The Inside Travel Group has successfully transported 12,500 passengers to 240 unique destinations across Japan in 2023 and has now secured the Cool Japan Fund as a significant investor. This funding includes a £10 million investment from the Cool Japan Fund and another £10 million from private equity firm Piper.

Co-founder Alastair Donnelly commented, “Our mission has been to promote Japan and its culture, and this investment marks a significant validation, as we are now 38 percent owned by the Japanese taxpayer.”

Donnelly noted that it is notable for Japan to invest in businesses that advocate for Japanese culture on a global scale. He questioned if the UK has an equivalent initiative, while observing that Middle Eastern nations have been effectively utilizing foreign investment in their cultural sectors.

Established in 2013, the Cool Japan Fund is a joint public-private initiative aimed at fostering the sustainable growth of the Japanese economy by enhancing overseas demand for unique Japanese products and services that showcase its lifestyle and culture.

Donnelly explained that the investment opportunity came more by chance than through direct pursuit, as the fund reached out to Clearwater International, the advisory firm facilitating Inside Travel’s sale, after learning of its availability due to a private equity firm’s involvement.

“We present a unique profile in Japan as a British-owned travel company with operations in the country. Although we had previous connections with Cool Japan before the pandemic, this specific investment originated from an unexpected pathway,” stated Donnelly, 48.

He emphasized that the involvement of a Japanese investor will bolster their efforts within Japan and facilitate the expansion of their travel services throughout Asia.

Donnelly highlighted the importance of relationships in Japanese culture, noting the difficulty non-Japanese firms face in breaking into certain sectors, particularly mentioning the challenges related to rail ticketing access.

Inside Travel reported revenues of £50.1 million and pre-tax profits of £2.4 million in 2023. They have continued to expand, hiring an additional 50 staff and servicing approximately 14,000 passengers to Japan, South Korea, and Southeast Asia this year, a notable increase from 10,700 in the previous year. The company is chaired by Ian Simkins, former CEO of Audley Travel.

Donnelly revealed that the company is enhancing its “community-based tourism” initiatives, which are vital for supporting local economies in rural Japan. They are also exploring unique experiences in Osaka, such as back-road cycling and tours featuring local craftsmen to showcase Japan’s historical arts and crafts.

As per Statista, Japan ranks as the fourth-largest economy globally, trailing only the US, China, and Germany. Donnelly observed that Japan has been increasingly focused on its cultural influence, asserting, “The government has realized that Japan’s significance on the global stage is now defined more by its cultural than its economic power.”

Donnelly elaborated on Japan’s cultural infiltration worldwide, contrasting it with the top-down approach of American culture, which is often disseminated through major corporations and entertainment industries. He stated, “Japanese culture is being widely embraced by individuals across the globe, whether it pertains to food, gaming, manga, anime, or technology. Today, Japanese culture is prominently acknowledged worldwide.”

Donnelly pointed out that the influx of foreign tourists to Japan indicates the effectiveness of government strategies. He noted that inbound tourism numbers surged from 3.5 million annual arrivals in 2000 to an anticipated 42 million this year, with around 400,000 arrivals from the UK peaking in 2019 during the Rugby World Cup.

Despite achieving profitability every year since its inception 20 years ago, Inside Travel’s founders were compelled to transfer part of their business control during the COVID-19 pandemic to secure necessary funds for its survival.

The company was forced to reduce its workforce from 200 to 90 in 2020, which Donnelly considered the minimum staff needed to sustain operations. They accessed £3.5 million through the coronavirus business interruption loan scheme to remain operational until early 2022.

Due to ongoing COVID-related travel restrictions in spring 2022, the company did not see expected ticket sales. To remain afloat, the founders sold a portion of their 86 percent stake, acquiring £3.25 million from Blandford Capital while also using personal savings.

Since its pandemic low, Inside Travel has recovered well, aided by the investments from Cool Japan Fund and Piper, proving beneficial for Blandford with a sixfold return on their investment, according to Donnelly.

The company has also successfully repaid the COVID-era loan as a result of this investment. After the pandemic’s challenges, the Bristol team has expanded back from 37 to 100 staff members.