Japanese Hotels Face Challenges and Opportunities: Executive Interviews

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A view of Tokyo Station from the Motif Restaurant and Bar. Photo Credit: Four Seasons.

Japanese hotels face challenges and opportunities as Japan gears up to welcome the world at the Rugby World Cup later this year and the Tokyo Summer Olympics in 2020. Check out what hotel executives have to say in these exclusive ATWHK interviews.

Japan 101

Japan is an island nation situated in the Pacific Ocean off the coast of the East Asia. The world’s 10th most populous country, Japan has an estimated population of 127 million people.

Tokyo is the nation’s capital. With a population of 38 million people, Greater Tokyo is the worlds most populated metropolitan area.

Japanese is the official language of Japan. English is spoken at many Japanese hotels, but it is not as widely spoken in Japan as it is in other neighboring countries.

A quick guide to Japan follows …

Japan Visitor Arrivals

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Osaka Castle is one of Japan’s most popular sightseeing attractions with tourists. Photo Credit: Accidental Travel Writer.

The number of visitor arrivals to Japan grew by 8.7% in 2018 to 31,191,900, up from 28,691.073 in 2017, according to the Japan National Tourism Organization (JNTO).

Here are visitor stats for Japan’s top 10 visitor sources in 2018 …

  • China was the largest source of foreign visitors, with 8,380,100 arrivals, up 5.6% from the year before.
  • South Korea came in second, with 7,539,000 arrivals, up 5.6% from the year before.
  • Taiwan came in third, with 4,757,300, up 4.2% from the year before.
  • Hong Kong came in fourth, with 2,207,900, down 1.1 % from the year before.
  • The United States came in fifth, with 1,526,500, up 11% from the year before.
  • Australia came in sixth, with 552,400, up 11.6% from the year before.
  • Philippines came in seventh, with 504,000, up 18.8% from the year before.
  • Malaysia came eighth, with 468,300, up 6.5% from the year before.
  • Singapore came in ninth, with 437,300, up 8.2% from the year before.
  • Indonesia rounded out the top 10, with 396,900, up 12.7% from the year before.

Japanese Tourism Industry

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Families engaging in hanami (flower viewing) in Mitsuzawa Park in Yokohama Japan. Photo Credit: Koumpsu.

After the United States and China, Japan has the world’s largest economy.

Its tourism industry, however, lags far behind that of many of its Asian neighbours, representing just 0.5% of its GDP, according to a report issued by McKinsey & Company.

To put that figure in context, tourism accounted for 10.4% of GDP in Thailand, 2.4% of GDP in France, and 1.3% of GDP in the United States.

With just under 20 million visitors in 2015, the country’s leaders set a five-year plan in motion to double the number of visitors to 40 million by 2020.

That is the same year that Japan is set to host the Summer Olympics.

Japanese Hotels Building Boom

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Pullman Tokyo Tamachi  is one of the many hotels opening recently in the Japanese capital. Photo Credit: AccorHotels

Rugby World Sevens, the world’s third largest sporting event after the Olympics and the Football World Cup, will play a total of 48 matches in Japan from 20 September to 2 November in 2019.

The Tokyo Summer Olympics will be held in Japan between 24 July and 9 August in 2020.

Will these major sporting events have an impact on Japanese hotels?

When Japan was awarded the Summer Olympics in 2012, there  were fears that there wouldn’t be enough hotel rooms to host the inflow of sports fans expected to visit the country during the Olympics.

Since then, investors have been scrambling to build hotels and resorts across the country. There has also been a sharp rise in the amount of private lodging, such as Airbnb. Does Japan now face an oversupply of hotel rooms?

Japanese Geography

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Kanazawa is one of the most picturesque cities in Japan. Photo Credit: ANA Crowne Plaza Kanazawa.

Japan is made up of 6,852 islands. The four main islands of Kyushu, Hokkaido, Honshu, and Shikoku account for approximately 97% of the country’s land mass.

Okinawa is the country’s southernmost major island. It has a tropical climate. Hokkaido is Japan’s northernmost major island. Its snow-clad mountains make it a popular travel destination for winter sports enthusiasts.

