APPD Market Report Article


August 26, 2022

Takahiro Tsujikawa, Senior Managing Director - Hotels & Hospitality Group, Japan


JPY 15,310


Domestic demand continues to recover in 2Q22

  • This quarter marked the first spring break and Golden Week holidays in three years without any travel restrictions. The total accommodation demand in Tokyo showed m-o-m increase for two consecutive months in April. As of YTD April 2022, inbound travellers have not yet returned, and demand from domestic travellers increased by 4.9%, driving the recovery to pre-COVID levels of 65%.
  • The number of international visitor arrivals increased more than three times y-o-y as of YTD May 2022, although still 97% lower as compared to YTD May 2019. The Japanese government began easing the border policies from 1 June, doubling the number of international arrivals per day, followed by further deregulation to boost tourism starting from 10 June.

No supply of four- or five-star hotels to be added in 2Q22

  • There were originally no plans to open any luxury hotels in 2Q22. The opening of Edition Hotel Ginza, which was originally scheduled for the spring of 2021 was first postponed to the second half of 2021, then a second time to 2022, though the opening date is yet to be announced.
  • With regard to the upcoming supply, besides the second Edition property that is scheduled to open in 2022, two international branded luxury hotels, Bulgari Hotel and Aman’s Janu, are scheduled to open in 2023 along with several luxury hotels by domestic hotel operators, indicating a rebound in the supply of luxury hotels in Tokyo.

Uplift in occupancy improves trading performance

  • Tokyo’s luxury hotel revenue per available room (RevPAR) recorded an increase of 78.0% y-o-y to JPY 15,310 in 2Q22. Although average daily rate (ADR) is still awaiting a full recovery, improved occupancy rate has contributed to the improvement of RevPAR.
  • With regard to the hotel investment market, a stronger investment momentum continues to be seen, supported by the enhanced hotel trading performance and clearer expectations for the post-COVID-19 outlook. Large-scale hotel transactions, mainly driven by global investment funds, are also accelerating.

Outlook: Trading performance remains uncertain

  • Despite expectations for an increase in demand during the summer holidays, the hotel industry environment has become more uncertain since new cases of COVID-19 started surging in July. As the government had announced the postponement of the nationwide travel subsidiary program, similar to “Go-To-Travel” in 2020, a rapid short-term recovery is not expected.
  • Several large-scale or portfolio hotel transactions are expected in 2022 onwards, in light of the increase in hotel assets in the transaction market that meet investment strategy criteria in terms of size or quality, and it is anticipated that hotel transactions will show increased activity in the next 12 months.

Note: Tokyo Hotels refers to Tokyo's luxury hotel market.

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