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Hotel Intelligence Report

Market Insight Japan

May 2011

Hotel Intelligence Report • Market Insight Japan • April2011 • 2

Limitation This report has been prepared based on the statistics prior to the recent 11 March 2011 earthquake and tsunami events in Japan and as such does not take into account the impact of these events. Contributors Yasokazu Terada Executive Vice President [email protected] Aki Nakata Research Assistant [email protected] Glossary ADR Average Daily Rate RevPAR Revenue Per Available Room GDP Gross Domestic Product Remarks “The total number of accommodation guests” sourced from Japan Tourism Agency does not include guests staying in hotel accommodation with less than ten employees. All statistics on 2010 sourced from Japan Tourism Agency and JNTO are provisional.


Market SummaryAfter experiencing a sluggish year in 2009, Japan’s tourism and hotel market experienced a turn around in 2010. As a result of the steady recovery of the Japan macro economy and domestic consumers’ confidence, the overall tourism and accommodation demand bounced back in the most locations and segments.

The domestic business demand increased in line with the general improvement of profitability of the corporate sector and increasing business activity volume. The domestic leisure demand also showed a recovery underpinned by the consumers’ confidence and increasing discretionary spending.

The number of international arrivals, which experienced the first decrease in 2009 in the last six years, also rebounced in 2010. This trend is mainly attributed to the growth of Asian economies and visa requirement deregulation for many Asian nationalities.

Nonetheless, the speed of the recovery was lacking behind the other Asian countries. The rapid and strong appreciation of the Japanese Yen has hindered the pace of the recovery of the Japan macro economy and hotel room rates.

Albeit the recovery of accommodation demands, Japan’s hotel investment market was remained inactive in 2010. The transaction volume in 2010 remained at par to the level of 2009. While a number of small-sized transactions took place in the market, we witnessed only few transactions over JPY 1.0 billion (US$ 12 million) in 2010. As a continuing trend since 2009, Asian investors remain the main player of the hotel transactions, particularly on full-scale hotel transactions. In addition, a number of investment funds who successfully completed fund raising are known to be seeking hotel investment opportunities in Japan but a difficulty in debt financing prevents them from new asset acquisition.

Economic Snapshot 2009 2010 2011F 2012F 2013F

Real GDP Growth (%) -6.3 4.0 1.1 3.0 1.6 Inward FDI (Net USD billion) -62.5 -55.4 -83.7 -69.2 -62.7 Av. Inflation / CPI (%) -1.3 -0.7 -0.4 -0.9 -0.5 Short-term Interest Rate (%) 0.48 0.23 0.15 0.26 0.41 Av. Exchange Rates (JPY per USD) 92.06 81.40 82.06 83.85 82.32 Av. Unemployment Rate (%) 5.1 5.1 5.2 5.0 4.6 Source: Global Insight (forecast as at Feb 28,2011)


Tourism / Accommodation Market Overview Japan’s tourism and accommodation market showed a steady recovery in 2010. Demand bounced back across all sources, accommodation types and locations throughout Japan.

Overall Trends and Demand Drivers In Japan, the total number of accommodation guests (both domestic and international) reached approximately 370 million, which represented a 21.3% increase as compared to the previous year. This increase can be attributed to an increase in the volume of business activities and consumers’ confidence, underpinned by the recovery of the Japan macro economy.

By guest type, domestic accommodation guests accounted for approximately 93.0% of the total guests in 2010 while inbound accommodation guests accounts for 7.0% of them. The total number of domestic and inbound guests increased by 21.3% and 40.9%, respectively, as compared to the previous year.

The quarterly statistics, sourced from Japan Tourism Agency, indicate that the number of accommodation guests increased significantly after Q2 2010. Overall sentiment for spending appears to have changed since April, the fiscal year beginning in Japan. The total number of international accommodation guests also increased steadily.

Total Number of Accommodation Guests in Japan (Million) 2007 2008 2009 2010

Domestic Guests 286.7 287.5 283.0 343.2 Growth - 0.3% -1.5% 21.3%

International Guests 22.7 22.2 18.3 25.8 Growth - -1.8% -17.8% 40.9%

Total 309.4 309.7 301.3 369.0 Growth - 0.1% -2.7% 22.5%

Source: Japan Tourism Agency .

Figure 1: Total Number of Accommodation Guests in Japan

　

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2007 2008 2009 2010

# of G

uests

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n)

Domestic Guests International Guests

Source: Japan Tourism Agency Figure 2: Total Number of Accommodation Guests in Japan - By Quarterly

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2008 2009 2010

Source: Japan Tourism Agency Source: Japan Tourism Agency

.


Figure3: Total Number of Domestic Accommodation Guests in Japan - By Quarterly

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# of

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ts(M

illion)

2008 2009 2010

Source: Japan Tourism Agency

Figure 4: Total Number of International Accommodation Guests in Japan - By Quarterly

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uests

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2008 2009 2010


. By accommodation type, hotels accommodated approximately 70.0% of the total accommodation guests in 2010, while ryokans (Japanese inns) accommodated approximately 24.7% of them. Among the various accommodation types, limited-service hotels, full-service hotels and resort hotels absorbed 36.3%, 17.4% and 16.3% of the total accommodation guests, respectively. In 2010, the accommodation demand increased across all accommodation types including hotels and ryokans.

Total Number of Accommodation Guests - By Accommodation Type (Million) 2007 2008 Ratio 2009 Ratio 2010 Ratio

Limited-Service Hotel - 103.1 33.3% 105.2 34.9% 134.0 36.3%

Full-Service Hotel - 61.6 19.9% 58.3 19.4% 64.4 17.4%

Resort Hotel - 56.2 18.1% 55.0 18.3% 60.0 16.3%

Ryokan - 84.7 27.3% 79.1 26.2% 91.2 24.7%

Others - 4.2 1.3% 3.7 1.2% 19.5 5.3%

Total 309.4 309.7 100.0% 301.3 100.0% 369.0 100.0%

Growth 0.1% -2.7% 22.5%

Source: Japan Tourism Agency . Figure 5 : Total Number of Accommodation Guests - By Accommodation Type

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2007 2008 2009 2010

# of G

uests

(Millio

n)

Limited-Service Hotel Full-Service Hotel Resort Hotel Ryokan Others No Details


. International Accommodation Demand Among the international accommodation guests, China (14.4% of total inbound demand) ranked at the top international demand source market in 2010 for the first time, followed by South Korea (14.1%) and Taiwan (12.7%).

