The chances of picking up prime hotel or resort asset deals in Japan may be over as the industry swings back into full gear. 

Major developer, Mitsui Fudosan, has reported that its revenue from hotel operations has recovered to around 90% of pre-pandemic levels. Demand from tourists from North America and Europe has been particularly strong, making up for the decline in business trips.

The developer has recently completed the Tokyo Midtown Yaesu high-rise in front of Tokyo Station, securing the Bulgari Hotel Tokyo as the hotel tenant on floors 39 to 45. This is the first Bulgari-branded hotel in Japan and room rates are expected to be amongst the highest in the country.

Earlier this month, ORIX Real Estate Corporation announced plans for a luxury ryokan on a long-dormant ocean-view site in Atami. The Atami Izusan Karaku resort will have 57 rooms, each with their own open-air hot spring baths. The developer has already opened a hot spring resort in Hakone under the same Karaku brand and room rates are over 100,000 Yen a night during busy periods. Approximately 20% of the guests are foreign tourists, the rest are domestic travelers. The general manager is, however, noticing an uptick in foreign guests looking for a luxury onsen experience. 

Real estate company Hulic is planning a luxury ryokan in the center of the Ginza shopping district in Tokyo on a site replacing the former Apple Store. The Fufu Tokyo Ginza property will contain 38 rooms, with the most expensive one expected to be priced at around 300,000 Yen a night. All rooms will be fitted out with their own terraces and private hot spring baths, making this project stand out from its competitors. Hulic is expecting a third of the guests to be foreign tourists. 

Other luxury hotel developments in the pipeline include the reconstruction of the Imperial Hotel in Chiyoda ward which will take place from 2024 to 2036. In 2025, a Waldorf Astoria hotel is expected to open in Osaka, with a second one to open in Nihonbashi, Tokyo, in 2026. The Dorchester Collection will be operating an ultra-luxury 110-room hotel in the 390-meter-tall Torch Tower skyscraper under construction near Tokyo Station. The hotelier is owned by the Brunei Investment Agency and operates The Beverly Hills Hotel, Plaza Athénée in Paris, and The Dorchester in London, to name a few.

Japan welcomed 31.88 million inbound visitors in 2019, with total foreign tourist consumption of 4.8 trillion Yen. This amounted to a little over 1% of Japan’s GDP.

However, the pandemic saw the borders closed to inbound tourists for 2.5 years, striking a blow to the roughly 5 million people employed in the hotel, transport, and retail industries. Borders reopened in mid-October 2022, with 930,000 inbound travelers recorded in November. This number was about 40% of the number seen in November 2019. 

Source: The Yomiuri Shimbun, January 18, 2023.