Weak Yen boosts Japan’s hotel market

Minato-ku, Tokyo, Japan

The weak Japanese Yen has boosted the country’s hotel market this year.

According to global hotel consultant STR, the market has seen gross operating profit per available room (GOPPAR) rise by double-digit percentages for four years in a row, something that is attributed directly to the devaluation of the Japanese Yen.

Indeed, the weaker currency has made visiting Japan more affordable for holidaymakers from overseas, with Japan welcoming almost 20 million overnight tourists in 2015, up 47 per cent year-on-year. The biggest groups of nationalities visiting were China, South Korea, Taiwan and the USA, who all saw their currencies rise against the Yen in 2015.

According to STR, Japans GOPPAR hit JPY12,512.18 in 2015, its highest figure since 2008.

“Interest in the Japan hospitality sector among domestic and international investors has increased in recent years, with hotel property transactions surging by 3.2x to JPY 325 billion between 2012 and 2015,” reads a CBRE report from earlier this year. “At the same time, transaction yields have fallen sharply, as the sector has become mainstream among institutional investors.”

New hotel development is accelerating against the backdrop of the growing number of inbound tourists and brisk sales, according to CBRE. With the government targeting 40 million inbound tourists in Japan by 2020, the supply-demand balance in central Tokyo and Osaka is expected to remain tight.

While occupancy has dipped, notes the World Property Journal, 2015 saw Japan reach a record high level of full-year occupancy. Looking forward, there are no=w 61 hotel projects and 16,426 rooms in the construction pipeline, with most of that located in Tokyo, as the city prepares to host the 2020 Olympics.

The only question mark now is the Yen’s reaction to the US election. With Donald Trump voted to be President Elect of the United States, the Yen initially saw a rise against the dollar, fuelled by investors racing to invest in a safe haven. However, since then, Trump’s calmer, reconciliatory tone in his speeches have steadied the dollar and seen the US currency climb back against the yen. With Trump not set to take office until the start of 2017, investors in Japan’s hotel market will be watching the currency markets, as well as the tourism figures, in the months to come.