While the recession has seen foreign press titles (Time and Newsweek among them) shipping out, the hospitality sector has also experienced a mass exodus. The local market has declined, with the Japanese cutting back on holiday spend and business tourism left battered. Yet the industry has refused to surrender. While Tokyo room rates march ever upwards, nationwide occupancy continues to struggle. Australia, India and Singapore all outperformed Japan in January 2010, recording major increases on 2009 while Japan slipped backwards. Even China, where occupancy trails Japan, has seen 28 per cent year-on-year growth.
The Japanese industry has had to make a choice: face closures or open up to the world. In truth, the latter trend began much earlier. Ten years ago, only 50 hotels in Japan were owned by international hotel brands and even these were largely confined to the economy sector. Then the Four Seasons chain arrived in 2002, swiftly followed by Conrad and Mandarin Oriental, and then by Ritz-Carlton, Peninsula and Shangri-La.
By the start of 2008, a survey by Japanese business paper Nikkei found that seven of the 10 top-rated luxury hotels in Japan were foreign-owned. In short, Tokyo now has the same top-end offering as any other major Asian city.The most significant recent move saw InterContinental team up with All Nippon Airways to create a hotel management company that now markets 12,000 guest rooms.
Local competitors are increasingly aligning themselves with international hotel groups such as WorldHotels to ensure their share of the lucrative overseas market.The fate of those hotels currently owned by troubled Japan Airlines (JAL) may prove pivotal. In the latest development, a number of foreign firms are currently circling Nikko Hotels and JAL City Hotels in the belief that they will soon be sold off.
The Japanese industry has had to make a choice: face closures or open up to the world. In truth, the latter trend began much earlier. Ten years ago, only 50 hotels in Japan were owned by international hotel brands and even these were largely confined to the economy sector. Then the Four Seasons chain arrived in 2002, swiftly followed by Conrad and Mandarin Oriental, and then by Ritz-Carlton, Peninsula and Shangri-La.
By the start of 2008, a survey by Japanese business paper Nikkei found that seven of the 10 top-rated luxury hotels in Japan were foreign-owned. In short, Tokyo now has the same top-end offering as any other major Asian city.The most significant recent move saw InterContinental team up with All Nippon Airways to create a hotel management company that now markets 12,000 guest rooms.
Local competitors are increasingly aligning themselves with international hotel groups such as WorldHotels to ensure their share of the lucrative overseas market.The fate of those hotels currently owned by troubled Japan Airlines (JAL) may prove pivotal. In the latest development, a number of foreign firms are currently circling Nikko Hotels and JAL City Hotels in the belief that they will soon be sold off.
Brand health diagnosis
Shin Asai, president of MPI (Meeting Professionals International) Japan Club“The Japanese hotel sector, like other industries here, has traditionally been very well supported by domestic demand. Those hotels with strong Japanese heritage have enjoyed particular loyalty in times gone by. But the Lehman shock’s reverberations throughout the country’s economy have dramatically changed this picture.
Amid a raft of repercussions, steady banquet trade from big businesses is no long forthcoming under the influence of corporate cost-cutting. In an untimely coincidence, Japan is now facing rapid aging of its population, resulting from a decline in the country’s birth-rate.
Global hotel operators, such as Hyatt, Starwood, IHG and Hilton, naturally have structures to sustain their hotels in Japan via global networking systems. Japanese-owned hotel companies on the other hand do not. They have never previously required them.
In short, these domestic hotel operating companies immediately need to develop strategic plans to help promote themselves in overseas markets.”
Yosuke Yamauchi, planner at I&S BBDOThere are many factors affecting the overall health of the Japanese hotel sector - the strong yen, the economic downturn, a shift in underlying Japanese consumer values, and the difficulty Japan has experienced in selling itself as an international tourist destination, to name just a few.
But another interesting point is that both modern non-Japanese hotels (like the Conrad or the Peninsula) and authentic Japanese hotel brands (like The Imperial, The Okura or The New Otani) are suffering not just because of decreasing hotel stays, but also due to dramatic decline in revenue from their banquet divisions. It’s believed that these account for roughly one third of a given hotel’s revenue, and the downturn has drastically curtailed those receipts.
But as most hotel brands struggle, perhaps the industry’s future can be found on the banks of a river in Kyoto. The Hoshino-ya brand of hotels goes against the traditional hotel code. Neither a modern sleek Western-style hotel, nor a small traditional inn, Hoshino-ya has created an authentic mixed style resort. It combines a true Japanese experience with modern Western comforts - something I think that is very well suited for today’s visitor, be they Japanese or foreign.
Facts
> Only Dubai has a higher average room rate (US$249.81) than Tokyo ($249.60).> Japan hotel room occupancy averaged 61 per cent in January, a one per cent drop on January 2009. China saw a rise of 28 per cent year-on-year, and Singapore a 23 per cent increase.
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This article was originally published in the 25 March 2010 issue of Media.
