Japan hotel prices surge as domestic and inbound travel rebound

 Saturday, April 22, 2023 


Room prices at Japanese hotels are soaring on a rebound in domestic travel and foreign tourism, though the country’s ongoing labor shortage raises concerns about the supply of available rooms.

Nikkei surveyed 50 hotels with more than 100 guest rooms in five major Japanese cities: Sapporo, Tokyo, Kyoto, Osaka and Fukuoka. Hotels were asked to compare the average daily rate (ADR) for April 29, the first day of the upcoming annual Golden Week holiday period, with a year before.

Each city showed a strong rise in the rate, with no respondents reporting a drop. About 20% of hotels report an increase of 10% to 40%, with 60% saying ADR will climb at least 50%.

The rise was particularly notable in Tokyo, with ADR increasing by 50% or more at all seven facilities that responded to the survey.

A survey by U.S. hospitality research firm STR shows that Japan’s nationwide average room rate in March was 21% higher than before the pandemic in 2019, and up 59% on the year.

The rising prices are underpinned by the upswing in occupancy rates. The number of reservations increased at each surveyed hotel, with many saying they expected an occupancy rate of 70% or more, or were almost fully booked.

A recovery in domestic tourism contributes to the trend. A location for budget chain MyStays Hotel near Sapporo Station said in the survey that it is already close to capacity for Golden Week, with families being the driving force.

A Kyoto hotel said group reservations increased over last year, as the receding pandemic-era caution about traveling with others helped lift occupancy.

Travel agency JTB estimates the number of domestic travelers for an extended April 25-May 5 Golden Week period will increase by 2% from 2019, reaching a record.

A recovery in foreign tourism also fuels the higher occupancy and room rates.

A hotel in Tokyo’s Chuo Ward said the recovery in visitors to Japan, especially from other Asian countries, has been remarkable. At Hotel Yaenomidori in Tokyo, foreign guests on the first day of Golden Week are accounting for 64% of reservations.

As inbound tourist numbers continue to rise, room rates likely will as well. The total number of overnight guests from overseas was 5.92 million as of February, about 64% of the pre-pandemic level.

Chinese tourists are finally returning to Japan in numbers on par with other countries as of April.

With the recovery in Chinese tourists, the total number of overseas overnight guests in May will return to about 80% of the pre-pandemic level, estimated Takuto Yasuda, a researcher at NLI Research Institute.

Yet the recovery brings concerns about guest room supply constraints due to labor shortages.

According to the Bank of Japan’s Tankan survey, the diffusion index for employment conditions in the lodging and restaurant industries fell to minus 67 in March, a steep drop from last March’s minus 7, and considerably below this year’s minus 32 average for all industries.

“Hotels are having difficulty raising occupancy rates due to labor shortages, so they have no choice but to secure profits by raising rates,” said Takayuki Miyajima, a senior economist at Sony Financial Group.

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