A New Japan

Tough Times for Tokyo Hotels

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A New Japan

Tough Times for Tokyo Hotels

The earthquake and ongoing nuclear scare have created a dire situation for Japan’s hospitality sector.

I mentioned last week that the Prince Hotels group had opened rooms at its Grand Prince Hotel Akasaka to refugees from the tsunami. That got me thinking about the impact that the ongoing crisis and travel advisories is having on the hospitality sector.

The news isn’t good. Start with the Prince Hotels group, which even before the crisis was suffering from overcapacity, a legacy of bubble-era expansion. According to the Nikkei newspaper, the group is now reporting that 90 percent of reservations made by foreign visitors at its 44 hotels have been cancelled.

It’s perhaps cold comfort for Prince Hotels that it’s not alone: virtually the entire Tokyo hospitality sector has taken a severe hit, with no letup in sight. Even the Imperial Hotel, probably the most famous hotel in Japan, has revealed that occupancy is half the usual levels for this time of year. The Mainichi meanwhile is reporting that foreign arrivals at Narita in the 3 weeks following the March 11 earthquake were down 73 percent compared to the same time period last year—to just 3,390 people a day.

Discount hotels are also suffering. The Mainichi talks with the owner of the New Koyo Hotel, who says that occupancy has fallen to zero on some recent days. The hotel’s website is currently offering rooms for as little as 2,300 yen a night— extraordinarily cheap by Tokyo standards—exclaiming ‘TOKYO IS SAFE!!!’ on its top page. This statement is most likely correct. Radiation levels in Tokyo have never approached harmful levels and the aftershocks have rattled nerves but caused little or no actual damage. Still, the perception of risk is unlikely to change for some months—which is apparently how long it’ll take to bring the situation at the Fukushima Daiichi (No.1) nuclear plant under control.

Japan’s always been something of an underperformer when it comes to inbound tourism. High prices and a strong yen haven’t helped, and neither has the decision made a few years ago to fingerprint all foreign arrivals. The government has been making a major effort to attract overseas tourists in recent years, under its Visit Japan Campaign, which has had some success, particularly with visitors from China. The success is important for many hospitality and retail operators, as it offsets dwindling local demand. But China has had some of the most hyperbolic reporting on the nuclear scare, and the effect on visitor numbers from the country is likely to be profound.

Hotel and other tourist operators can take some heart from the decision by the British Foreign Office to lift its advisory against non-essential travel to Tokyo late last week, with signs that other countries may soon follow. But more than anything they’ll be looking for an end to the nuclear crisis. Unfortunately, that doesn’t look likely to happen any time soon.


James Pach is the publisher of The Diplomat and the founder of Trans-Asia Inc., a Tokyo-based translation and investor relations company.

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