While demand from most source markets for Japan’s accommodation dipped in 2009, all markets sources contributed to the increase of accommodation demand in 2010. Notably, accommodation demand from China grew by approximately 66%, resulting from a deregulation of visa requirements for Chinese tourists. In addition, accommodation demand from Korea showed a significant recovery, which represented a 78.9% increase as compared to the previous year. This recovery is attributable to the strong Korean economy and stable Korean Won against Japanese Yen.


Figure 6: International Accommodation Guest at Japan in 2010 - By Country of Residence

Others, 15.3%

China, 14.4%

Taiwan, 12.7%

USA, 11.9%

Hong Kong, 7.4%

Singapore, 3.0%

Australia, 2.8%

Thailand, 2.4%

France, 2.1%

UK, 2.0%

Germany, 1.9%

Malaysia, 1.2%

Russia, 0.7%

Canada, 1.1%

India, 0.6%

South Korea, 14.1%


. Figure 7: Top 10 Source Markets in 2010 - By Country of Residence

0

1

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3

4

5

China SouthKorea

Taiwan USA HongKong

Singapore Australia Thailand France UK Others

# of G

uests

(Milli

on)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Grow

th (%

)

2009 2010 Growth(%) Source: Japan Tourism Agency

.

International Visitors Arrivals According to the latest statistics from the Japan National Tourism Organization (JNTO), international visitor arrivals was 8.6 million in 2010, which showed a 26.8% increase compared to the previous year. Although the Japanese government’s target of 10 million international visitors by 2010 was not achieved, the 2010’s figure was the historical record.

The Japanese government, having recognised that the tourism industry can stimulate the economic growth and employment, has been committed to development of the industry. The government newly launched “Inbound Travel Promotion Project (Visit Japan Project)” and set a goal of 15 million visitors by 2013 and 30 million visitors in the long term. This project includes proactive

promotional activities outside of Japan, deregulation of visa requirement and so forth.

In terms of tourism infrastructure, the two main airports of Tokyo – Narita and Haneda completed their expansion in 2010. This move is expected to contribute to an increase in international traffic volume:

• The newest runway in Narita Airport was expanded in March 2010, which increased the airport’s capacity from 200,000 flights to 220,000 flights per year. The airport plans to increase the flight capacity to 300,000 flights in the future.

• Haneda Airport opened its fourth runway in October 2010. This

new runway, utilised for international flights mainly from and to Asian destinations, has contributed to an expansion of the airport’s capacity from 303,000 flights to 407,000 flights per year.

Figure 8 : International Visitors Arrivals

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2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

# of

Vis

itors

(Mill

ion)

-30%

-20%

-10%

0%

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30%

Gro

wth

Rat

e(%

)

International Visitors Growth Rate (%)

Source: JNTO

.


Accommodation Supply Trend

The profile of the Japanese accommodation market continues to evolve. The long-term trend which has seen an increase in the number of hotels and a reduction in the number of ryokans was evident in the latest data. This trend is expected to continue over the next several years.

According to the latest data from Japan’s Ministry of Health, Labour and Welfare, Japan had 9,688 hotels with 798,070 rooms at the end of March 2010 or an average property size of 82 rooms. This is an increase of 85 hotels (0.9%) or 17,565 rooms (2.3%) from the corresponding period previous year.

In contrast, the number of ryokans declined 3.7% with 48,966 establishments at the end of March 2010. Over the same period, the number of rooms declined by 2.0% to 791,893 rooms. This declining trend of ryokans is mainly attributable to financial difficulties and succession problems which occasionally occur in small-sized family-run ryokans. We expect this trend to continue.

Figure 9: Number of Hotels and Ryokans Establishment (As at End of March)

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10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

# of

Pro

perti

es

# of Hotels # of Ryokans

Source: Ministry of Health, Labour and Welfare

Figure 10: Number of Hotels and Ryokans Room Supply (As at End of March)

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2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

# of

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ms

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ion)

# of Hotel Rooms # of Ryokan Rooms Source: Ministry of Health, Labour and Welfare


Hotel Investment Market • Japan Hotel REIT Advisors, the fund/asset management platform

of Nippon Hotel Fund (one of the two listed hotel J-REIT), was taken over by Singapore-based RECAP. This takeover did not involve a hotel asset transaction but could be regarded as a notable transaction representing the recent trend of capital flow from Asian countries to Japan.

While the Japan tourism and hotel trading market stepped on a recovery path, the hotel investment market remained inactive in 2010. Potential buyers still struggle with debt financing and sellers (or lenders behind sellers) were reluctant to reduce the asset sales price to avoid loss recognition. As a result, the pricing gap between sellers and potential buyers was still distant.

• In 2010, many of loans financed before the financial crisis reached maturity. However, most lenders, who took a wait-and-see attitude, were reluctant to dispose the collateral assets at a price below the loan principal amount. As a result, we saw only a few of transactions led by lenders in 2010.

The results of the Japan hotel investment market in 2010 are summarized as follows:

• A total of 37 hotels with 6,102 rooms were publicly announced to have changed the ownership in 2010. The transaction volume in 2010 was approximately same as the transaction volume of 2008 and 2009.

Figure 11: Number of Hotels Sold in Japan

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80

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

#of H

otels

• The average size of the hotels transacted in 2010 was 165 rooms. This figure indicates that the hotels transacted in 2010 were mainly small-sized properties.

• Buyers of the small-sized transactions were mainly domestic

owner-operators, who were mostly full-equity or corporate financing buyers.

• On the other hand, buyers of the large-sized transactions were

mostly investors based outside of Japan. They are also full-equity or corporate financing buyers, who do not rely on asset-backing financing. In today’s market, Asian investors are substantially the only potential purchasers of middle-to-large sized assets (over US$ 30 million).

