Superior Stays

With increasing numbers of overseas visitors arriving in Japan each month, is Tokyo’s luxury hotel market ready to welcome guests?

Descending the grand spiral staircase at The Peninsula Tokyo, guests are drawn to the main lobby by the dulcet sounds of a pianist and flautist. There, Keisen Hama’s incandescent bamboo dragon sculpture serves as the space’s centerpiece.

A few floors above the hotel’s reception is the office of Sonja Vodusek, the Peninsula’s general manager. Bay windows overlook the Imperial Palace and Hibiya Park.

Despite domestic luxury hotels Hoshinoya Tokyo and Prince Gallery Tokyo Kioicho opening this summer, Vodusek, 49, says Tokyo still lacks accommodations to cater to the growing international luxury travel market.

“Tokyo has seen much growth in the international luxury hotel market over the past 13 years, but with Tokyo being the capital of the world’s third-largest economy, we should have seen much more,” says Club Member Vodusek, who started her hotel career in Tokyo in 1992 as a room attendant. “It leaves Tokyo in a predicament with not enough rooms for such events as the 2019 Rugby World Cup and 2020 Summer Olympics.”

According to Five Star Alliance, a luxury hotel portal, Tokyo has 26 five-star hotels, far fewer than other major cities like New York (114), London (112), Paris (81) and Dubai (70).

The 30-year-old Hilton Tokyo in Shinjuku is the Japanese capital’s most enduring international hotel. Mike Williamson, the hotel’s general manager, says Hilton has four hotels in Tokyo (including Tokyo Bay), compared with 30 in London.
“There is still an awful lot of opportunity for openings of good hotels here of an international nature. There appears to be a shortage,” says the Club Member, in between sips of his cappuccino in the hotel’s executive lounge. “The number is obviously a focus of the Japanese government, as is the [number of] increasing inbound tourists. …With that there is going to be a need for a greater supply of bedrooms at all levels in Tokyo.”

The Japan National Tourist Organization’s (JNTO) one-time goal was 20 million foreign tourists a year by 2020. After more than 2 million visitors arrived in Japan in April, officials expect a total of 25 million by year’s end. The new prognostication for 2020 is 40 million foreign tourists, with a target of 60 million by 2030.

“It’s been a good time over the last two or three years,” says Williamson, 54. “That is because of a mix of various economic factors, but also…there seems to be a greater awareness of Tokyo as far as a destination. It’s almost a reawakening.”

According to research, the occupancy rate for Tokyo’s luxury hotel market bypassed 90 percent in 2014, the highest in the world. Low room rates, one of the reasons Tokyo hasn’t been attractive to international hotel chains, are also on the rise. The average room rate for the Palace Hotel Tokyo has doubled to ¥50,000 since it opened four years ago.

High construction costs and land constraints have historically discouraged developers from building new hotels in Tokyo. Most newcomers to the market favor mixed-use developments, where they share a building with office or retail spaces.

Of the most recent luxury hotels to open in Tokyo, the Andaz Hotel occupies the uppermost floors of the Toranomon Hills high-rise complex, Aman Tokyo resides at the top of Otemachi Tower, while the new Prince Gallery Tokyo Kioicho is on six floors of a commercial building near the Imperial Palace.

The first Langham-branded hotel is set to open in Roppongi as a standalone in 2019, and the Four Seasons, now under construction, will welcome guests to the upper floors of a commercial building in Otemachi in 2020.

Meanwhile, the much-loved Okura Hotel will reopen in 2019 after a ¥100 billion renovation. Betty Ozaki, Japan director of Leading Hotels of the World, a consortium of independent hotels, says the Imperial Hotel also plans to renovate within the next three years.

“Going forward the next two to three years, [the luxury hotel] segment is going to be competitive,” says Member Ozaki, 63. “[The Okura] felt with these international luxury hotels coming into the marketplace, and in order to keep their status as a Japanese-owned and -managed luxury hotel, it was time to close, tear down and rebuild. …The other hotels, such as the New Otani and even the Imperial, will need to adjust in order to compete with this new business.”

Williamson says Hilton Tokyo recently completed a $40 million renovation, which saw all 800 rooms and its restaurants refurbished.

“I think you will see more conversions as opposed to openings, purely because of the fact that there aren’t many empty sites here for building new hotels,” he says. “I think the emphasis will be on the refurbishment of existing products. There will possibly be an increase in the number of brands coming into the market. That was certainly the case [before the London Olympics].”

Ozaki says she was surprised to see the Asian beach resort group Aman, whose rooms are typically up to ¥100,000 a night, open in the capital. She says it’s a sign of demand.

“The corporate business market has grown significantly,” she says. “There are many executive board meetings and conventions taking place, and there is an increase of cruise ships arriving this year. They have doubled, tripled. These cruise ships are bringing new visitors who are traditionally high-end, wealthy people who stay in luxury hotels.”

Steve Dewire, general manager of Grand Hyatt Tokyo, says the Roppongi hotel is in the midst of two phases of renovations to its event venues. With the city gearing up for the 2020 Olympics, the Club Member says he knows that Tokyo will make the most of its moment in the world spotlight.

“The industry is showing that luxury travel is very much desired and doing well. I think the number of hotels that have been coming the last few years indicates that major chains have a significant interest internationally in being in Tokyo,” says Dewire, 61, sitting in one of his hotel’s deluxe suites. “Each hotel has worked very well to create their identity and their sense of service, their connection, and that benefits the entire industry here and speaks well to Tokyo.”

While the JNTO works to attract high-end travelers, multinational hoteliers face a number of challenges in Tokyo.

Vodusek points out that Tokyo’s room rates are still well below those of New York, Paris and London. Other concerns include the lack of airport transfer options and VIP services and the shortage of international skilled personnel.

“The world—now more than ever—is focusing its attention on Tokyo,” she says. “What better time to showcase all that Japan has to offer, from its hospitality to its cuisine and technology? It is simply an exciting time to be in Japan.”

Words: Nick Narigon