December 4, 2023

Domestic Luxury Hotels Will Increase the Number of New Openings Targeting Wealthy Visitors to Japan

The Palace Hotel will increase the number of hotels by 2.5 times by 2030. The Imperial Hotel will open its first new hotel in 30 years. These hotels envision filling most of the guest rooms with foreign guests. The government aims to increase travel spending per person visiting Japan, but there is a shortage of luxury accommodations. Hotels in the higher price range will also move to invest to attract visitors to Japan.

Palace Hotel will open new hotels in major cities to increase the number of hotels in operation from the current four to approximately 10 by the year 30. Palace Hotels aims to increase the number of hotels quickly by focusing on not owning the land or buildings, which require significant investments, but only managing them.

According to the Japan National Tourist Organization (JNTO), 2.5165 million foreigners visited Japan in October, a 0.8% increase over the same month in 2019. The growth of visitors to Japan from Europe, the US, and Australia, where high unit prices and more extended stays are expected, is noticeable.

Hotels in the higher price ranges attract a growing percentage of foreign guests. At the Palace Hotel Tokyo, the flagship of the Palace Hotel chain, foreigners accounted for about 75% of overnight guests in October. It was about 5 points higher than before the COVID-19 pandemic. The Imperial Hotel Tokyo also exceeded 60%.

The average room rate has also increased. The Palace Hotel Tokyo has risen from the 60,000-yen range before the COVID-19 pandemic to slightly under 100,000-yen. Until now, new hotels targeting visitors to Japan have been mainly affordable hotels designed for group travelers. With the increasing number of wealthy people visiting Japan, there has been an upsurge in the movement of luxury accommodations.

Imperial Hotel will open a new hotel in Kyoto in the spring of 2026. In the 2030s, the main building of the Imperial Hotel Tokyo will be rebuilt. The government is promoting a shift from quantity to quality in its inbound tourism policy, to raise the amount of travel spending per person visiting Japan. One of the challenges to achieving the goal is the small number of luxury accommodations.

According to Japan Tourism Agency data based on the US travel website "Five Star Alliance," there are 34 five-star hotels in Japan as of June 2020. This is far behind the United States (801) and far less than China (137), Thailand (112), and Indonesia (58), also in Asia.

The penetration of Japanese hotel brands among wealthy people overseas will lead to opportunities for Japanese hotel companies to expand their business overseas.