Japan Hotels ViewPoint - January 2018

Room to Grow - Hotel Demand Expected to Keep Pace with New Supply

SUMMARY

• A total of 80,000 new hotel rooms are scheduled to be completed in Japan's eight major cities by the end of 2020, increasing the existing stock by around 30%. These developments are on the back of the industry's buoyant performance driven by the growth of inbound tourism.

• The market reached a turning point in 2017. RevPAR growth in the eight major cities had been slowing since 2016 and turned negative in Osaka in February 2017. Factors behind the slowdown in RevPAR growth include the rapid rise in room rates, increase in new supply and a greater variety of lodging options, including vacination rentals and hostels.

• However, an estimate of the number of hotel rooms required, based on the government's target of attracting 40 million inbound tourists to Japan in 2020, suggests that there will still be a shortage of rooms in Tokyo, even after new supply is taken into account.

• While it is estimated that there will be more rooms than are needed in Osaka and Kyoto, this does not necessarily indicate oversupply. This is because new supply could encourage a recovery in demand that had become latent or had been lost to other cities as a result of a shortage of stock.

• That said, more than 90% of new supply will be in limited-service hotels. For hotels to become more competitive in a market where supply is increasing, they must respond to the ever more diverse requirements of travellers. CBRE believes hotels will need to improve the quality of their lodging experience, rather than just providing a place to stay.

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CONTACT

Kiyoshi Tsuchiya
Director - CBRE Hotels, Japan
O: +81 3 5288 9200
E: kiyoshi.tsuchiya@cbrehotels.com