First half Second half

Source: Jones Lang LaSalle Hotels based on publicly available data only.

Figure 12: Number of Rooms Sold in Japan

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2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

# of

Room

s

• In 2010, the 79-room Hyatt Regency Hakone Resort and Spa

was transferred to a Hong Kong investor and Niseko Village (including Hilton Niseko) was transferred to Malaysia-based YTL group. The other transactions completed by Asian investors in 2010 include Skycourt Asakusa and Asagaya, which were transferred to Singapore-based IPC group.

First half Second half

Source: Jones Lang LaSalle Hotels based on publicly available data only.


Major Lodging Transactions in 2010 (Publicly announced transactions only) Property Name City Prefecture Sales

Month No. of Keys Seller Name Buyer Name

Purchase Price(Millio

n yen) Price Per

Room Legal

Proceeding or No

Managed Bid

or No Best Western Hotel Fino Osaka Shinsaibashi Osaka Osaka Jan-10 179 Athens Dvelopment Secured Capital

Japan N/A N/A No No

Kinpaso Nanao Ishikawa Feb-10 111 Kaihin Hotel Kinposou Yukai Resort N/A N/A Yes Yes

ANA Hotel Wakkanai Wakkanai Hokkaido Feb-10 143 Wakkanai Seaport Plaza

Meiji Shipping Group N/A N/A No No

Hiroshima Airport Hotel Mihara Hiroshima Mar-10 171 HAV Hiroshima Airport Building 1,040 6.08 Yes No

Hotel Kinugawa Gyoen Nikko Tochigi Mar-10 224 N/A Oedo Onsen Monogatari N/A N/A No No

Chiyoda Park Hotel Kitahiroshima Hiroshima Mar-10 32 Kitahiroshimacho RING 27 0.84 No No

E・Hotel Utsunomiya Utsunomiya Tochigi Mar-10 214 Harakosan Alpha Club Group 1,000 4.67 No No

Royal Grace Hotel Sumoto Hyogo Mar-10 46 N/A Hotel New Awaji Group N/A N/A No No

Kurayoshi City Hotel Kurayoshi Tottori Mar-10 59 N/A Himawari Kikaku N/A N/A No No

Daisen Lake Hotel Saihaku Tottori Mar-10 47 Hotel Keihan Family N/A N/A No No Hyatt Regency Hakone Hakone Kanagawa Mar-09 79 Morgan Stanley N/A N/A N/A No Yes Hotel Europe Sasebo Nagasaki Mar-10 328 Jowa Holdings Huis Ten Bosch 50 0.15 No No Niseko Village Niseko Hokkaido Mar-10 706 Citi Group YTL HP 6,000 8.50 No Yes

Kushiro Tokyu Ｉnn Kushiro Hokkaido Mar-10 150 Tokyu Corporation Breez Bay Hotel N/A N/A No NA Obihiro Tokyu Inn Obihiro Hokkaido Mar-10 171 Tokyu Corporation Breez Bay Hotel N/A N/A No NA Kokura Tokyu Ｉnn Kitakyusyu Fukuoka Mar-10 190 Tokyu Corporation Breez Bay Hotel N/A N/A No NA Hotel Qurega Tenjin Fukuoka Fukuoka Mar-10 159 Morimoto Jowa Holding N/A N/A Yes No Hotel Unizo Shibuya Shibuya Tokyo Apr-10 186 Kowa Real Estate Jowa Holding 8,356 44.92 No No

Yamada Onsen Hotel Kutchan Hokkaido Apr-10 37 Kamori Kanko N/A N/A N/A No No

Hotel Izumi Shiraoi Hokkaido Apr-10 25 Island Hotels and Resorts Cruise Hotels N/A N/A No No

Central Hotel Sasebo Sasebo Nagasaki Apr-10 166 N/A Kyusyu Relationship VCI Limited Partnership

N/A N/A No No

Reomanomori Marugame Kagawa May-10 238 Table Mark Oedo Onsen Monogatari N/A N/A No No

Naqua Shirakami Ajigasawa Aomori Jun-10 188 Citi Group KICC Group N/A N/A No No

Sky Court Asakusa Sky Court Asagaya

Taito Suginami Tokyo Jun-10 96

112 N/A IPC Corporation 1,866 N/A No No

Comfort Hotel Hiroshima Otemachi Hiroshima Hiroshima Jun-10 258 Invincible Invesutment

Corporation N/A 1,400 5.43 No No

Capsule Land Shibuya Shibuya Tokyo Jun-10 166 Land Concept Inspire N/A N/A No No

Best Western Kochi Kochi Kochi Jun-10 170 N/A Central Group N/A N/A No No

Star Hotel Yokohama Yokohama Kanagawa Jul-10 126 N/A Hulic 1,200 9.52 No No Hotel Wing International Shinjuku Shinjuku Tokyo Aug-10 134 Wonder Table Humax N/A N/A No No

Hotel Tsubakikan Matsuyama Ehima Sep-10 234 Boyokisen Takaraso Hotel N/A N/A No No

Hotel Sunroute Okayama Okayama Okayama Sep-10 120 Shimoden Taxi Apa Group N/A N/A No No

Himeji Washington Hotel Plaza Himeji Hyogo Sep-10 149 The Dai-ichi Life

Insurance Apa Group N/A N/A No No

Toukouen Yonago Tottori Oct-10 70 Goldman Sachs Kansya Group N/A N/A No No

Hilton Niseko Niseko Hokkaido Dec-10 506 YTL Land Starhill Global REIT 6,000 11.86 No No

Yuyado Kuttari Onsen Lake Inn Shintoku Hokkaido Dec-10 29 Tomura Climbing

School Lake Inn Hotel Tokachiya 32.6 1.12 No No

Kikuchi Kanko Hotel Kikuchi Kumamoto Dec-10 83 N/A Breeze Bay Hotel N/A N/A Yes Yes E・Hotel Higashi Shinjuku Shinjuku Tokyo Dec-10 255 N/A Westmont

Hospitality Group N/A N/A No No

Comfort Hotel Okayama Okayama Okayama Dec-10 208 N/A IPC Corporation 711 3.4 No No

Hotel Blue Kinosaki Toyooka Hyogo Dec-10 87 N/A Oedo Onsen Monogatari N/A N/A Yes No

Source : Jones Lang LaSalle Hotels


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We stress that forecasting is a problematical exercise which at best should be regarded as an indicative assessment of possibilities rather than absolute certainties. The process of making forward projections involves assumptions in respect of a considerable number of variables which are acutely sensitive to changing conditions, variations in any one of which may significantly affect the outcome and we draw your attention to this factor. Jones Lang LaSalle Hotels makes no representation, warranty, assurance or guarantee with respect to any material with which this report may be issued and this report should not be taken as an endorsement of or recommendation on any participation by any intending investor or any other party in any transaction whatsoever.

