Hospitality Industry In Japan - Growth, Trends, Covid-19 Impact, and Forecasts (2023 - 2028)

Hospitality Industry In Japan - Growth, Trends, Covid-19 Impact, and Forecasts (2023 - 2028)

In Japan, Hotel performance remained weak for most of 2021. However, slightly recovering occupancy rates from the previous half-year, which are almost at the levels seen in 2H/2020 even without the help of the “Go To” Travel campaign. Moreover, hotel revenues have also improved slightly. In 2H/2021, the average daily rates (ADR) index increased by 0.8 points half-year-on-half-year (HoH), and the revenue per available room (RevPAR) index increased accordingly, by 3.8 points HoH. With the COVID-19 pandemic drastically decreasing revenue from not only accommodation but from other key revenue streams such as corporate events and banqueting, the hospitality industry in Japan has been struggling over the past two years. 2020 saw a rapid increase in the number of bankruptcies, exceeding 120 cases, more than half of which were a result of the pandemic. While the number of bankruptcies in 2021 has fallen, more than two-thirds were due to the pandemic, showing its lingering effects. Budget hotels in particular have been hit harder by the pandemic due to the large supply in the market. The small room sizes of such hotels appear to be an issue for both customers and operators, especially after the pandemic. Overseas investors have also been looking at the Japanese hospitality industry. For instance, Baring Private Equity Asia acquired The B Osaka Midosuji, a large hotel in Chuo ward, Osaka, in a transaction estimated at over JPY10 billion. Overall, while 2021 has seen large transactions in the hotel sector, transaction volumes have been relatively low considering the pandemic.Key Market TrendsIncreasing Number of Tourists is Driving the Market International travelers are slowly returning to Japan. The Japan National Tourism Organization estimates that in September, the country welcomed 206,500 overseas visitors. It was the first time the figure has surpassed 200,000 since the start of the COVID-19 pandemic. The largest number of visitors was from South Korea at 32,700, followed by Vietnam at 30,900, United States at 18,000, and China at 17,600. The government has gradually eased border control measures since March, and the number of overseas visitors has subsequently increased significantly compared to 2021 when Japan’s borders were almost completely closed. September saw a more than 11-fold increase compared to the same month a year earlier. The easing of border restrictions has coincided with the rapid depreciation of the yen, which has worked to make Japan a more affordable option for many foreign tourists. It is expected that the number of overseas visitors will continue to climb in the months ahead.Rising Luxury Hotel Segment Boosting the Market in Japan The luxury hotel sector has garnered the attention of many brands that are looking to expand their footprint in the market. Compared with other countries, Japan has a relatively limited number of luxury hotels. According to Five Star Alliance, Japan has slightly over 50 hotels listed. In contrast, many Western countries completely dwarf this number, and even neighbors in the Asia Pacific like Hong Kong and Singapore have a comparable number of luxury hotels despite the vast difference in the sizes of their economies. Many well-known international brands have already started opening luxury hotels in Japan. For instance, in late 2020, The Tokyo EDITION, Toranomon, was opened, and the Marriott will keep expanding its footprint with The Tokyo EDITION, Ginza in 2022. Investment volumes in the hotel sector were on par with the previous year and are expected to increase in 2023. Opportunities in the Japanese hotel market are likely to further emerge shortly.Competitive Landscape The hospitality industry in Japan is largely dominated by homegrown hotel companies. Domestic brands and their chains constitute around 90% of the total market share. Tokyo Inn Co. is the largest hotel chain in the country, in terms of rooms/keys supply. It has more than 250 hotel properties and offers around 50,000 rooms/keys across the country. However, with technological advancement and service innovation, domestic to international companies are increasing their market presence by securing new contracts and tapping new markets.Additional Benefits: The market estimate (ME) sheet in Excel format 3 months of analyst support Please note: The report will take approximately 2 business days to prepare and deliver.