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Foreign hotel chains race to tap tourism boom in Japan

Foreign hotel chains race to tap tourism boom in Japan

TOKYO — Big-name foreign hotel chains are rushing to expand their presence in Japan amid optimism by the nation’s booming tourism industry that good times will last beyond the Tokyo Olympics Games in 2020.

The game is afoot

A rendering of the hotel that Marriott International plans to open in Osaka in 2021, its first upmarket W brand property in Japan.

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A rendering of the hotel that Marriott International plans to open in Osaka in 2021, its first upmarket W brand property in Japan.

As a global hotel brand, Marriott International cannot afford to miss the great opportunity arising from the sharp growth of tourism in Japan, Craig Smith, the company’s president of Asia Pacific, said Wednesday, expressing his hopes for a new hotel to be opened in Osaka in 2021.

Located in the western Japanese city’s Shinsaibashi district, the planned hotel will be the first in Japan to bear the U.S. lodging giant’s upmarket W brand. Japanese builder Sekisui House will construct a 27-story structure featuring local tastes in its design and outsource hotel operations to Marriott. The W Osaka hotel will have 337 rooms, including 50 suites, and Smith said Marriott aims to charge among the highest room rates of the hotels operating in the city.

Hilton Hotels Resorts of the U.S. is gearing up to open its first Curio Collection by Hilton hotel in Japan in the popular tourist destination of Karuizawa, Nagano Prefecture, in the spring. Tokyo-based developer Tokyu Land has been renovating the building since acquiring it last March.

Hyatt Hotels, another major U.S. hotel chain, is working toward rolling out 10 new locations in Japan by 2020. Meanwhile, the U.K.’s InterContinental Hotels Group is slated to open an establishment in Hakone, a well-known tourist destination near Mount Fuji, jointly with Daiwa House Industry in 2019.

Growing optimism and potential pitfalls

Foreign hotel operators’ interest in Japan comes as inbound tourists are expected to continue increasing at a brisk pace in coming years. Their number is estimated to approach 28 million this year, giving the tourism industry confidence that hitting the government’s target of 40 million foreign visitors in 2020 is almost a certainty.

Some argue that the number of tourists could crash once the 2020 Tokyo Olympics is over, but many — including Marriott‘s Smith — remain highly optimistic. For the host city, the real benefit of the Olympic Games will be the creation of long-term tourism demand, Smith said, predicting that Japan’s tourism market will continue to grow after the games.

The Japanese real estate industry is also counting on a long-lasting tourism boom, hoping that hotels will step up as a key revenue generator amid the developing oversupply conditions in the office building market.

However, an estimate by the Mizuho Research Institute based on data from property consultant CBRE shows hotel room supply will exceed demand by 110,000 in eight prefectures, including Tokyo, in 2020. On top of this, demand for hotels is certain to decrease once the deregulation of the home-sharing market comes into effect this June.

Foreign hotels expanding their Japanese operations would no doubt suffer from a demand decline, but such a turn of the market would impact the country’s property developers more severely. This is because many of the new hotels will be operated by the hotel companies under subcontracting or franchise agreements, and the Japanese corporations will face bigger business risk as property owners.

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