APPD Market Report Article


December 1, 2021


JPY 12,220


The recovery in domestic demand becomes more pronounced

  • The total number of accommodation guests in Tokyo increased from 1.6 million in January 2021 to 3.25 million in July 2021. Compared to pre-COVID-19 levels, the total demand decreased by 55% y-o-y in July 2021. The inbound demand, which accounted for about 40% of the total demand in Tokyo, has not yet returned; while domestic demand has recovered to 70% of the pre-COVID-19 level.
  • The number of visitor arrivals to Japan in 3Q21 marked a y-o-y increase of 155%. While the borders still remained closed to international tourists (since April 2020), the number of international visitor arrivals mainly represents business travellers. However, the significant increase in demand in 3Q21 can be attributed to the Tokyo 2020 Olympic and Paralympic games.

No new supply of four- or five-star hotels added in 3Q21

  • There were no new openings of luxury hotels in 3Q21. The opening of the Edition Hotel Ginza, which was originally scheduled for the spring but postponed to 2H21, has been further delayed to 2022.
  • Despite the sluggish demand for accommodation due to the prolonged impact of COVID-19, market sentiment has started to improve along with vaccination progress. There have been no confirmed delays or cancellations of the luxury hotel projects which are scheduled to open in 2022 and onwards.

Improvement in ADR contributes to trading performance recovery

  • As of YTD September 2021, revenue per available room (RevPAR) of Tokyo’s luxury hotels saw a decline of 4.7% y-o-y to reach JPY 12,220; however, the y-o-y rate of decline has become slower compared to the previous quarter. In 3Q21, while the occupancy rates continued to be sluggish, average daily rate (ADR) improved to exceed pre-COVID-19 levels. As a result, RevPAR improved significantly in 3Q21.
  • With regards to the hotel investment market, investors who are eyeing discounted properties continued to show a strong appetite, but the price has not been substantially adjusted, and the gap between buyers’ and sellers’ price expectations still persists. As of YTD 3Q21, the total transaction volume (as shown in the total transacted value) is approximately 70% as compared to YTD 3Q20.

Outlook: A gradual recovery in trading performance is expected

  • The state of emergency was fully lifted on October 1st, and it is expected that the demand for accommodation, for both business and leisure purposes, will notably increase. Until overseas travel restrictions are lifted, the shift of demand from overseas travel to domestic travel is expected to further improve trading performance.
  • Large-scale hotel transactions by foreign investment funds are expected from 4Q21 onwards, and investor willingness to invest in hotels remains strong. In light of the current market where the momentum is improving, hotel transactions are expected to be more frequent in the next 12 months as compared to 2021.

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

Talk to us 
about real estate markets.