This report has been produced solely as a general guide and does not constitute advice. Users should not rely on this report and must make their own enquiries to verify and satisfy themselves of all aspects of information set out in the report. We have used and relied upon information from sources generally regarded as authoritative and reputable, but the information obtained from these sources may not have been independently verified by Jones Lang LaSalle Hotels.

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Market Insight Tokyo

May 2011

Hotel Intelligence Report • Market Insight Tokyo • April 2011 • 2

Limitation This report has been prepared based on the statistics prior to the recent 11 March 2011 earthquake and tsunami events in Japan and as such does not take into account the impact of these events. Contributors Yasokazu Terada Executive Vice President [email protected] Aki Nakata Research Assistant [email protected] Glossary ADR Average Daily Rate RevPAR Revenue Per Available Room Remarks “The total number of accommodation guests” sourced from Japan Tourism Agency does not include guests staying in hotel accommodation with less than ten employees. All statistics on 2010 sourced from Japan Tourism Agency and JNTO are provisional.


Market Overview As one of the key business centres and gateway cities in Asia, Tokyo enjoyed a recovery in tourism and accommodation demand in 2010. As a result of the increasing business activities and strong growth in most Asian economies, the capital’s hotel occupancy level showed a steady recovery throughout 2010.

Despite the occupancy recovery in 2010, the growth levels experienced in the Tokyo hotel market was insufficient to sustain a growth in ADR. This is mainly attributed to the strong appreciation of the Japanese Yen which had a net off effect on any potential rate growth. Most hotels in Tokyo adopted a pricing strategy to suppress their room rates in order to maintain a supportable occupancy level.

In terms of tourism infrastructure, the two international airports serving the Tokyo metropolitan region, Narita Airport and Haneda Airport, expanded their capacities in 2010. While Narita Airport expanded its capacity by approximately 10% in March 2010, Haneda Airport opened a new runway for international flights and increased its capacity by approximately 34% in October 2010. The Haneda Airport’s newly opened runway mainly serves for short-haul intra-regional flights which are expected to contribute a significant volume of passenger traffic.


Tourism / Accommodation Market Overview As the capital of Japan and a major financial centre in Asia, Tokyo attracts both domestic and international business visitors from all over the world. In addition, as one of the retail destinations in Asia, Tokyo also attracts many intra regional leisure visitors. The city offers visitors the experience of its rich historical and cultural heritage as well as the 21st century environment of a major metropolis in Asia. In line with the recovery in the macro economy in Japan and other Asian countries, Tokyo has also experienced a significant recovery of tourism and accommodation demand in 2010.

Overall Trends and Demand Drivers The total number of accommodation guests (domestic and international) in Tokyo, which decreased to 34.5 million in 2009, bounced back by 23.8% to 42.7 million in 2010. This increase was attributed to a recovery in business activities and stronger consumers’ sentiment in Japan as well as regional Asian countries.

By visitor profile, domestic accommodation guests accounted for approximately 79.4% of the total accommodation guests in 2010 while international visitors accounted for 20.6%. The Tokyo accommodation market is more reliant on international demand, as compared to other markets in Japan. The numbers of domestic and international accommodation guests increased by 20.3% and 38.2% respectively.

Total Number of Accommodation Guests in Tokyo (Million)

2007 2008 2009 2010

Domestic Guests 29.3 28.6 28.1 33.9

Growth - -2.4% -1.6% 20.3%

International Guests 7.9 7.3 6.4 8.8

Growth - -6.5% -13.2% 38.2%

Total 37.2 36.0 34.5 42.7

Growth - -3.3% -4.0% 23.6% Source: Japan Tourism Agency

. Figure 1: Total Number of Accommodation Guests in Tokyo

0

10

20

30

40

50

2007 2008 2009 2010

# of

Gue

sts

(Mill

ion)

Domestic Visitors International Visitors


Figure 2: Total Number of Accommodation Guests in Tokyo - By Quarterly

0

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8

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12


# of G

uests

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on)

2008 2009 2010


.


Figure 3: Total Number of Domestic Accommodation Guests in Tokyo -By Quarterly

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# of G

uests

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n)

2008 2009 2010


Figure 4: Total Number of International Accommodation Guests in Tokyo – By Quarterly

0.0

0.5

1.0

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2.0

2.5

3.0


# of G

uests

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2008 2009 2010


Among the international accommodation guests, China (13.8 % of the total international accommodation guests) was the leading geographical demand at Tokyo’s accommodation, followed by USA (13.6%) and South Korea (12.4%). Demand from all source markets increased in 2010 as compared to the previous year. Particularly, growth in demand from China (by 69.7%) and South Korea (by 62.0%) was notable.

Figure 5: International Accommodation Guests in Tokyo in 2010 - By Country of Residence

China, 13.8%

USA, 13.6%

South Korea, 12.4%

Taiwan, 8.1%

Hong Kong, 6.8%

Australia, 3.9%

Singapore, 3.4%

France, 3.2%

UK, 3.1%

Germany, 2.4%

Thailand, 2.4%

Canada, 1.7%

Russia, 1.2%

Malaysia, 1.1%

India, 0.7%

Others, 18.6%


.

Figure 6: Top 10 Source Markets in 2010 - By Country of Residence

0.0

0.5

1.0

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2.0

China USA SouthKorea

Taiwan Hong Kong Australia Singapore France UK Germany

# of

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illion)

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50.0%

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2009 2010 Growth(% ) Source: Japan Tourism Agency

.

