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Tragic start to 2024 fails to dampen Japan hotels’ allure for investors

Name: American tourists flock to Japan to take advantage of weak yen, strong US dollar
Uploaded: 2024-01-15T09:30:16.000Z
Duration: 1 min 58 s
Description: American tourists flock to Japan to take advantage of weak yen, strong US dollar

The earthquake and plane collision earlier this month are unlikely to deter travellers as Japan continues to welcome record levels of tourists

The rebound has aided the investment appeal of Japanese hotels, but so have loose monetary policy and a large domestic tourism market

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A couple walk over a bridge in Hakone, Japan. Hotels in the hot spring resort and elsewhere around the country are dealing with a surge in visitors. Photo: Getty Images

Nicholas Spiro

Nicholas Spiro is a partner at Lauressa Advisory, a specialist London-based real estate and macroeconomic advisory firm.

Published: 5:30pm, 15 Jan 2024Updated: 8:49pm, 15 Jan 2024

The first days of 2024 were not kind to Japan’s tourism industry. On New Year’s Day, a powerful earthquake struck the Noto Peninsula on the country’s northwest coast, killing more than 200 people. On January 2, five people died when a passenger aircraft collided with a coastguard plane at Tokyo’s Haneda Airport, the world’s third-busiest last year.

While these events are tragic, they are unlikely to deter tourists and business travellers. Since Japan reopened its international borders in October 2022, putting an end to nearly three years of pandemic-induced isolation, foreign visitors have returned in droves.

Tokyo has led the recovery in international travel among Asia’s leading cities, with foreign visitor arrivals in the first half of last year reaching 118 per cent of their levels in the corresponding period in 2019, according to data from Savills. Last November, 2.4 million overseas travellers visited Japan, just shy of November 2019 levels and the sixth straight month when foreign arrivals exceeded 2 million.

The brisk recovery has been a boon to Japan’s hotel investment market. Although hotels only account for 6 per cent of Asia’s commercial property transaction volumes, they comprised 15 per cent of investment activity in Japan in the first three-quarters of last year, according to JLL.

Yet, while the sharp rebound in inbound tourism has been a key factor contributing to the investment appeal of Japan’s hotel market, there are more important sources of resilience.

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American tourists flock to Japan to take advantage of weak yen, strong US dollar

In an unpredictable global economy facing acute geopolitical and financial threats, Japan is as close as it gets to a safe haven. The country boasts political stability and world-renowned infrastructure. Moreover, its obsession with hygiene and cleanliness has taken on added significance in the post-pandemic world.