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Business travel returns to Tokyo's luxury hotels
January 12 2011

Business travel has returned to Tokyo’s luxury hotel market. A rate recovery is on the way.

  • Luxury hotels in Tokyo tend to maintain ADR at the cost of occupancy.
  • High-end development projects are still underway.
  • Luxury hotels must offer “soft” extras, like butlers, in order to maintain their rates.

TOKYO—Luxury hotels in Japan’s largest city must offer oversized guestrooms, cutting-edge technology and extraordinary service if they are to regain the levels of occupancy and the rates the properties enjoyed before the recession hit.

At the same time, the high-end sector must compete with the burgeoning supply that continues to be built in this futuristic city of 29 million, a magnet for both the business and the leisure traveler, according to Koji Takabayashi and Tokiro Kawai. Takabayashi is managing director of Horwath HTL Japan, and Kawai an associate there. 


The exterior view of the Conrad Tokyo also showcases the Hamarikyu Gardens, an oasis for a feudal lord.

Leisure-travel business has remained robust at the Conrad Tokyo in Shiodome, a new, multileveled business district in Japan’s capital city—but rates have not recovered, said Gregor Andréewitch, GM of the ultramodern, 290-room hotel.

Opened in 2005, the Conrad Tokyo suffered badly during 2008 and 2009 when business travel dried up, leaving the property’s three meeting rooms and two ballrooms underused.

According to Andréewitch, the Conrad Tokyo’s key competitors are the Shangri-La Hotel Tokyo, which opened in 2009; The Peninsula and the Ritz-Carlton Tokyo, which opened in 2007; and the Mandarin Oriental Tokyo that opened in 2005.

“The luxury segment got hit deep in the pocket because we all lived for the corporate traveler, particularly coming from the finance industry,” he said during a recent interview at the hotel.

The rooms—the Conrad claims they’re the largest in the city— are a minimum of 43 square meters (almost 463 square feet), the ceilings are high, the public spaces generous. Andréewitch noted space is a premium in this city, where the average apartment size for a family with three children is 52 square meters (about 550 square feet).

Part of Hilton Worldwide’s luxury lifestyle brand portfolio, the Conrad Tokyo is a business hotel Monday to Thursday and a leisure hotel Friday through Sunday. Fifty percent of its clientele is Japanese; 25% is European and American; and 25% is Asian other than Japanese. Based on demand, ADR spans JPY33,000 to JPY70,000 (US$394 to US$835).

Tokyo luxury market

And those aren’t the top rates, according to Horwath’s Takabayashi and Kawai, who define luxury hotels as those that charge at least JPY50,000 (US$597) per room night. They call Tokyo Japan’s only luxury market, noting that in Osaka, the country’s second-largest city, the Ritz-Carlton Osaka is price leader but charges just more than JPY30,000, or US$358, and the St. Regis Osaka, which opened in October, targets an ADR of JPY30,000 (US$358). At the same time, hotel rooms in Osaka are as big as the largest in Tokyo.

“Average occupancy of Tokyo luxury hotels … shows a decrease from about 80.0% in 2007 to around 60.0% in 2009 mainly due to the global economic recession,” Takabayashi and Kawai wrote in an e-mail. “While luxury hotels in Tokyo tend to maintain their ADR at the cost of occupancies in order to keep their brand value or brand image, Grand Hyatt Tokyo is the most negatively impacted by the global recession and its ADR has dramatically decreased in 2009.”

How competitive the Tokyo luxury hotel market will be, particularly considering the scheduled 2012 opening of the Palace Hotel Tokyo and of the Aman Tokyo in 2014, comes clear in Horwath recommendations. Takabayashi and Kawai said to maintain high ADR, hotels in this class must offer not only “hard” products like large units, cutting-edge technology and sophisticated furniture, but also “soft” services such as the personalized butler typical at Ryokans, small, high-end hotels in resort locations.

The Horwath executives note that despite the area’s economic doldrums, such high-end projects as the Palace Hotel and the Aman are proceeding “due to the high credibility of their developers.” They also suggest that potential hotel developers consider linking their projects to a multiuse development including offices, which could charge higher rents.


Pros and cons

Labor is not an issue at his hotel, says the Conrad Tokyo’s Andréewitch. In Japan, hotel work is a profession, not a job, and the workforce is highly educated—which can make it hard for an outsider because of strict work permit regulations. The GM said he couldn’t hire a Frenchman as sommelier because he couldn’t get a permit even though he spoke three languages.

In addition, it’s hard to fire someone in a culture that values experience over competence, Andréewitch said.

“Japanese have a huge respect for each other, for harmony within the group, where nobody stands out,” he said. “What that means is a very talented person might be kept back because it’s against Japanese culture. It’s the protruding nail syndrome: If you stand out, you can be banged down.

“You don’t fire people here, you move them. You get moved sideways. They still have an income. The government doesn’t want them to be a social problem.”

Some more factoids, from the Japan Hotel Association:


  • As of 2009, there were 9,689 hotels representing 798,070 rooms in Japan, according to the Ministry of Health, Labor and Welfare.
  • Hyatt Hotels and Resorts, Marriott International, Hilton, Starwood Hotels & Resorts Worldwide, InterContinental Hotels Group and Accor are the United States and European brands represented in the country. Imperial Hotel, Okura Hotel, Prince Hotel and Hotel New Otani are the dominant domestic brands, the association said.
  • As of 30 November, the Japan Hotel Association had 239 member hotels representing 55,378 rooms; of those, 43 hotels representing 16,431 rooms were in Tokyo.
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