Japan is a mountainous country, and 73 % of its land mass is not suitable for residential, agricultural, or commercial development. Most people live in cities and towns near the coast.

Transport in Japan

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Narita Express links Tokyo Narita International Airport with downtown Tokyo. Photo Credit: Wikimedia Commons

Japan has a well-developed transportation infrastructure, but it is expensive by international standards. Most travel is done by car, and major cities are linked by high-speed toll roads.

There are dozens of railway companies linking Japanese cities and towns. There are eight shinkansen lines, a.k.a. bullet trains. They offer high speed travel between major Japanese cities.

Japan has the world’s fourth largest commercial aviation industry. Tokyo has two major airports. Narita International Airport is used mostly for international travel. Haneda Airport is used mostly for domestic travel. Also known as Tokyo International Airport, Haneda is the busiest airport in Asia. It is the fifth busiest airport in the world.

The government is slowly opening up Haneda to international travel. It is preferred by many travelers because of its proximity to downtown Tokyo.

In addition to Narita, other major foreign gateways include Kansai International Airport, which serves Osaka, Kobe, and Kyoto; Chūbu Centrair International Airport, which serves Nagoya; New Chitose Airport, which serves Sapporo; and Fukuoka Airport.

Japan Airlines and All-Nippon Airways are the country’s largest airlines. Many foreign carriers also serve the country.

Japanese Currency

The yen is the official currency of Japan. The currency code for the yen is JYN; the currency symbol is ¥.

Frequently used coins include ¥1, ¥5, ¥10, ¥50, ¥100, and ¥500. Frequently used banknotes include  ¥1,000, ¥5,000, and ¥10,000; ¥2,000 notes are rarely used.

As of 3 April 2019, one euro was equal to roughly 125 yen.; One USD was equal to roughly 112 yen.

Japanese Visas

Japan liberalized its visa policy a few years back, and travelers from 68 countries can now visit the country without a visa for up to 90 days for sightseeing purposes.

Visitors must hold passports valid for the duration of their stay. They cannot engage in activities for which they will receive compensation.

Japanese Hotel Executive Interviews

Hotel executives speak out on the challenges and opportunities facing the Japanese hotel hospitality industry in the run-up to the 2020 Tokyo Olympics.

Patrick Bassett – Accor Hotels

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Patrick Basset – Chief Operating Officer of Accor Upper Southeast & Northeast Asia and the Maldives – spoke with the Accidental Travel Writer on the challenges and opportunities facing hotels in Japan.

Excerpts from the interview follow:

Can I have a brief description of your hotel group’s presence in Japan?

Accor is a world-leading augmented hospitality group offering unique experiences in 4,900 hotels and residences across 110 countries.

The Group established an office in Tokyo as early as 1986 but its mission was to drive business out of the rapidly growing outbound market into Accor’s hotels in Europe.

Today we are operating 16 hotels in Japan, under eight hotel brands – MGallery, Pullman, Swissôtel, Novotel, Mercure, ibis, ibis styles and ibis budget.

We currently have two hotels in the pipeline, with the Mercure Kyoto Station (225 keys) and ibis Styles Nagoya (284-keys) scheduled to open in 2020.

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MGallery Kyoto Yura Hotel is the first MGallery hotel in Japan. Photo Credit: AccorHotels.

Does your Accor have any new properties that have opened recently? If so, can you give me a brief overview?

We are very excited to have opened our first MGallery Hotel in Japan earlier this year. MGallery Kyoto Yura Hotel joins our collection of 101 storied boutique hotels that are renowned for enhancing local discovery by offering a highly individual experience.

MGallery Kyoto Yura Hotel offers 144 rooms featuring contemporary classical design, as well as an all-day dining restaurant and lobby bar. Last year we launched Pullman Tokyo Tamachi which was our 1,000th hotel in Asia Pacific.

The opening of this 143-key upscale hotel demonstrates our commitment to expanding our presence in the premium segment in Japan.

Tokyo Summer Olympics
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Kasa is the fusion restaurant at the Pullman Tokyo Tamachi serving Mediterranean fishes with Japanese influences. Photo Credit: AccorHotels.

