Real estate developers are bringing luxury hotels to Japan

With a shrinking residential property market nationwide and an office market that is limited to prosperous city centers only, Japan’s real estate giants have to diversify in order to survive. That diversification is coming from developing hotels.

In Japan, many of the luxury hotels are owned and, in some cases, even managed by major Japanese real estate companies. This is different from the typical scenario overseas where the properties are often owned by investors and funds. Some of the major players include Mori Trust, Sekisui House, and Mitsui Fudosan. These real estate companies have been actively opening up high-end hotels across the country.

Rapid growth in the number of foreign visitors, especially those from the US and Europe, has led to a shortage of luxury hotels. In 2018, visitors from the US increased by 17% from the year before to 1.52 million visitors. This was the 7th year in a row to record a double-digit increase. Visitor numbers from Germany and Italy also saw double-digit increases in 2018. Compared to visitors from Asia, visitors from the US and Europe tend to stay longer and spend more on average. A tourist from Asia spends an average of 20,000 ~ 60,000 Yen on accommodation per person for the duration of their trip, while a visitor from the US or Europe spends between 70,000 ~ 100,000 Yen (approx. 645 ~ 920 USD).

Future luxury hotels opening up in Japan include:

  • JW Marriott Hotel Nara, 2020
  • Four Seasons Hotel (Tokyo), 2020
  • Tokyo Edition Toranomon, 2020
  • Hilton Okinawa Sesoko Resort, 2020
  • Kyoto Nijo Hotel (temporary name), 2020
  • W Osaka, 2021
  • Tokyo Edition Ginza, 2021
  • Bulgari Hotel (Tokyo), 2022
  • Unnamed hotel (Kanagawa), 2022
  • The Ritz Carlton Fukuoka, 2023

On July 26, Mitsui opened Halekulani Okinawa. The 360-room beachfront hotel is just the second Halekulani-branded hotel to open since it was founded in Hawaii in 1907. Mitsui Fudosan USA acquired the hotel and operating rights in 1981. Rooms in the Okinawa hotel range from 50 ~ 294 sqm, while nightly rates start from 50,000 Yen (460 USD). Mitsui also operates the Four Seasons brand in Japan, and will soon be opening a new 190-room Four Seasons in Otemachi in 2020. The developer hopes to increase their annual hotel and resort profit from its current level of 4 ~ 5 billion Yen to 14 ~ 15 billion Yen (approx. 130 ~ 140 million USD) by 2025.

In June, Shangri-La Group acquired a 4,700 sqm site on the northern side of Nijo Castle in Kyoto. Aman opened the Aman Kyoto hotel earlier this year, while the Park Hyatt Kyoto is scheduled to open in December. 

CBRE is forecasting 80,000 new hotel rooms to be supplied across Japan’s 9 major cities between 2019 and 2021. Of the new supply, 87% is from business hotels that cater to domestic business travelers. Full-service luxury hotels will account for just 5% of the new supply.

The Five Star Alliance website lists just 32 five-star hotels in Japan. This falls far below other locations such as London (79 hotels), Paris (61 hotels), New York (60 hotels), China (137 hotels), and Indonesia (58 hotels).

Sources:
The Nikkei Shimbun, July 26, 2019.
The Okinawa Times, July 24, 2019.

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