have a nucleus of schools that will begin to focus on hospitality education. And from there, then hopefully we'll proliferate. So that was the goal. And that's what at least initially looks like it's happening. But I've been in Japan a long time and I know I've been at the universities and Japanese universities now for eight or nine years. Things move very slowly in Japan and even slower within the university environment. So we'll have to see how it goes. You can lead a horse to water, right? Yes. And we're leading the horses to the water. We'll see if they're going to drink. Well, hopefully they will. Well, you know, at the same time, it seems to me that the whole picture you've described suggests that maybe these working, the staff that exist now are underpaid. And maybe there's a whole new class of Japanese managers in the hospitality industry that can be, will be paid better. Not only in the industry, but teaching the industry. Matter of fact, if you want me to come over there and show them how to make a really mean martini, I'll do that. But anyway, so it seems to me that it's a turning point. When I'm in Hawaii next, you have to prove that to me. I'll have to sample your word. But that's point about salary. So right now the demand is so big that if you move up to the assistant GM level or GM level, and you can do that within Japan in about a 10-year period of time. So you can graduate at 22. And in your early 30s, be the assistant GM or GM. And you'll be getting paid around 8 million yen, which is about $80,000. Yeah, the average salary in Japan is around 50, about the same as the United States. So that's actually a pretty good salary. But those first few years, you're getting paid nothing. So one of the things I'm thinking about in my role, my elevated role now in this industry is to advocate hotels to pay more. And some are beginning to do that when students start in those first few years, because they look at the salary that the hotels are offering, and it's just not inspiring. So they lose people because they're not paying enough. But you know, will success spoil rock hunter? What I mean is, you have this magnet that draws people from all over. You have a new class of travelers coming from Asia and elsewhere who want to enjoy the Japanese culture, which is world famous for its quality, its refinement. It's really an amazing culture. And it's been preserved in Japan so you can find it. It's like a special sauce in Japan. So if we do all these things, if you do all these things, then we build new hotels. We get new capital. We get new managers. We elevate the staff. We bring in staff, or at least management from elsewhere. And we change the system to handle more tourists coming from more places. Are we going to spoil rock hunter? So you're talking about over tourism and the sustainability issues and so forth. Is that what you're addressing, Jeff? Yeah. If I come for the special culture in Japan, which is, you know, in my case, what drives me, am I going to find that it's changed? And it's been, it's been, it's declined somehow because of all this additional infrastructure that is going to be built. I don't see the basic attraction of the food and the focus on the history of Japan and the art of Japan. I think that will continue, regardless of the number of tourists that come in. There may be issues though, in terms of overcrowding, like you guys experience in Hawaii. And that's, I know, something that the government is trying to address. So there are some beginning times that that's beginning to occur. But I think over the next 10 to 20 years, the attractiveness of Japan will continue. It's still, even though we have many, many more foreign tourists here and there is some grumbling with local people, especially Kyoto, the experience of the tourists still is outstanding and 80% of them want to come back. They just have such a great time the first time they're here. And they come back a second time and they come back a third time. And as they come back, they explore different aspects. They go further out into the more rural areas and they deepen their experience here. So it's kind of like the first bite of the apple and then the second bite of the apple and the third bite of the apple. That's been what the numbers are showing and that's the people that I talked to that do surveys of the tourists that come in. They really are taken with this country and after the first trip they want to come back. So hopefully that will not change in the next 10 or 20 years. We'll see it. One last thing I wanted to bring up, Jay, and we're running out of time I realized, is that today the emperor, the new emperor, is being enthroned. So I believe the president Trump has not come and vice president, they're a little bit busy with stuff that's going on in Washington D.C. I think right now. But I think the secretary, the secretary is here representing the United States along with many, many other dignitaries to partake in this ceremony where the new emperor becomes officially enthroned. So it's a national holiday here. Everything is closed. They're going to have several events in Tokyo to celebrate this. Actually enthronement occurs in about 25 minutes. Are you going to go? I mentioned to you earlier, I wasn't invited. I think it was 2000 Jay and I think I was the 2000 first or 2000 second on the list. Didn't quite make it. So you were mentioning that the enthronement raises an interesting point and that is people don't feel the same way about emperorship as they used to in Japan. Can you talk about that? Yeah, I was at an event a couple weeks ago and this retired professor was involved with an art display in Nagoya. This man made international news. There were some art pieces there that were involved with the comfort woman or the sexual slavery issue. And also some art pieces that were somewhat critical. Kind of in an indirect way of the emperorship in Japan. So I ended up talking to this guy and he explained to me and I have to tell you that I didn't even know that this existed in Japan and I've been here for many, many, many years. There is a minority of people in Japan that are actually against the emperor's system and think it's not positive for the country. And maybe this goes back to the world war two days and emperor Hito and his involvement in driving Japan towards engagement with the United States and the colonialism that occurred in the early 1900s under Japan. But I had never heard that there was any kind of organized or loosely organized resistance or reluctance to embrace the emperor system because in the Japanese media it's 100% support. Probably the Japanese public if you told them, are you supportive of the emperor? I would be in the 80 to 90% range. But there is a minority of people here that I discovered that thinks that it's outdated and should be abolished. I never heard that before. So it was shocking to me to hear that from you. Well, you know, we live in a century of change. Every time you look, there's something iconic which is changing around us. We have to be so sensitive to that. And there's a common denominator here in terms of the change of feeling, at least by some people about the emperor and the fact that Japan has awoken to the possibilities of tourism. Another change and the idea is to be sensitive to all kinds of sea changes and you are. And I congratulate you on being involved in this huge sea change around tourism and, you know, travel management education in Japan. Good for you, Steve. Thank you very much. It's a lot of fun to be on the leading edge of stuff. I really enjoy doing that. We'll want to hear more about it in two weeks time specifically. We want to hear how everything is doing in Japan and Japan business and how Japan connects with Hawaii. Thank you so much, Steve Zurcher, Professor of Entrepreneurship in Kobe, Aloha.