UBS Asset Management is planning to invest $400 million in the Japanese hotel industry. As part of this investment strategy, UBS will focus on value-add assets and development opportunities in key metro and regional areas, including Tokyo, Osaka, Nagoya, Fukuoka and Hokkaido.
UBS AM's joint venture with Mitsubishi, which has been running for 16 years, will source and manage the hotels through MCUBS Japan Advisors, its private fund management subsidiary. The JV investment will focus on Japan's limited-service hotel sector.
“Our investment thesis is underpinned by the clear gap between strong growth in demand for overnight accommodation and the lagging response in supply of new hotel rooms. We see a particular window of opportunity in limited service hotels, a sector that accounted for over 40 percent of all hotel stays in Japan last year," Graham Mackie, head of real estate Asia Pacific at UBS AM, told I&PE Real Estate.
UBS AM has predicted further growth in Japan's tourist sector, as the industry has been experiencing rapid expansion recently. In 2016, tourist arrival numbers to Japan were recorded at 24 million and were expected to increase to 40 million by 2020 thanks to the emerging Asian middle class. “The evidence is there to demonstrate that tourist arrivals have experienced buoyant growth and that this momentum will continue,” Mackie said. Demand from domestic travelers--six times more than that of international tourists--contributed to the increase. “Supply is just playing catch-up here in response to the demand,” he said.