By accommodation type, hotels accommodated 93.8% of the total accommodation guests. Among the various accommodation types, limited-service hotels accommodated 50.5% of the total accommodation guests, while full-service hotels accommodate 41.8% of them. Although the share of each accommodation type in 2010 was similar to the previous year, the absolute demand increased across all segments.


Total Number of Accommodation Guests in Tokyo - By Accommodation Type (Million)

2007 2008 Ratio 2009 Ratio 2010 Ratio

Limited-Service Hotel

- 18.1 50.4% 17.9 51.8% 21.5 50.5%

Full-Service Hotel

- 15.8 43.9% 14.9 43.1% 17.8 41.8%

Resort Hotel - 0.6 1.6% 0.5 1.6% 0.7 1.6%

Ryokan - 0.7 2.0% 0.5 1.5% 0.7 1.7%

Others - 0.8 2.1% 0.7 2.0% 1.9 4.5%

Total 37.2 36.0 100.0% 34.5 100.0% 42.7 100.0%

Growth -3.3% -4.0% 23.6%


. Figure 7: Total Number of Accommodation Guests in Tokyo - By Accommodation Type

0

5

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30

35

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45

2007 2008 2009 2010

# of

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Limited-Serv ice Hotel Full-Serv ice Hotel Resort Hotel Ryokan Others No Details


.


Hotel Market Overview The hotel room supply in Tokyo continuously increased in 2010. This increase has been most notable in the limited-service hotel sector rather than the full-service hotel sector. With the exception of some re-openings and re-developments, the Tokyo hotel market is not expected to have any new supply in the luxury and upscale segment until 2014.

Existing Supply According to statistics by Japan’s Ministry of Health, Labour and Welfare, the Tokyo Metropolitan area had 694 hotels with 95,756 rooms at the end of March 2010. This represents an increase of three properties or an increase of 1,987 rooms (2.1%) as compared to March 2009.

At the end of 2010, Tokyo had 12 luxury hotels with 2,881 rooms and 21 upscale hotels with 14,887 rooms. The increase in the luxury and upscale room supply in 2010 has been generated from the opening of The Capitol Hotel Tokyu in Oct 2010 on the site of the former Capitol Tokyu. The 251-room hotel offers a standard room size of 45 sqm, which is the largest amongst the domestic hotel brands in Tokyo.

Figure 8 : Number of Hotels and Ryokans Establishment in Tokyo(As at End of March)

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200

400

600

800

1,000

1,200

1,400

1,600

1,800

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

# of

Pro

pertie

# of Hotels # of Ryokans Source: Ministry of Health, Labour and Welfare

Figure 9 : Number of Hotels and Ryokans Room Supply in Tokyo (As at End of March)

-

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40,000

60,000

80,000

100,000

120,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

# of R

ooms

# of Hotel Rooms # of Ryokan Rooms


Future Supply Based on our research, we are aware of the following future supply to the Tokyo luxury and upscale hotel segment. In addition, there will also be the closure of an existing hotel.

• Palace Hotel, which closed down in 2009, will reopen with 290 rooms in 2012. The new hotel will be situated in a mixed-use development located in Otemachi (near JR Tokyo Station).

• Aman Tokyo, the first Aman property in Japan, is projected to

open in 2014. This projected hotel will also open in a mixed-use building Otemachi.

• Mori Building recently announced a new project of large-scale

mixed-use development, including a hotel, in Toranomon. While the project detail is not yet announced, a luxury or upscale hotel is likely to open in this development project. The completion of the development is scheduled in 2014.

• Grand Price Hotel Akasaka with 715 rooms closed in March

2011. A mixed-use building including a hotel will be developed on the site of this hotel, although the project detail is not yet announced.


Luxury/Upscale Hotel Market Based on STR Global data representative sample of 21 Tokyo luxury/upscale hotels with 8,486 rooms as at the end of February 2011, the following trends were noted:

• The average occupancy level showed a significant improvement in 2010. Increase in business activities and inbound traffic contributed to this improvement.

• In contrast, ADR declined slightly as a result of the hotels’ pricing strategy to maintain a supportable occupancy level.

• RevPAR recovered as compared to the previous year.

• In the first two months (January and February) of 2011, both occupancy level and ADR improved as compared to the same period of the previous year.

Figure 10 : Luxury/Upscale Hotel Performance In Tokyo

0

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2006 2007 2008 2009 2010 YTD Feb2010

YTD Feb2011

ADR/

RevP

AR (J

PY)

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90%

ADR (JPY) RevPAR (JPY) Occupancy (% )

Occu

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Source: STR Global Jones Lang LaSalle Hotels





Paris 40-42, rue La Boétie 75008 Paris France tel: +33 1 4055 1718 fax: +33 1 4055 1868 Perth Level 29, Central Park 152 - 158 St Georges Terrace Perth Western Australia 6000 tel: +61 8 9322 5111 fax: +61 8 9481 0107 Rome Via Bissolati 20 00187 Rome Italy tel: +39 06 4200 6710 fax: +39 06 4200 6720 São Paulo Rua Joaquim Floriano, 72 – cj. 97 04534-000 São Paulo, SP tel: +55 11 3043 6900 fax: +55 11 3043 6999 San Francisco One Front Street, Suite 300 San Francisco, CA 94111 United States tel: +1 415 395 4900 fax: +1 415 955 1150 Shanghai 25/F Tower 2 Plaza 66 1366 Nanjing Road (West), Jing An District Shanghai 200040 China (PRC) tel: +86 21 6393 3333 fax: +86 21 6288 2246 Singapore 9 Raffles Place, #38-01 Repulic Plaza Singapore 048619 tel: +65 6536 0606 fax: +65 6533 2107 Sydney Level 18, 400 George Street Sydney NSW 2000 Australia tel: +61 2 9220 8777 fax: +61 2 9220 8765 Tokyo 3rd Floor, Prudential Tower 2-13-10 Nagatacho, Chiyoda-ku Tokyo 100-0014 Japan tel: +81 3 5501 9240 fax: +81 3 5501 9211 Washington D.C. 1801 K Street NW , Suite 1000 Washington, DC 20006 United States tel: +1 202 719 5000 fax: +1 202 719 5001




Market Insight Osaka

May 2011

Hotel Intelligence Report • Market Insight Osaka • April 2011 • 2



Market SummaryDemand for accommodation in Osaka showed a steady recovery in 2010, as similar to the other markets in Japan. As the second largest commercial and international city in Japan, Osaka enjoyed an increase in accommodation demand alongside the recovery in the country’s macro economy. As a result, Osaka’s market occupancy level showed an improvement.

