Chinese investors seek hotel opportunities in Japan

Tokyo

China has famously cast eyes westward for hotel investment opportunities—but now potential developers are looking east as well. In Japan, real estate prices have increased by nearly 30 percent over the last few years following demand for hospitality-related realty from Chinese investors.

It makes sense: Japan’s visitor numbers from China are growing steadily. In July, the Japan Tourism Agency reported that a record 2.29 million travelers visited Japan, many of whom came from the Chinese mainland. In the first half of the year, nearly 12 million international visitors came to Japan, up 28 percent year-on-year. Of that, a little more than 3 million were from the Chinese mainland.

With Tokyo set to host the Olympic Games in 2020, hotel assets in the city and its surrounding areas could offer a strong ROI in the coming years. The JTA reported that in 2015, the occupancy rate of Tokyo hotels reached 82.3 percent, and 85.2 percent in Osaka—and these cities are facing a “serious shortage of hotels,” making them prime targets for investment. 

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A 21st Century Business Herald report quoted UBS Securities in Japan as saying that if “the occupancy rate of a hotel reaches 80 percent, the hotel is regarded as operating with full load. If visitor numbers rise by 5 million a year, the hotels in Tokyo and Osaka won't be enough.”

Last month, we noted that the lack of hotel options in Tokyo was encouraging private homeowners to list rooms on Airbnb, generating conflict with traditional hoteliers and driving the government to institute a ban on the practice. “If ryokans (traditional inns) and hotels operate under the same regulations (as Airbnb hosts) and then we lose, I could accept it,” Japan Ryokan & Hotel Association chairman Satoru Haritani said at the time. “But if one industry is regulated and the other is not, and we have to compete under different rules, then that kind of situation would be nothing but unfair.”

In the Japanese real estate market, mainland Chinese investors are building a presence, and are now ranked at number four behind the U.S., Hong Kong and Singapore, according to data from Real Capital Analytics. The trend could deepen going forward as the business of proving private home accommodation to travelers is likely to be made legal by the Japanese government in the near future.

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