Tokyo hotel vacancies down to 19.3% in Q1

It was a moderate improvement from the 40% vacancy rate the previous quarter.

According to JLL, the ‘Go To Travel Campaign’, which boosted the recovery of accommodation demand in 4Q20 was suspended in December 2020 due to the third wave of COVID-19. As a result, the number of visitor nights by domestic guests in Tokyo, which was gradually recovering and marked -14.2% y-o-y in November 2020, dropped by -53.4% y-o-y as at February 2021.

The total number of international visitor arrivals has decreased by 98.3% y-o-y as at YTD March 2021, whilst the borders still remain closed to international tourists, and have done so since April 2020.

Here’s more from JLL:

No supply of four- or five-star hotels added in 1Q21

There were no new openings of luxury hotels in 1Q21. The opening of ‘Edition Hotel Ginza’ scheduled for the spring of 2021 was postponed to the second half of 2021.

Although accommodation demand is currently sluggish due to the continuing outbreak of COVID-19, international luxury hotel operators take a long-term perspective in Tokyo, and several luxury hotels are scheduled to open in Tokyo over the next few years.

Sluggish market performance continues for Tokyo Luxury hotels

According to STR, revenue per available room (RevPAR) of Tokyo luxury hotels decreased by 62.2% y-o-y in 1Q21. The y-o-y decline widened from the previous quarter of -59.7%.

Under the second state of emergency, the occupancy of Tokyo luxury hotels has declined to 19.3% in 1Q21 from nearly 40% in 4Q20. Average daily rate (ADR) has been decreasing for 13 consecutive months, though the rate of decline in 1Q21 was less severe than the previous quarter, when the impact of the demand drop following the 2019 Rugby World Cup was observed.

Outlook: Trading performance remains uncertain

A third state of emergency was declared on 25 April, and the hotel market remains challenged. It is expected that trading performance in Tokyo will improve gradually when demand for domestic travel starts to resume along with the COVID-19 vaccinations rollout.

With regards to the hotel investment market, while investor’s appetite for bargain-assets are strong, hotel asset prices has not been heavily discounted in the current market. Therefore, it is expected the hotel transaction will likely remain suppressed.

Note: Tokyo Hotels refers to Tokyo's luxury hotel market.