Inside Travel secures funding from Cool Japan to promote culture

Inside Travel Group, which this year has taken 12,500 passengers to 240 different destinations in Japan, has attracted Cool Japan Fund as a major shareholder. The fund has invested £10 million, alongside Piper, a private equity firm, which has also invested £10 million.
Inside Travel’s co-founder Alastair Donnelly said: “We set out to promote Japan and Japanese culture and we see it as a real validation that we are 38 per cent owned by the Japanese taxpayer now.
“It is interesting to see Japan investing in businesses that promote Japanese culture globally. I don’t know if we have an equivalent for the UK. The Middle Eastern countries are doing it effectively through direct foreign investment in culture.”
Cool Japan Fund was set up in 2013 as a joint public and private fund with the aim of contributing to the “sustainable growth of Japan’s economy through the expansion of overseas demand and supply of attractive products and services unique to Japanese lifestyle and culture”.
Donnelly said the investment had been serendipitous rather than one he and his fellow co-founder Simon King had sought out. Instead, the fund had approached the advisory firm handling the sale of Inside Travel, called Clearwater International, after hearing it was up for sale from a private equity firm in the UK.
“We are an interesting proposition in Japan. We are a British-owned travel business with a base in Japan. We had some connections with Cool Japan pre-pandemic, but those conversations were not what led to the investment. It came from a circuitous route,” said Donnelly, 48.
He said that having a Japanese investor would help the business with its plans in the country and for the expansion of its holiday services to Asia more broadly.
“Everywhere is based on relationships, but Japan is very much a ‘how can you open the door?’ culture. To be honest, as a non-Japanese firm some doors have remained closed to us. One particular area is access to rail ticketing — we would prefer to have a direct relationship than an indirect relationship. But as a non-Japanese firm it is very hard for us to get in the door.”
Inside Travel made revenues of £50.1 million and pre-tax profits of £2.4 million in 2023 and has expanded further this year, hiring an additional 50 staff and taking about 14,000 passengers in total to Japan, South Korea and southeast Asia this year, up from 10,700 last year. The company is chaired by Ian Simkins, a former chief executive of Audley Travel.
Donnelly said the firm was expanding its “community-based tourism” offering. “Tourism plays an important role in Japan in providing money into rural communities, but we are also doing some cool stuff in Osaka — one of the biggest cities in the world — such as back-road cycling, visiting local craftsmen that introduce you to some of the historic crafts of Japan.”
Japan is the fourth-largest economy in the world, ranked behind the US, China and Germany, according to the research firm Statista. Donnelly said it has increasingly invested in its cultural reach in recent years. “The government has long recognised that Japan’s place in the world now is not driven by its economic power but by its cultural power,” he said.
“Japanese culture has seeped in from underneath globally. American culture is delivered top down, through big corporations, Hollywood and fast-food chains. Japanese culture is millions of people discovering something for themselves, whether that be Japanese food, video gaming, manga and anime, Japanese cars and electronics. Now we are in the position where Japanese culture is very prevalent.”
Donnelly said that inbound tourism numbers into Japan showed the government’s strategy was working. “When we started [in 2000] there were 3.5 million inbound tourists [a year] to Japan globally; this year there will be something like 42 million. The numbers from the UK peaked in 2019 at around 400,000, with a big boost for the Rugby World Cup.”
Despite turning a profit every year of its 20 years of trading, Inside Travel’s founders had to relinquish control of their business during the Covid pandemic in order to raise funds so it could survive.
It cut its team from 200 to 90 in 2020, which it saw as the minimum to remain a viable travel business, and needed funding to support them. It secured £3.5 million from the coronavirus business interruption loan scheme, which covered them until the start of 2022.
Donnelly said they needed ticket sales from its spring season in 2022, which did not happen because of the last virulent strain of Covid still restricting travel. It meant the founders sold down their 86 per cent stake to raise £3.25 million from the finance firm Blandford Capital, and added some of their own savings, to keep the business afloat.
Inside Travel has since bounced back, with the investment from Cool Japan Fund and Piper handing Blandford a return of six times their investment, said Donnelly.
The Covid-era loan was also repaid as a result of the deal. Since its low point during the pandemic, the company has also increased its Bristol-based team back up from 37 to 100.