Strong tourism growth led by increasing international visitors

• International arrivals in 2024 were 15.6% higher than in 2019, reaching a record high of 36.9 million. The delayed recovery of Chinese visitors was offset by significant increases in arrivals from the other top four markets, South Korea, Taiwan, USA and Hong Kong.
• According to JTA, overnight stays in Tokyo in YTD October 2024 exceeded the annual total achieved in 2019. Domestic guests have historically accounted for around 60% of the total, but in YTD2024, international guests took over the majority, reaching 51% of the total.

New international hotels on the horizon in the next few years

• YOTEL Tokyo Ginza, which is the first entry of an upscale lifestyle hotel in Japan, opened in December 2024. Otherwise, there were no new international brand hotel openings in Q4.
• International brands are still keen to open new hotels in Tokyo. From 2025 onwards, many luxury hotels, such as JW Marriott, Fairmont, Waldorf Astoria, Raffles and Dorchester Collection, are scheduled to open.

Continued record high performance

• Tokyo continued to see an increase in trading performance across all hotel segments in Q4, driven by rising international arrivals.
• In the luxury and upper-upscale segments, although the pace of growth has slowed in 2024 compared to 2023, both ADR and RevPAR have continued to reach record highs each quarter. Occupancy in 2024 has improved slightly y-o-y but is still recovering to 2019 levels.

Outlook

• With strong inbound demand and the 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.
• In addition to the emerging apartment hotel segment, branded residences are also attracting the attention of developers and investors. The ability to recoup the initial investment early by selling the units and to keep them in the hotel rental program for ongoing income is attractive.