One Tiny Ski Town Is Defying Japan’s Scary Population Slump

(Bloomberg) -- Japan’s shrinking population has weighed on the world’s third-biggest economy, alarmed government forecasters and turned some rural communities into veritable ghost towns.

Not so in Niseko, a ski resort community on the nation’s mountainous, northern island of Hokkaido that’s prospering in the face of all the demographic gloom.

The local government has embraced immigration in a way the national government hasn’t. The area’s booming economy has spurred investment in luxury hotels, restaurants, and shops--and attracted local and expat workers who’ve become full-time residents. Niseko’s population grew 2.9 percent last year to 4,952 compared with 2010 levels, the highest mark in four decades. Nationwide, the population slid 0.7 percent over the same period.

“There haven’t been any other towns that have been this successful before,” said Tatsuya Wakao, a consultant at Fujitsu Research Institute. "They did a good job in recognizing the need for foreign tourism."

Snow Mecca

True, not every rural community is blessed with the ski slopes and hot springs that Niseko enjoys. Should the town’s much larger neighbor Sapporo win its bid to host the Winter Olympics in 2026, Niseko would host the Alpine events for the games and enjoy an economic windfall.

That said, other Japanese ski resorts and tourism centers have fallen on hard times and Niseko offers broader lessons to all struggling rural towns about the power of savvy and sustained marketing as a rising middle class in Asia broadens the region’s tourism opportunities.

Seiji Ohsaka, who served as mayor of Niseko from 1994 to 2005, realized early on that he needed to turn his town into a must-see resort destination. He dispatched staff to Hong Kong, Taiwan and Vail, Colorado, to talk up Niseko and study competitors. As a result, the number of visitors during the ski season has surged in the past six years--and last year hit a record 811,000 visitors.

“I knew it would be impossible to turn around the domestic market, which is why I sent staff overseas on promotions,” says Ohsaka. “I opened their eyes to the outside world. You can’t only know your own town if you want to be a tourist destination.”

The intelligence gathering paid off. The number of foreign tourists has increased more than 10-fold over the past 11 years. The majority of tourists last year were drawn from Asia, led by Hong Kong, with about 35,000, followed by China with around 30,000, then Taiwan and Australia. 

The popularity of the area is also shared with neighboring town Kutchan, which also has slopes on the shared mountain and where many hotels are being developed. What used to be a sleepy scenic ski resort just a decade ago is now home to numerous new hotels and shops carrying English signs more commonplace in Tokyo than the Japanese countryside.

Residential land prices in the town are increasing at the fastest pace in Japan, surging 20 percent as of January, compared with a decline overall in Japan.

Balanced Budget

The area has the most snowfall on average of any major resort in Asia, and second-highest in the world, behind only Mount Baker in Washington State. Niseko was rated the best ski resort in Japan in 2015 for the third year in a row by the World Ski Awards.

“Some people will say it’s the best snow you will ever experience,” said John Barton, the head of Niseko Management Service Co., a holiday provider. He moved to the area almost eight years ago and now has a 4 year-old son. “In a way, it’s like St. Andrews golf course."

Unlike many other debt-burdened regional governments, Niseko is running a balanced budget as it has privatized the operation of hot spring facilities and passed tourism operations to a local company. A rival and nearby ski resort community, Yubari, filed for bankruptcy a decade ago amid failed plans to attract tourists.

The resort community has seen a surge in full-time foreign residents. Ben Kerr, owner of Niseko Green Farm and Niseko Real Estate Co, started visiting the area for skiing in 1996. He then stayed for a summer and "then decided to stay up here,” he said. Kerr, who is married and now has three children, started a real estate company and then a farm, where he grows organic vegetables, which he supplies to restaurants locally and in Tokyo.

The city became more of a draw to foreigners with the 2011 opening of the HIS Niseko international school. "We have people from five different countries working in the town hall,” said Kenya Katayama, who has been mayor of Niseko since 2009 and helped push for the international school. “One lady was talking about moving to Yokohama for her kid’s education before the international school came.”

Baby Boomlet

The influx of people has also helped push up the number of babies in the area. The average birthrate in the area has jumped, reaching 9.9 births per 1,000 people in the year ended March 2014, with 48 babies born in the area in 2013. The average nationwide slid to 8.0 last year.

“There’s a little bit of a baby boom here,” said Paul Butkovich, the sales manager at Hokkaido Tracks Resort Properties, who moved up with his wife and now has two children. “There are retired lawyers, photographers, artists--and younger people having kids."

The popularity of the area has helped make it only one of five out of 20 places in its sub-prefecture of Hokkaido to boost jobs in recent years. Three of the other four are also ski resort areas, including neighboring Kutchan. While Niseko’s economy is robust, the overall gross domestic product of the sub-prefecture, the smallest area for which figures are public, has fallen for the five years to March 2014.

It’s not just tourists from overseas that are helping Niseko’s economy, locals are also going abroad to learn new techniques to expand their business.

Mamoru Takahashi, founder and president of Milk Kobo, which runs a dairy farm, shop, cafe and restaurant in Niseko, sent his wife and two staff overseas to study cheese making in Italy. He plans to add a cheese factory making mozzarella and other types of Italian cheese to sell to restaurants and shops.

“I never have imagined Niseko would turn out like this,” said Takahashi, the third generation of his family to live in Hokkaido. “It’s great to have lots of young people coming here. We can see different cultures coming together."

The surge in local real estate investment has raised some concerns. There are million dollar second-homes being built, a $5,000 a night penthouse suite, and hotels being built by the Ritz Carlton and the Park Hyatt. “It’s like a bubble,” said Minoru Fukui, the owner of the Niseko Park Hotel. “The current situation could burst."

To keep the economy on firmer footing, Niseko is diversifying into white-water rafting, horse-riding and golf to attract visitors the year round. Hong Kong-based Tim King, president of Edventure, who quit his job last year to run a company that organizes family camps in Niseko and is weighing a move to Japan. “The lifestyle I could provide for a family here would be fantastic,” he said.

Further out, the city should get a boost from the extension of a bullet train line to Sapporo, with a stop in Kutchan, in 2030. The link will shorten the travel time by train from Tokyo by about three hours to four and a half hours. "There’s stability in the area because of the growth prospects. It’s sustainable. People are relaxing and saying we can have a future here,” said Jonathan Martin, a resident and chairman of local real estate developer Nisade.

To contact the reporters on this story: Chris Cooper in Tokyo at ccooper1@bloomberg.net, Katsuyo Kuwako in Tokyo at kkuwako@bloomberg.net. To contact the editors responsible for this story: Anand Krishnamoorthy at anandk@bloomberg.net, Kazunori Takada at ktakada17@bloomberg.net, Brian Bremner