Has next year’s Olympics had an impact on the decision to open new or upgrade existing properties?

We certainly anticipated significant development opportunities in the lead up to the Rugby World Cup this year and the Olympic Games next year.

What are your future plans for Japan and the Asia Pacific?

We are working hard on expanding our presence in Japan and believe that there will continue to be positive trends for the tourism industry there, even after these major events have concluded.

Globally, we are opening one hotel every 29 hours and 51% of our development is in Asia Pacific.

We are very focused on extending our global presence and leadership so we must continue to innovate and assert our presence in geographic areas with high potential.

We believe that Japan presents such potential so we must expand our presence here to be competitive.

Can you give a rough breakdown of your key overseas markets?

Our main source of business is predominately from Asia & Pacific, making up around 90% of our guest mix due to Accor’s strong brand presence throughout the region.

China and South Korea make up a large proportion of our guest mix, as well as travelers from countries in South East Asia due to infrastructure improvements, more efficient visa processes and the value of the Japanese currency.

How important is the domestic Japanese market?

We see potential to enhance growth for the domestic market moving forward as Japanese travellers seek to discover destinations closer to home.

There had been fears of a shortage of hotel rooms when Japan hosts the summer Olympics in 2020. With the entry of new players into the market – and the growth of private lodging such as Airbnb – there is now talk of an oversupply. Could this lead to a price war? Would there be any other kinds of impact?

Accor has an unrivalled portfolio of brands and more than 50 years of expertise – with brands for every type of stay and every budget (38 accommodation brands, 26 of which are in luxury and premium sector).

We are one of the largest luxury operators in the world with over 600 luxury and premium hotels globally (more than half being in Asia Pacific).

We see potential to increase our presence in Japan with luxury, lifestyle and apartment-style hotels.

Trends Affecting Japanese Hotels
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Mercure Tokyo Ginza features quirky interior design. Photo Credit: AccorHotels.

Consumer preferences are reportedly changing “from merchandise to experience”. Can you comment on this trend and how Accor hotels are responding to it?

Indeed, consumers are increasingly seeking out experiences rather than merchandise.

In February 2019, we unveiled our new lifestyle loyalty programme, ‘ALL’ (Accor Live Limitless), which will be launched in Q4 2019.

ALL puts loyalty at the heart of the customer universe, integrating rewards, services, and experiences across our entire ecosystem of brands to bring value to everyday life when consumers work, live or play.

The lifestyle loyalty programme will be delivered through a new app and website that will allow members to access the world of Accor.

It will give consumers one place to find all our brands to make their experiences better not just when they travel but in the way they live.

This is a key development for us globally that will involve all our hotels in Japan.

Patrick Bassett’s Bio

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Takuya Kishim – Four Seasons Hotel Group

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Takuya Kishim Hotel Manager of Four Seasons Hotel Tokyo at Marunouchi, posing with hotel staff.

Takuya Kishi – Hotel Manager of Four Seasons Hotel Tokyo at Marunouchi spoke with the Accidental Travel Writer on the challenges and opportunities facing hotels in Japan.

Excerpts from the interview follow:

Can I have a brief description of your hotel?

The Four Seasons Hotel Tokyo at Marunouchi opened in 2002. It has 57 rooms including nine suites. It has one restaurant and three meeting rooms.

Does the Four Seasons have any other hotels in Japan?

The Four Seasons operates two properties in Japan (one in Tokyo and another Kyoto). The hotel in Kyoto opened in 2017. A third property is scheduled to open in Otemachi in Tokyo in 2020.

Does your hotel have a “unique selling proposition”?

Four Seasons Hotel Tokyo at Marunouchi is the smallest “boutique-type” city hotel among groups’ 111 properties worldwide. Located in the midst of world-famous Marunouchi business district, the hotel offers an intimate atmosphere and a range of services and amenities to cater every guest’s needs.

Tokyo Summer Olympics
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Chairman’s suite at the Four Seasons Tokyo at Marunouchi. Photo Credit: Four Seasons.

The Rugby World Cup and the Tokyo Summer Olympics were expected to be a major boost to Japan’s hospitality industry. Did these two sporting events have an impact on the decision to open new properties or upgrade existing properties?

