Strategic domestic investors acquire hotels in Japan amidst pandemic woes 

Samty and Hoshino Resort are two strategic investors who recently clinched hotel properties in the country. 

Despite the expected long recovery process and the remaining uncertainties, Savills says some investors continue to buy hotel properties in Japan, although transaction volumes have declined by 52% in 1H/2021 compared to the same period last year (Graph 9). 

In contrast to the pre-pandemic periods when overseas investors flocked to this sector, recently active players have been strategic domestic investors. 

“As an example, Samty acquired Aloft Osaka Dojima, which was originally owned by Goldman Sachs, from Mitsubishi UFJ Lease & Finance in April 2021. This acquisition is in the context of Samty’s plan to launch a hotel REIT, which was positioned as one of its post-pandemic strategic pillars in its renewed mid-term management plan. The company also acquired 32% of Wealth Management, which has a strong focus on the development and management of high-end hotels, for JPY3.9 billion. Similar to Samty, strategic investors such as Hoshino Resort with a long commitment horizon should be able to seize acquisition opportunities.”

Here’s more from Savills:

Going forward, however, opportunistic overseas investors, such as Blackstone, could return once the market starts showing more signs of recovery and the availability of loans improves. Considering the nature of this downturn, the recovery could progress rapidly once the economy starts moving towards normalcy, which presents excellent opportunities for investors who seek large returns. 

To further help acquisitions going forward, lending opportunities appear available for those with proven track records or sound financial standing. Lenders appear willing to lend based on operator credit. Although prices are still elevated as many hoteliers are holding up by borrowing short term, the prolonged pandemic will likely force some to exit, which may lead to more acquisition opportunities. 

For instance, Seibu Holdings is planning to sell some of its hotel and leisure facilities portfolio for around JPY100 billion. In terms of development opportunities going forward, many are likely to be upscale hotels over four stars which can take advantage of the potential growth of wealthy tourists. Challenges include the fact that this segment has a higher entry barrier while the potential labour shortage may also limit rapid increases in supply in the upscale segment.

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