Japan’s Tourism Surge Drives Tokyo Hotel Prices to Record New Highs, Straining Domestic Business Travellers

Published on January 15, 2025

Japan’s thriving tourism industry is reshaping the travel landscape, but not without challenges for domestic business travelers. With international visitors flocking to iconic destinations like Tokyo and Osaka, hotel prices have surged, leaving Japanese professionals scrambling for affordable accommodations. While the economic benefits of tourism are undeniable, the rising costs are prompting businesses to consider alternative solutions for their travel needs.

Tourism Boom and Rising Prices

A weak yen has been a significant driver of Japan’s record-breaking tourism surge, attracting an unprecedented number of visitors. Tourism figures for 2024 are expected to surpass the 2019 record of nearly 32 million visitors, and the country aims to welcome 60 million annually by 2030.

However, the influx of tourists has caused hotel prices in major cities to skyrocket. In Tokyo, the average price for a basic business hotel room reached ¥20,048 in November, a steep increase from the prepandemic peak of ¥12,926 in April 2019. This has left domestic business travelers, like those in Yoshiki Kojima’s IT company, struggling to find affordable accommodations during their work trips.

The Capsule Hotel Alternative

Kojima’s employees, who often travel to Tokyo for company-wide meetings, have turned to capsule hotels, a uniquely Japanese lodging option featuring compact, bed-sized pods. While capsule hotels have historically been perceived as “shabby,” Kojima discovered a more modern version with comfortable mattresses, private TVs, and shared bathhouses.

Starting at ¥5,000 ($30) per night, capsule hotels remain more affordable than standard business hotels, but their prices are also rising due to increased demand. Despite this, Kojima’s employees appreciate the experience, describing it as “fun” and convenient.

Struggles of Domestic Business Travelers

The challenges faced by Kojima’s company are shared by others across Japan. Keisuke Morimoto, who owns a kimono shop in Nara Prefecture, expressed frustration at the high cost of a two-night stay in Tokyo, which totaled ¥60,000. Many business travelers are now exploring alternative accommodations like Airbnb to manage costs.

The strain on domestic travelers highlights a broader issue of overtourism in Japan. Takuto Yasuda, an analyst at NLI Research Institute, noted that while tourism generates jobs and boosts the economy, it also disrupts the lives of local residents and makes domestic travel more difficult.

The Role of Overtourism

Popular tourist destinations such as Tokyo, Osaka, and Kyoto have borne the brunt of overtourism. In Kyoto, where residents have complained of overcrowding and inappropriate behavior by visitors, local officials are planning to raise accommodation taxes, particularly for luxury hotels. This move aims to mitigate the impact of overtourism while generating additional revenue to support the city’s infrastructure.

The government is also encouraging tourists to explore lesser-known regions, urging them to spend at least two nights in rural areas. This strategy aims to ease the pressure on major cities and distribute tourism’s economic benefits more evenly.

Rising Hotel Occupancy and Rates

Hotel occupancy rates in Tokyo reached 88% in 2024, with average rates rising by 26% compared to the previous year, according to major operator Fujita Kanko. Osaka has experienced similar trends, with visitor numbers increasing 1.5 times since 2019.

Fujita Kanko and other industry players are hopeful that demand will spread to smaller cities like Sapporo and Naha, alleviating some of the strain on Tokyo and Osaka’s hospitality sectors.

Adapting to New Realities

The rising costs of domestic business travel are prompting Japanese companies to explore creative solutions. Kojima is considering relocating his company’s headquarters to Sapporo or organizing meetings in less crowded areas, such as hot spring towns near Tokyo. These destinations offer a quieter environment and more affordable lodging, allowing businesses to balance productivity with cost savings.

Morimoto, too, is contemplating a shift to short-term rentals or budget-friendly alternatives to reduce travel expenses. These adjustments reflect a growing trend among domestic travelers to adapt to the changing landscape of Japan’s tourism industry.

Broader Implications for the Travel Industry

Japan’s tourism boom highlights the dual impact of a thriving industry. On one hand, international visitors bring significant economic benefits, supporting local businesses and creating jobs. On the other, the surge in demand has created challenges for domestic travelers and local residents.

The situation underscores the importance of sustainable tourism practices. By promoting less-visited destinations and balancing infrastructure development with environmental and social considerations, Japan can maintain its appeal as a travel hotspot while minimizing disruptions to everyday life.

Global Lessons from Japan’s Experience

Japan’s approach to managing overtourism offers valuable lessons for other countries facing similar challenges. Encouraging visitors to explore rural areas, implementing targeted taxes, and diversifying accommodation options are strategies that could be replicated globally.

For business travelers worldwide, Japan’s experience serves as a reminder of the importance of flexibility and adaptability. As travel costs rise in popular destinations, companies may need to rethink their approach to meetings, exploring virtual alternatives or choosing locations off the beaten path.

Key Takeaways

• Record Tourism: Japan’s 2024 tourism figures are expected to exceed the 2019 record of 32 million visitors.
• Hotel Price Surge: Average business hotel rates in Tokyo reached ¥20,048 in November 2024.
• Capsule Hotels: Affordable alternatives, starting at ¥5,000, are gaining popularity among domestic travelers.
• Government Strategy: Efforts to promote rural tourism aim to ease the pressure on major cities.

Looking Ahead

As Japan works toward its goal of welcoming 60 million visitors annually by 2030, balancing the needs of tourists and locals will remain a priority. The tourism industry’s ability to adapt to these challenges will shape the future of travel in Japan and serve as a model for other nations navigating the complexities of overtourism.