Despite the improvement of the occupancy level, ADR in 2010 remained at the level of 2009. As seen in the other hotel markets in Japan, many hotel operators appeared to adopt a conservative pricing strategy during the year in order to increase the occupancy level.

The above price competition was partially attributable to continuous new supply in the market. Notwithstanding the recent financial difficulty, several new hotel properties opened in 2010 in Osaka. In addition, more supply in hotel rooms are expected to enter the Osaka hotel market over the coming years.


Tourism / Accommodation Market Overview While Osaka is the second largest business centre in Japan, the city attracts a large number of leisure visitors with a wide choice of shopping, cultural and cuisine experiences. The city is also home to Universal Studios Japan (USJ) and close to popular tourist destinations such as Kyoto, Nara and Kobe.

Overall Trends and Demand Drivers In 2010, the total number of accommodation guests (international and domestic) in Osaka reached 20 million. The total number increased by 20% as compared to 2009.

By visitor profile, domestic accommodation guests accounted for an overwhelming 84.0% of the total visitors in 2010 while international accounted for 16.0%. Domestic and international accommodation guests increased by 22.6% and 59.6% respectively, as compared to the previous year. The number of the international accommodation guests in Osaka of 3.1 million was the second highest in Japan following Tokyo.

Total Number of Accommodation Guests in Osaka Prefecture (Million) 2007 2008 2009 2010

Domestic Guests 13.5 13.6 13.7 16.8 Growth - 1.0% 0.8% 22.6%

International Guests 2.5 2.6 2.0 3.1 Growth - 2.4% -23.3% 59.6%

Total 16.0 16.2 15.7 20.0 Growth - 1.2% -3.0% 27.2%


Figure 1: International/Domestic Accommodation Guest in Osaka Prefecture

0

5

10

15

20

25

2007 2008 2009 2010

# of

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sts(

Milli

on)



Figure 2 : Total Number of Accommodation Guests in Osaka Prefecture – By Quarterly

0

1

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3

4

5

6

Jan-Mar Apr-Jun Jul-Sep Oct-Dec# o

f Gue

sts(M

illion)

2008 2009 2010

Source: Japan Tourism Agency . Figure 3 : Total Number of Domestic Accommodation Guests in Osaka Prefecture – By Quarterly

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2008 2009 2010

Source: Japan Tourism Agency . Figure 4 : Total Number of International Accommodation Guests in Osaka Prefecture – By Quarterly

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2008 2009 2010



.

Among the international accommodation guests, four East Asian countries (South Korea, China, Taiwan and Hong Kong) ranked the top four international market sources and collectively accounted for two-third of the total international accommodation guests in Osaka.

Similar to many other cities in Japan, South Korea was the top inbound market to Osaka in 2010. Demand from South Korea, which dipped due to slowdown of the Korean economy and depreciation of Korean Won in 2009, significantly increased by 138.6% as compared to the previous year. Demand from China also significantly increased by 83.3%.

Figure 5: International Accommodation Guest in Osaka Prefecture in 2010 - By Country of Residence

South Korea, 23.3%

China, 23.0%

Taiwan, 10.7%

Hong Kong, 7.7%

USA, 6.4%

Thailand, 3.3%

Singapore, 2.2%

Australia, 2.0%

France, 1.4%

Germany, 1.4%

Malaysia, 1.3%

UK, 1.0%

Canada, 0.7%

India, 0.4%

Russia, 0.3%

Others, 12.9%


.

Figure 6: Top 10 Source Markets in 2010 - By Country of Residence

0.0

0.2

0.4

0.6

0.8

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SouthKorea

China Taiwan Hong Kong USA Thailand Singapore Australia France Others

# of G

uests

(Millio

n)

0%

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60%

80%

100%

120%

140%

160%

Grow

th (%

)

2009 2010 Growth(% ) Source: Japan Tourism Agency

.

By Accommodation type, hotels accounted for 93.5% of the total accommodation guests in 2010 while ryokans (Japanese inns) accounted for just a fraction of a percent of the total. Among the accommodation type, limited-service hotels, full service hotels and resort hotels absorbed 54.2%, 32.6% and 6.7% of the total accommodation guests respectively. In 2010, demand increased across all accommodation types.

Total Number of Accommodation Guests in Osaka Prefecture - By Accommodation Type (Million)


Limited-Service Hotel - 8.5 52.7% 8.3 52.8% 10.8 54.2% Full-Service Hotel - 6.2 38.3% 6.1 39.1% 6.5 32.6%

Resort Hotel - 0.9 5.4% 0.8 5.0% 1.3 6.7%

Ryokan - 0.3 1.6% 0.2 1.3% 0.4 1.9%

Others - 0.3 2.0% 0.3 1.8% 0.9 4.5%

Total 16.0 16.2 100.0% 15.7 100.0% 20.0 100.0%

Growth 1.2% -3.0% 27.2%

Source : Japan Tourism Agency

.

Figure 7 : Total Number of Accommodation Guests in Osaka Prefecture - By Accommodation Type

0

5

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15

20

25

2007 2008 2009 2010

# of

Gue

sts (M

illion

Limited-Service Hotel Full-Service Hotel Resort Hotel Ryokan Others No Details


.


Hotel Market Overview The hotel room supply in Osaka has shown a steady increase. In terms of the trading performce, the occupany level recovered in accordance with an increase in the room demend, however; the market ADR still remained at the level of 2009.

