Japan's hotels need 2 years to rebound

PUBLISHED : Wednesday, 18 May, 2011, 12:00am
UPDATED : Wednesday, 18 May, 2011, 12:00am


Japan's hotels are not expected to fully recover from the collapse in revenues that followed the March earthquake and tsunami until the first quarter of 2013, according to a report by agency Jones Lang LaSalle Hotels.

The agency says the revenue per available room (revPAR) of Tokyo's full-service hotels were down 38 per cent in March compared with the same month last year.

The Japan National Tourism Organisation announced that in March the number of inbound visitors to Japan dropped 50.3 per cent compared with the same month a year ago, to 352,800. Before the March 11 earthquake numbers were up 4 per cent, but plunged by 73 per cent after the twin disasters.

Tomohiko Sawayanagi, managing director at Jones Lang LaSalle Hotels, said most bookings by inbound guests were cancelled in the first 30 days after March 11, hitting international luxury hotels in Tokyo hard. Full-service hotels reported occupancy rates of between 10 per cent and 40 per cent as of April 15.

Many domestic business trips were also cancelled because transport systems were not functioning properly. People also cancelled leisure trips. However, the situation had improved in eastern Japan since April 25, the report noted, since most countries had lifted their travel warnings, public transport was back in operation and sentiment in Japan showed signs of improving.

The firm interviewed several hoteliers in April and found that the domestic business volume, both in the leisure and corporate sectors, had begun to recover.

The domestic corporate business segment was likely to be the first to recover in full, possibly as soon as the second half of this year, though a recovery in inbound leisure visitors could take until next year.

Sawayanagi said the meetings, incentive, convention, and exhibition business and corporate banquet business would face challenges for some time as many Japanese corporations suffered extraordinary losses due to the earthquake. Because of this, he does not expect revPAR for the industry to return to the 2010 level until the first half of 2013.

The Tokyo limited-service hotel market is expected to be the first sector to recover, as these hotels are focused on domestic corporate demand. Even so, in the coming year revPAR would languish at 10 to 15 per cent below that of the previous year, he said. Tokyo's full-service hotel market will experience a 20 to 30 per cent drop in revPAR in the coming year because of the delayed recovery in inbound leisure and meeting and convention bookings.

Sawayanagi said there was a chance of a quick recovery of inbound volume in the short term if Japan could address concerns about radiation leaking from the crippled Fukushima nuclear power station northeast of Tokyo. He noted that the revPAR of New York hotels took three years to recover from the September 11 attacks.