Travel demand continues to show robust recovery

• Tokyo saw a strong recovery in demand in 4Q22, driven by the reopening of borders on 11 October and the launch of the nationwide travel subsidiary program. The recovery is still mainly driven by domestic guests, and as at YTD October 2022, the number of domestic guest accommodations in Tokyo surpassed that of the same period in 2019 by 24.4%, driving recovery to 80% of pre-pandemic levels. 
• International visitation to Japan has seen a strong pick up since the reopening of its borders, welcoming 3.8 million visitors in 2022. While still down by 88.0% from 2019, December 2022 is the first single month since February 2020 to exceed 1 million inbound visitors, recovering to about 50% of December 2019 levels. 

No additional supply of four- or five-star hotels

• There were originally no planned luxury hotel openings in 4Q22. Though the opening date is yet to be announced, Tokyo’s second EDITION Hotel is slated to open in Ginza in 2023, following delays since the spring of 2021. 
• In addition, international branded luxury hotels such as Bulgari Hotel, Aman’s Jenu and Hotel Indigo Tokyo Shibuya are scheduled to open in 2023 along with several luxury hotels by domestic hotel operators, indicating a resumption in the supply of luxury hotels in Tokyo. 

An uplift in occupancy leads to an improvement in RevPAR

• Tokyo’s luxury hotel revenue per available room (RevPAR) marked an increase of 92.7% y-o-y to JPY 23,511 as at YTD December 2022. While the average daily rate (ADR) has yet to recover fully, improved occupancy rates have contributed to the improvement of RevPAR.
• With regards to the hotel investment market, strong investment momentum continues to be seen, supported by enhanced hotel trading performance and positive expectations for the post-pandemic economy. Large-scale hotel transactions, mainly driven by global investment funds, are also accelerating.

Outlook: A full-fledged recovery of the market is anticipated

• The government announced that, for the time being, it intends to continue its nationwide travel subsidiary program, which is driving domestic demand. Inbound demand is also on a recovery trend and a further increase in arrivals is expected from the relaxation of China’s ‘zero-COVID’ policy. Recovery in accommodation demand is expected to continue to support the hotel trading performance in 2023. 
• Several large-scale and portfolio hotel transactions are expected going forward. In addition to the recent depreciation of the Japanese yen, the debit financing environment in Japan is attractive to investors despite the backdrop of globally rising interest rates. It is expected that hotel transaction activities will accelerate in Japan over the next 12 months.