Existing Supply According to Japan’s Ministry of Health, Labour and Welfare, Osaka Prefecture had 357 hotels with 51,993 rooms at the end of March 2009. This represents an increase of six hotels (1.7%) and 851 rooms (1.7%) as compared with a previous year.

At the end of 2010, Osaka City had 13 luxury/upscale hotels with 6,067 rooms. Although there had been no new hotels in Osaka’s luxury/upscale hotel market since 1996, the following two properties newly entered the market in 2010:

• Harmonie Embrassee Osaka with 38 rooms opened in April 2010 in a mixed-use building located in Umeda, Osaka.

• St. Regis Hotel Osaka, the first St. Regis property in Japan, opened in Oct 2010 in a mixed-use building located in Honmachi, Osaka. St. Regis occupies this higher level of the building with a long-term lease contract. This new luxury hotel with 160 rooms forms the luxury hotel segment for Osaka, together with Ritz-Carlton Osaka, the leading hotel in the market.

Figure 8 : Number of Hotels and Ryokans Establishment in Osaka Prefecture (As at End of March)

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2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

# of

Pro

perti

es# of Hotels # of Ryokans


Figure 9 : Number of Hotels and Ryokans Room Supply in Osaka Prefecture (As at End of March)

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2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

# of

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ms

# of Hotel Rooms # of Ryokan Rooms



Future Supply There are no known additions to Osaka’s luxury/upscale hotel segment in 2011. On the other hand, the following hotel projects have been publicly announced in the coming years.

• A new InterContinental Hotel is scheduled to open in 2013 as a part of the redevelopment of Umeda North Yard, a former cargo train station to the north of JR Osaka Station. The new hotel will have approximately 200 guestrooms and 50 residential units used for a long-term stay. Project construction was launched in March 2010.

• Kintetsu Corporation has announced a plan to redevelop the Osaka-Abenobashi terminal station building into a high-rise complex for completion by 2014. An international standard hotel is planned for the upper floors. Project construction was launched in January 2010.

• Sun Capital Management has announced that it is exploring the development of a Paramount Pictures branded Resort with 5-star hotel on the site of the former Exspoland in Suita City, adjacent to Osaka City. No future details are available on this project.

• Keihan Electric Railway has announced a plan to re-develop their company-owned land in Nakanoshima. As part of the Nakanoshima project, an internationally branded luxury hotel is planned.

• Rihga Royal Hotel is reportedly considering the redevelopment of its existing building within the next 8-10 years.

Luxury/Upscale Hotel Market Based on STR Global data representative sample of 10 Osaka City luxury/upscale hotels with 4,987 rooms as at the end of February 2011, the following trends were noted:

• Occupancy levels improved as compared to 2009.

• On the other hand, ADR declined as a result of the hotels’ pricing strategy to increase the occupancy level.

• Consequently, RevPAR remained at the same level as 2009.

• In the first two months (January and February) of 2011, both occupancy level and ADR declined as compared to the same period of the previous year.

Figure 10: Luxury/Upscale Hotel Performance In Osaka City

0

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Market Insight Okinawa

May 2011

Hotel Intelligence Report • Market Insight Okinawa • April 2011 • 2



Market SummaryThe Okinawa tourism and accommodation market entered the recovery trend in 2010. In 2009, due to domestic consumers’ uncertainty and declining discretionary spending, the number of tourists to Okinawa decreased for the first time since 2001. However, in 2010, the number of tourists increased and consequently the market occupancy level also bounced back. Okinawa Prefecture’s strong commitment to promote the tourism industry is expected to enhance the visitation traffic to Okinawa.

In terms of room supply, several new hotels planned before the financial crisis opened in Okinawa in 2010. While more new hotels are also scheduled to open in 2011, the pace of a growth in room supply is expected to slow down in the next coming years due to difficulty in financing new development projects.


Tourism / Accommodation Market Overview Okinawa is one of the most popular southern resort destinations in Japan. Apart from its natural beauty and marine activities, the destination has a broad appeal through its unique culture, performing arts and historical heritage. Located only three hours by air from mainland Japan and in the same time zone, it shares a common language, food and tastes and offers familiarity to domestic travellers relative to other foreign resort destinations. As these advantages attract and appeal to many domestic tourists and in particular the family and senior travellers, the Okinawa tourism market has enjoyed continual growth. In 2009, with weakened consumers’ sentiment throughout Japan, the Okinawa market experienced a decline in tourism and accommodation demand. However, demand recovered significantly in 2010.

Overall Trends and Demand Drivers The total number of accommodation guests (international and domestic) in Okinawa Prefecture increased by 13.9% to 13.1 million in 2010. This increase is mainly attributable to a recovery in consumers’ confidence and discretionary spending.

By demand source, domestic accommodation guests accounted for approximately 96.2% of the accommodation guests in 2010 while international guests accounted for only 3.8%. Notwithstanding the proximity to several East Asian countries, Okinawa has remained primarily a domestic tourist destination. The number of domestic and international accommodation guests increased by 12.7% and 49.2% respectively.

Total Number of Accommodation Guests in Okinawa Prefecture (Million) 2007 2008 2009 2010

Domestic Visitors 11.7 11.9 11.2 12.6 Growth - 1.3% -5.4% 12.7%

International Guests 0.2 0.3 0.3 0.4 Growth - 31.2% -4.7% 49.2%

Total 11.9 12.2 11.5 13.1 Growth - 1.9% -5.4% 13.7%


Figure 1: Total Number of Accommodation Guests in Okinawa Prefecture

0.0

2.5

5.0

7.5

10.0

12.5

15.0

2007 2008 2009 2010#

of G

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Source: Japan Tourism Agency . Figure 2: Total Number of Accommodation Guests in Okinawa Prefecture -By Quarterly

0

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uests

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.

Among the international accommodation demand, Taiwan and Hong Kong were the two leading source markets in Okinawa in 2010. The traffic from the two markets was likely increase due to the convenient access to Okinawa. Accommodation demand increased from all source markets as compared to the previous year, underpinned by Okinawa prefecture’s promotional efforts.


