December 12, 2019
With its cool modernist interiors and views of Tokyo's Imperial Palace, Hotel Okura has been the choice of the wealthiest since its golden lobby opened in 1962 as a symbol of Japan's emergence of postwar austerity. Taro Aso, Deputy Prime Minister, enjoys alcohol at the bar. Yoko Ono makes a suite on her trips to the city. Every American president, Gerald Ford, has adorned his rooms. Donald Trump could have done it too, had Okura not been closed for renovation when he visited Japan in May.
One reason for Okura's popularity is the lack of alternatives. Japan has about the same number of five star hotels as Vietnam and fewer than London or Paris. Okura stopped accepting reservations for next summer's Olympics for lack of rooms, many of which were intended for organizers. The scarcity of sophisticated accommodations makes the government consider tax-free loans and cheap loans to help build 50 "world class" hotels – though not in time for the Tokyo games.
Japan is late to mass tourism, says Koki Hara, a real estate lawyer. For decades, the government has spurred industrial growth, so that the country's cities have been filled with monotonous business hotels that serve wage armies. Real estate developers dominated the real estate market and clung to most of downtown's main spots. High inheritance taxes mean that Japan has fewer tycoons than other rich places, so fewer people want to build and run elegant hotels.
A jump in the number of tourists exposed the problem. Attracted by the cheaper yen, 31 million people visited Japan last year, a five-fold increase since 2011. Next year, 40 million foreign visitors are expected, including 10 million for the Olympics alone. By 2030, demand for foreign accommodation will double, estimates the consulting firm CBRE. Many of them will be rich.
Hotels used to be a bad deal, but no more, says Yutaka Kawamura of Mitsui Fudosan, Japan's largest developer. Hotels in central Tokyo are performing well in the real estate market, with annual revenues of about 3%, according to the CBRE. Prices at fancy hotels have gone up. Some have unimaginably lush margins, says Sam Sakamura, vice president of Hyatt Hotels in Japan.
This attracted more developers. Real estate companies are building hotels in former office buildings, of which less will be needed as Japan's workforce ages and shrinks. Franchise agreements with foreign brands, once rare, are becoming commonplace. Mitsui Fudosan is expanding its portfolio in collaborations with Four Seasons, Bulgari and Mandarin Oriental. Hyatt will open four luxury hotels by next year. And in September, Okura completed its $ 1 billion renovation, including an elegant 41-story building overlooking distant Mt. Fuji. ■
This article appeared in the Business section of the print edition, titled "Chic Hotels are Scarce in Japan – and Increasingly Profitable"
Reuse this contentThe Trust Project