Not because of two mega events, but because of our hotel’s age, we have started renewing and enhancing soft goods in the public spaces. We are considering more enhancement projects after these events take place.

8.61 million foreigners visited Japan in 2010. By 2017, that number had risen to 28.69 million and could reach 40 million in 2020. To what do you attribute this spectacular growth?

There were many positive attributes which have worked very well to position Japan as a safe and interesting destination in the world.  Certainly, the most positive attribute was for Tokyo to be selected as a host city of the Olympic Games and Paralympics.  This put Tokyo and Japan at the forefront as a destination you would want to visit. 

The Japanese government loosened the restrictions on tourist visa and opened up the door to tourists, especially from other Asian countries. 

Proliferation and acceptance of social media certainly helped “expose” Japan to people all over the world. Many different positive factors have made contributions to boost Japan’s popularity as a destination.           

There had been fears of a shortage of rooms at Japanese hotels when Japan hosts the summer Olympics in 2020. With the entry of new players into the market – and the growth of private lodging such as Airbnb – there is now talk of an oversupply. Could this lead to a price war? Would there be any other kinds of impact?

I read a newspaper article almost every week about new entries into the hotel industry by companies which have never been in the industry.  We are in a different segment [from many of our new entrants, who don’t have food and beverage outlets], but we will somehow feel pressure in occupancy.  Other than that, we will most likely not be affected by this increase.  There will certainly be a price war among limited service hotels.

What happens after the Olympics?

Not many luxury hotels will be added to the market, and I do not see any negatives after the Olympics. On the other hand, limited service hotels and new entrants without a strong brand might not survive after the Olympics. 

Japan is one of many countries that experienced some very hot weather last summer. As a result,  fears have been voiced that this could affect both athletes and fans during the 2020 Olympics. Is there anything that your hotel or (the hotel industry in general) can (or needs to) do deal with this possibility?

I cannot think of anything unique and out-of-box at this moment; however, we continue to be a good supporter to athletes as well as fans from all over the world because we are a global brand.   

Trends Affecting Japanese Hotels

Can you give a rough breakdown of your key overseas markets? How important is the domestic market? Are there any interesting trends?

Approximately 35 to 40% of our guests are from North America, 20% are domestic, and the rest is equally divided between the UK, China, Australia, Hong Kong, Canada, and Singapore. The domestic market is very important, and we would like to see the market grow further for us.  It gives us stability even if there are currency exchanges and/or geo-political issues outside of Japan.     

Can you say something about your occupancy and RevPAR? How does it compare with previous years? What are your expectations between now and 2020?

We were expecting higher RevPAR in 2018 largely due to ADR increase.  The Tokyo market has been experiencing a very high occupancy for the last three years or so and there is not much space you can increase in occupancy.  I believe this trend will continue at least until 2020. 

Consumer preferences are reportedly changing “from merchandise to experience”. Can you comment on this trend and how hotels in Japan are responding to it?

Definitely, this trend is happening and will get stronger and stronger.  Our competitors have created unique activities and experiences.  So have we.  Our latest addition is “Sea to Table,” where our guests go out fishing with an Izakaya Chef and experience Izakaya cuisine in a local setting.  Isn’t it unique?

Takuya Kishi’s Bio

Mr. Kishi has 28 years career in the industry, including the past 20 years with Four Seasons Hotels and Resorts, having first joined the company as Assistant Front Office Manager at The Pierre in New York (formerly a Four Seasons hotel) in 1998.

Where to Stay in Tokyo

If you’ve never been to Japan, you don’t know what you’re missing.

There’s the urban sophistication of major cities such as Tokyo and Osaka. There’s the rustic beauty of historic cities like Kyoto and Kanazawa.

There are the palm lined beaches of tropical Okinawa in the south and the snow-clad mountains of Hokkaido in the north.

Click on the following links for travel inspiration and information on hotels in Tokyo and the rest of Japan.

Useful Links

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This report on Japanese Hotels is the latest in an occasional series of Round Table Discussions and Executive Interviews with industry leaders in the global travel, tourism, and hotel sectors.

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