Japan’s hotel industry is growing at a tremendous rate, but the excitement is coming from demographic and economic influences, as well as from the major events in 2019 and what’s to come in 2020 and beyond.
REPORT FROM JAPAN—Leapfrogging from the global success of its hosting of the 2019 Rugby World Cup, hoteliers in Japan are expecting a record 2020 and many good years to follow, according to sources.
Last year, Japan also hosted the G20 Summit in Osaka, while this year the biggest event of them all, the 2020 Summer Olympics, comes to Tokyo from 24 July to 9 August.
Hoteliers are lining up to take advantage of Japan’s new prominence, but due diligence is necessary, said Hirohisa Fujimoto, senior director of development, Japan and Micronesia, at Hilton.
“Everyone is talking Japan, Japan, Japan, Japan, Japan,” he said. “Yes, it is good country, but you have to be patient. Make sure you are proactive in communication with owners, and give all partners the information required about your rationale.”
Isabelle Miaja, managing director of Singapore-based Miaja Design Group, which has designed such Japanese hotels as the Club Med Sahoro Hokkaido, said the cost of doing business is higher in Japan.
“In Japan, everything done there is done impeccably, but it takes more time and expense, two or three times what it could be in another place,” she said.
She added that one advantage is that it is “a joy to put your name on the building.”
Luke Hurford, SVP of YTL Hotels, champions destinations outside of the main Japanese cities, which he added comes from seeing a general rise in tourism and hotel stays throughout the country.
YTL operates three hotels in Niseko, Japan, which is the Japanese region bidding for the 2030 Winter Olympics. YTL’s Niseko properties include the 506-room Hilton Niseko Village, but when the firm first invested there a decade ago, it was a leap of faith in a destination that had a growing but still weak inbound market, Hurford said.
“For many years, inbound tourism to Japan underperformed, but the factors driving increased visitation are not trends or short-term hits,” he said. “The food experiences and produce are amongst the best in the world … the skiing is amongst the best in the world with consistent and reliable, quality snowfalls, the regional areas have experienced investment in quality lodgings beyond the traditional Japanese ryokan inns, which may not have been a comfortable stay for many travelers previously.”
This December, YTL will open a Ritz-Carlton resort in the destination, while in 2021 it will also add a Moxy Hotels property.
The Summer Olympics isn’t the only major event happening in Japan in 2020. Kiyoshi Tsuchiya, director and head of CBRE Hotels, Japan, said the demand from the Olympics has influences on all sectors.
“Obviously, the major key demand generator is the increase of foreign visitors in Japan. In relation to events, the others would be Osaka Expo (in 2025) and integrated resorts,” Tsuchiya said.
By “integrated resorts,” Tsuchiya is referring to the Japanese government’s announcement that it will create three large-scale entertainment complexes combining casinos, hotels and other hospitality and business services that will also debut in 2025.
Most numbers up
Increased tourism has already had a positive effect on the Japanese industry’s hotel performance metrics.
Data from STR, the parent company of Hotel News Now, shows Japan’s countrywide occupancy decreased by 1.5% to 82.8% year to date through November 2019, but average daily rate increased by 1.9% to 15,374.46 Japanese yen ($139.69) and revenue per available room rose 0.4% to 12,722.81 yen ($115.60).
In Tokyo, year-to-date November 2019, occupancy similarly decreased 2.1% to 86.3% but ADR rose 5.6% to 19,969.13 yen ($181.44) and RevPAR increased 3.4% to 17,241.83 yen ($156.66).
Tsuchiya said despite all the excitement, the value of international capital coming into Japan is falling.
“Roughly saying, 20% of the total hotel transactions were from international capital in 2017 and 2018, but less than 10% in 2019,” he said. “As for the regions, the major capital came from Asia and North America.”
Hurford said domestic demographic and economic factors such as the declining population and low inflation have resulted in a more affordable experience for travelers, which he sees as being bigger demand drivers than the mega-events.
“Ultimately travelers are coming to Japan to experience the country beyond the Golden Route around Tokyo and Kyoto, to see Hokkaido and Okinawa and the countryside regions and then coming back as repeaters for multiple trips,” Hurford said.
He said his marketing team has to balance selling both the traditional Japanese elements of YTL’s Niseko properties along with their appeal to global guests.
“The main challenge for us has always been driving the internationalization of the resort, whilst being sure to maintain and enhance the essential Japanese elements which every traveler wants to experience,” Hurford said.
He added that finding labor is also challenging, especially outside of Japan’s larger cities.
“We see great opportunity for the massive potential growth from all Asian markets to Hokkaido,” Hurford added, referring to the expansion of the Shinkansen bullet train line to Hokkaido, as well as to Niseko.
Choice Hotels International is one of the major branding companies that is growing in Japan. In October, Choice announced it will open more than 30 properties by 2033 and be operated by Choice Hotel Japan, which has the master franchising agreement for the Comfort suite of hotel brands.