ArrowArtboardCreated with Sketch.Title ChevronTitle ChevronIcon FacebookIcon LinkedinIcon Mail ContactPath LayerIcon MailPositive ArrowIcon PrintIcon Twitter
Travel & Leisure

Luxury hotels pop up in Japan for Western visitors

Property developers tap tourism boom to diversify income sources

Halekulani Okinawa expects that foreigners will account for three out of 10 guests in the future. (Photo by Hiroyasu Oda)

TOKYO -- Real estate companies in Japan are busy building luxury hotels that will charge more than $250 a night, perceiving a shortage of top-of-the-line accommodations due to a surge in international travelers, particularly from the U.S. and Europe.

Mitsui Fudosan on Friday opened Halekulani Okinawa, whose 360 guest rooms all have rates exceeding 50,000 yen (about $460) a night -- the highest range in the country's southernmost prefecture. The hotel's website recently showed it heavily booked for late July and much of August. While most reservations are for guests from within Japan, foreign tourists are seen accounting for about 30% in the future.

Mitsui Fudosan also has plans to open four luxury hotels in 2020 and 2022, including a Four Seasons in Tokyo next year.

"Japan doesn't have many luxury hotels, so the market offers substantial growth potential," President and CEO Masanobu Komoda said.

The company seeks to boost operating profit in the hotel and resort business to between 14 billion yen and 15 billion yen by fiscal 2025 from about 4 billion yen to 5 billion yen.

Mori Trust is set to begin operating three luxury hotels in 2020, including in the Edition ultraluxury brand from Marriott International.

Sekisui House will open a Westin and two other upscale hotels with Marriott starting in 2021. These will attract affluent customers from around the world, according to Sekisui President Yoshihiro Nakai.

Tourism from the U.S. and Europe is booming. In 2018, about 1.52 million travelers from the U.S. went to Japan, rising 11% from the prior year for a seventh straight year of double-digit growth. Among European countries, travelers from Germany and Italy increased at double-digit rates. These figures easily topped the 8.7% growth for all foreign visitors.

Travelers from the West stay in Japan longer than those from China, South Korea and elsewhere in Asia, and tend to spend more on lodging. Visitors from the U.S. and Europe shell out 70,000 to 110,000 yen per person, compared with the 20,000 to 70,000 yen range for their Asian peers.

Visitors from the West are expected to increase even further next year, when Japan hosts the Olympics, and beyond.

With Japan targeting 60 million international visitor arrivals in 2030, the luxury hotel market will likely continue growing, said Timothy Soper, vice president of operations in Japan, South Korea and Micronesia at Hilton.

Between this year and 2021, about 80,000 hotel rooms will be added to the markets in nine major cities in Japan, including Tokyo and Osaka, according to CBRE. This is equivalent to 24% of existing guest rooms at the end of 2018. Supply is expected to surpass demand in 2021, but 87% of the new supply will be at business hotels and other limited-service facilities. Only about 5% will be in luxury hotels, which are full-service establishments. CBRE thus sees a continued shortage.

Japan recently had just 32 five-star luxury hotels listed on the Five Star Alliance booking website, compared with 137 for China, 112 for Thailand and 58 for Indonesia. The tally for all of Japan was around half those for big cities, such as 79 for London, 61 for Paris and 60 for New York.

"Wealthy international frequent travelers are starting to go to rural destinations, but these areas do not have enough lodging establishments for them," Mori Trust President Miwako Date said.

In other countries, luxury hotels tend to be owned by wealthy individuals or funds as investment properties. But in Japan, many real estate companies own and operate them, which is a rare arrangement, a Japanese-hotel executive said. Real estate developers propose good properties, helping to reduce the risk of business for hotel companies.

The hotel business offers real estate companies a critical tool for diversifying their sources of income at a time when the domestic housing market is trending downward with the population declining and demand for office buildings showing signs of a slump in most places except for major metropolitan areas. As long as they can keep occupancy rates high, luxury hotels can bring in higher revenues than using the same land for office buildings.

But competition to lure travelers from the West is heating up in Asia. France's Accor Group plans to double its presence in Southeast Asia to 600 properties over the next decade. Marriott intends to enlarge its network in Asia to 1,000 hotels by 2020 from the current 700.

Sponsored Content

About Sponsored Content This content was commissioned by Nikkei's Global Business Bureau.

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this monthThis is your last free article this month

Stay ahead with our exclusives on Asia;
the most dynamic market in the world.

Stay ahead with our exclusives on Asia

Get trusted insights from experts within Asia itself.

Get trusted insights from experts
within Asia itself.

Try 1 month for $0.99

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this month

This is your last free article this month

Stay ahead with our exclusives on Asia; the most
dynamic market in the world

Get trusted insights from experts
within Asia itself.

Try 3 months for $9

Offer ends July 31st

Your trial period has expired

You need a subscription to...

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers and subscribe

Your full access to Nikkei Asia has expired

You need a subscription to:

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers
NAR on print phone, device, and tablet media

Nikkei Asian Review, now known as Nikkei Asia, will be the voice of the Asian Century.

Celebrate our next chapter
Free access for everyone - Sep. 30

Find out more