October 26, 2023

Asian Ultra-luxury Resorts are Expanding into Japan One After Another

Singapore's "Soneva" and Hong Kong's "Rosewood" plan to expand into Okinawa and other areas. As tourism to Japan recovers with the end of the COVID-19 pandemic, they aim to capture lodging demand from wealthy foreigners. The prolonged yen depreciation has also been a tailwind for Asian capital to advance into the region.

There are already some Western luxury hotels in Okinawa, such as the "Hyatt Regency" and the "Ritz-Carlton," and the competition is fierce, with approximately 3,700 lodging facilities as of the end of 2022.

However, there are still a few ultra-luxury villa-type resorts with a private atmosphere that wealthy people prefer, and it has been determined that there is a commercial opportunity.

Foreign investment is active. According to Jones Lang LaSalle (JLL), a leading real estate services provider, total investment by foreign firms in Japanese hotels will be about six times higher in 2022 than the previous year at 162.5 billion yen, recovering to a level of a little over 90% of the pre-COVID-19 pandemic level of 2019. January-June 2023 is 128.5 billion yen, an increase at a faster pace than the same period last year.

In addition to the recovery in demand for tourism to visit Japan, the depreciation of the yen and low interest rates have attracted foreign investment due to affordability. Traditionally, investment in local resorts has been dominated by Western, Chinese, and Korean firms, but Southeast Asian firms that have gained strength through economic growth are increasingly entering the market.

Canolly Hotels of Singapore opened an exclusive-use lodging facility in Hakubamura, Nagano, a ski resort, in December 2022. Rates vary depending on the time of year and range from 200,000 yen to 800,000 yen per night. Currently, many guests come from Southeast Asia and Australia.

There is also the issue of overdevelopment concerning local resorts. In October, Kutchancho, Hokkaido, which hosts the Niseko area, a popular ski resort, reviewed its regulations regarding resort development. It tightened floor area limits, floor area ratio regulations, and height restrictions for facilities in each area. In Niseko, real estate prices and prices are rising due to increased development activity.

In March, the Cabinet decided on the Basic Plan for the Promotion of Tourism Nation for the fiscal year 2023 to the fiscal year 2025, which sets forth the government's policy to promote the attraction of guests to local regions. Along with creating high-quality resorts, measures to mitigate tourism pollution are also required.