GLOBAL REPORT—With the Tokyo Summer Olympics seven years away, hotel industry analysts already have awarded the city a gold medal for room availability during the games, although the International Olympic Committee has voiced concerns about possible high rates for the event.
“In our experience, the hotel market improved dramatically in Olympic venue cities such as London, Beijing and Sydney, and Tokyo will follow these positive examples,” said Koji Takabayashi, managing director of Horwath HTL Japan.
Last week, the IOC awarded the 2020 games to the Japanese capital, which beat out fellow contenders Madrid and Istanbul.
“The committee’s decision will spur real estate developers to implement their plans to open new hotels in advance of the games,” Takabayashi said.
“However, my concern is that increasing labor, material and equipment costs—which will boost total project costs—may hinder some projects to move smoothly forward,” he added.
Horwath HTL Japan has confirmed a number of planned hotels for the city’s central business district, including the 84-room Aman Tokyo (to be opened in 2014), the 164-room Hyatt Andaz Tokyo (summer 2014) and the 84-room Hoshinoya Tokyo (2016).
Yoko Nakamatsu, corporate communications manager for Hyatt Japan, said it was still too early to comment on any additional projects in Tokyo ahead of the games. “It will take more time for us to develop and finalize our plans toward the 2020 Olympics,” she said.
A spokesperson for Aman declined to comment on that group’s plans in Japan.
Horwath’s Takabayashi said Apa Hotels Company, a major Japanese budget hotel chain, plans to open approximately 20 more hotels in Tokyo’s central business district, each averaging approximately 200 rooms.
“And I have confirmed a few more full-service projects planned in Tokyo until 2020,” Takabayashi said, reflecting data from hotel industry researcher STR Global, sister company of Hotel News Now, which shows 28 new hotels totaling 7,172 rooms in the total active pipeline as of August.
The Olympic effect
Naureen Ahmed, the London-based manager for marketing and analysis at STR Global, said she would be surprised if any hotels were built specifically for the Olympics.
“You won’t see anyone building a hotel just for the two weeks of the Olympics. In London we saw slight growth, but then London is always in demand for visitors and it is a world financial center which generates guest flow.
“Tokyo and London do have similar characteristics as a destination, but perhaps Tokyo is less accessible than London for international visitors. Also, London is a major tourist destination in its own right. When you go to Europe for the first time, you visit at least two cities: London and Paris,” she said.
Ahmed doesn’t think Tokyo will see a dramatic change in the number of visitors in 2020.
“We’ll only see it shortly before the games, during the event itself and then afterward,” she said. “What we’ve seen in previous games is a drop in visitor numbers just before and just after.”
According to a host city evaluation report by the IOC, there are approximately 140,000 existing international-style hotel rooms within a 30-mile radius of Tokyo, along with 9,500 rooms in traditional Japanese inns.
“Tokyo’s accommodation plan offers a total guaranteed room inventory of over 46,000 rooms in 363 hotels (2- to 5-star) which meets IOC requirements. Approximately 37,000 of these are within a 10-kilometer (six-mile) radius of the games center, reflecting a very compact accommodation concept,” the report said.
Keeping rates in check
The IOC said it was worried about high hotel room rates in Tokyo, which varied from a maximum of $1,634 (including breakfast and taxes) per night for a double room at a 5-star property, to $337 for a double in a 2-star hotel.
Year-to-date July, average daily rate for Tokyo hotels was $157, according to data compiled by STR Global.
Following the IOC’s expression of concern, the organizers of the Tokyo games said they would cooperate with local hotels to ensure an adequate supply of rooms at rates for all budgets.
“Actually, room rates for Tokyo are not that high compared to those of major international cities such as London, Paris, New York City, Singapore and Hong Kong,” Horwath’s Takabayashi said.
And, he added, the IOC might not have taken into account the recent depreciation of the yen against the U.S. dollar and the euro.
Hotel capacity in Tokyo could expand if international casino operators go ahead with initial plans to open gambling resorts following their expected legalization later this year.
“Potential legalization of casino gaming in Japan has been discussed for many years, but the last time it came close to occurring the earthquake-tsunami derailed what was expected to be a six-month process,” Takabayashi said.
“The decision by the Olympic Committee will spur the casino gambling approval and development of integrated resorts like those in Singapore or Macau and would add hotel capacity and entertainment venues to be used during the games,” he added.
According to news reports, U.S. gaming groups Las Vegas Sands Corporation, MGM Resorts International and Caesars Entertainment are weighing moves into Japan, as are several Asian companies.