Figure 3 : International Accommodation Guest in Okinawa Prefecture in 2010 - By Country of Residence

Taiwan, 27.6%

Hong Kong, 27.5%

USA, 14.7%

South Korea, 8.6%

Others, 6.2%

China, 7.9%

UK, 0.5%

France, 0.3%

Germany, 0.3%

Russia, 0.5%

Canada, 0.5%

Thailand, 0.3%Australia, 0.4%

Singapore, 0.4%Malaysia, 0.04%

India, 0.1%


Figure 4 : International Accommodation Guest in Okinawa Prefecture in 2010 – By Country of Residence

0

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Taiwan HongKong

USA SouthKorea

China UK Russia** Canada Singapore Others

# of G

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90%

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. **No comparable data of Russia for 2009.

By accommodation type, hotels accommodated 92.8% of the total accommodation guests. Among the various accommodation types, resort hotels, full-service hotels and limited-service hotels accommodated 54.8%, 20.4% and 17.6% of the total accommodation guests respectively. The high demand for resort hotels is a characteristic of the Okinawa accommodation market.

Total Number of Accommodation Guests in Okinawa Prefecture - By Accommodation Type (Million)


Resort Hotel - 7.5 62.1% 7.0 60.6% 7.2 54.8% Full-Service Hotel - 2.7 21.8% 2.6 22.3% 2.7 20.4% Limited-Service Hotel - 1.7 13.7% 1.8 15.9% 2.3 17.6%

Ryokan - 0.1 0.8% 0.02 0.2% 0.1 0.9%

Others - 0.2 1.6% 0.1 1.0% 0.8 6.3%

Total 11.9 12.2 100.0% 11.5 100.0% 13.1 100.0%

Growth 1.9% -5.4% 13.7%

Source : Japan Tourism Agency . Figure 5 : Total Number of Accommodation Guests in Okinawa Prefecture - By Accommodation Type

0

2

4

6

8

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14

2007 2008 2009 2010

# of

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sts(

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on)

Resort Hotel Full-Serv ice Hotel Limited-Serv ice Hotel Ryokan Others No Details


.


Tourists to Okinawa According to data from the Okinawa Prefecture, 5.86 million tourists visited Okinawa Prefecture in 2010. This represents a 3.6% increase from 5.65 million in the previous year.

The Okinawa prefectural government is committed to the promotion of tourism as a primary driver of economic growth as evidenced by the launch of the “Okinawa Sightseeing Promotion Master Plan” and “Visit Okinawa Plan.” Targeting 10 million tourists a year, the government has focused its marketing efforts to attract senior and international visitors and promote conventions and resort weddings.

Figure 6 : Tourist Arrivals in Okinawa Prefecture

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4

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6

7

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

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isitor

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-10%

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-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

Grow

th Ra

te (%

)

International Visitors Growth Rate(% ) Source: Okinawa Prefecture


Hotel Market Overview The Okinawa hotel market witnessed several new additions to the hotel supply in 2010. These additions are mostly planned before the financial crisis.

The hotel performance in Okinawa entered a recovery path in 2010, underpinned by the recovery in the consumers’ confidence and increase in discretionary spending.

Existing Supply According to Japan’s Ministry of Health, Labour and Welfare, Okinawa Prefecture had 347 hotels with 31,428 rooms at the end of March 2010. This represents an increase of twenty properties and 3,155 rooms (11.2%) as compared to March 2009. The new room supply in Okinawa Main Island in 2010 includes:

• Moon Ocean Ginowan Hotel & Residence with 177 rooms opened in April 2010. The developer of this hotel became insolvent after the financial crisis but the construction company took over this project and opened the property.

• Daiwa Roynet Okinawa Kencho-mae with 190 rooms opened in April 2010 in Naha-city.

Figure 7 : Number of Hotels and Ryokans Establishment in Okinawa Prefecture (As of End of March)

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100

200

300

400

500

600

700

800

900

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

# of

Pro

perti

es# of Hotels # of Ry okans


Figure 8 : Number of Hotels and Ryokans Room Supply in Okinawa Prefecture (As of End of March)

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30,000

35,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

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# of Hotel Rooms # of Ry okan Rooms Source: Ministry of Health, Labour and Welfare


Future Supply Based on our research, we are aware of the following supply to the Okinawa hotel market in 2011.

• The Terrace Club Wellness Resort at Busena with 68 rooms opened in April 2011. This luxury resort, targeting wealthy leisure demand, is developed on the site of the Busena Terrace, the leading resort hotel in Okinawa.

• Nishitetsu Resort Inn Naha with 252 rooms will open in June 2011 in Naha-city.

• Daiwa Roynet Hotel Naha Kokusai Dori will open in the summer of 2011 in Naha-city.

In addition, the following new hotel development projects in Okinawa have been publicly announced; however, not all projects are likely to be materialised due to financial problems.

• CSK group developed a limited-service hotel with 268 in Naha-city. Although the construction was completed, the hotel’s opening schedule has not been announced.

• Orion Beer plans to develop and open a resort hotel in Motobu-cho in the fall of 2013.

• Orix Real Estate announced to develop Prince Hotel with 400 rooms in Chatan-cho, although this project seems to be suspended.

• A luxury resort hotel with approximately 360 rooms was planned to open in Sesoko Beach. As a result of the bankruptcy of the original developer, the hotel construction has been suspended.

Additionally, prior to the financial crisis, there was also were media announcements on several luxury hotel brands, such as Sheraton (Ginowan-city), Westin (Onna-son), Four Seasons (Onna-son) and Banyan Tree (Uruma-city) entering the Okinawa market; however, these projectes appear to have stalled.

Luxury Resort Hotel Market Based on STR Global data representative sample of five Okinawa hotels with 1,732 rooms as at the end of 2010, the following trends were noted:

• In 2010, the occupancy level in the luxury resort market showed an improvement to the same level of 2008.

• On the other hand, ADR continuously declined.

• Consequently, RevPAR resulted in a slight decline as comapred to the previous year.

Figure 10: Luxury Resort Hotel Performance in Okinawa Prefecture

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Source: STR Global/Jones Lang LaSalle Hotels

report headline without drive box goes here · significantly after q2 2010. overall sentiment for...

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