• International tourist arrivals to Japan increased from 6 million in 2010 to 19 million in 2015 and 31 million in 2019. However, due to COVID-19, arrivals decreased to 4.1 million in 2020.In 2023, Japan saw 25 million international tourists, a significant increase from the 3.8 million in 2022.
• Tourists spent a total of $35.9 billion in 2023, marking a 10% increase from 2019, with per-person spending increasing by almost 34%.
• The highest number of guests staying at accommodations is in the Kanto, Kinki, and Kyushu regions.
• In a May 2024 report by Nikkei Asia, it was reported that international visitors are flocking back to Japan, reaching a record high of more than 33 million in March.

International Visitor Arrivals to Japan:
2018 - 2023 (Mn)

• In recent years, the top countries visiting Japan have been South Korea, China, Taiwan, Hong Kong, Thailand and Singapore.

• Japan's hospitality industry is valued at USD 24.79 billion in 2024, projected to reach USD 26.29 billion by 2029, with a CAGR of 1.18%.
• Domestic hotel brands hold a dominant 90% market share, with Toyoko Inn Co. as the largest chain, offering over 250 properties and 50,000 rooms.
• The country's hotel and ryokan supply has grown at a CAGR of 1.0%, exceeding 1.7 million rooms by 2021, fueled by rising demand from overseas tourists and domestic travelers.
• Japan's hotel supply pipeline over the past five years will take time to be absorbed, but it is relatively low compared to other major destinations in the Asia Pacific region. Increasing construction costs across Japan and the growth of the multifamily residential asset class are expected to restrict hotel supply in the medium term.

Total supply (Hotel and Ryokan)

Key Players

-   Tokyo Inn Co Ltd

-   Route Inn Hotels

-   APA Hotels & Resorts

-   Prince Hotels & Resorts

• In 2023, Japan's hotel investment volume exceeded JPY 500 billion, driven by favorable factors like low debt costs and a strong operating environment.
• Cross-border investment accounted for 46% of the total, reaching JPY 240 billion, the highest proportion since 2007.
• Investors favored the luxury and upscale segments in 2023, which are expected to continue gaining traction due to their limited scale and Japan's affordability compared to other regional markets, aligning with tourist preferences.
• Hotel supply growth is projected to be at its lowest since 2015, leading to increased investment in existing properties.

Volume of Hotels Transactions (JPY in billions)

Notable Hotel Transactions (2023)

• Portfolio Transactions

  Portfolio transactions, a significant driver of foreign investment in Japan, allow investors to acquire multiple assets in a single deal, providing efficiency, cost-effectiveness, instant diversification, and operational efficiency, often involving management agreements with existing operators to reduce operational risk.

• Appeal of Yield Spread

  Japan's hotel sector is a prime target for offshore investors due to its attractive yield spread over borrowing costs, notably in Tokyo and Osaka, where spreads reach 2.5% to 3%, offering the potential for significantly higher returns compared to the cost of borrowing.

• Positive Outlook and International Investments

  Japan's hospitality sector is attracting increased international investments due to a positive economic outlook. Mapletree Investments closed the Mapletree Japan Investment Country Private Trust (MAJIC) in May 2024, managing over JPY 110 billion ($1.0 billion).

Notable Portfolio Transactions in 2022

Hotel yield spread over borrowing cost