Strong tourism growth led by growing interest from diverse markets

• In September 2024, international arrivals reached a record high of 26.9 million, 10% higher than in 2019. The top five source markets were South Korea, China, Taiwan, USA and Hong Kong. Chinese visitors are still recovering to 2019 levels, but at an accelerated pace.
• According to the Japan Tourism Agency, domestic guests accounted for around 60% of Tokyo’s overnight demand in 2019 and 2023. As of YTD July 2024, international guests reached 51% of total overnight stays in Tokyo, surpassing domestic guests for the first time.

Future hotel supply significantly impacted by soaring construction costs

• There were no openings of new international brand hotels in Q3 2024.
• No openings of upscale or luxury hotels are planned in 2024. However, in 2025 onwards, some luxury hotels, such as JW Marriott, Fairmont and Waldorf Astoria, are scheduled to open.

Record-high performance continues

• Tokyo registered a continued increase in trading performance in all hotel segments in Q3. The rising number of international tourists has led to a significant improvement in average daily rate (ADR).
• In the luxury and upper-upscale segments, ADR as well as revenue per available room (RevPAR) are continuing to achieve record highs every quarter, although occupancy has not fully recovered to 2019 levels yet.

Outlook

• With strong inbound demand and weak yen, hotels are focusing on increasing ADR rather than occupancy. Therefore, while international arrivals are at record highs, ADR is expected to continue to reach new highs, but occupancy will take some time to return to 2019 levels.
• An emerging market to watch is the apartment hotel. Developers and investors are increasingly interested in this type of hotel targeting inbound family and group travel. This new segment is expected to continue to grow.