Japanese Hotel Investment Market Gets Hot

With the revival of the international tourism one of the latest trends on the Japanese real estate market is an increasing foreign investor share of hotel investments. The numbers reached the highest record in almost a decade with the further growth expected!

According to many polls, people from all over the world name Japan among the countries they want to visit the most. As a result, Japanese popular tourist areas became a target for wealthy investors from abroad. According to the MSCI Real Assets data, as for March 2023 the 47% of the closed hotel investment deals were to do with the foreign shareholders.

While Japanese yen remains weak against the dollar, investors can enjoy the benefits of the currency rate to strengthen their positions. Among the major deals to depict the current market situation is the Hyatt Regency Tokyo purchase by KKR & Co. (an international investment company based in New York) along with Gaw Capital Partners (a real estate company from Hong Kong) and Rihga Royal Hotel Osaka purchase by BentallGreenOak (a real estate investment company with headquarters based in Canada and the USA). Another prominent country on the Japanese hotel investment is Singapore with GIC wealth fund acquiring a share of 150 billion yen (around 1 billion USD) from Seibu Holdings.

With the strong demand from both inbound and outbound tourists and a lack of supply with a considerate shortage of hotel rooms, especially when local public holidays overlap with overseas holiday seasons, we may expect even more foreign investors joining this market field.

Of course, there are investment opportunities of a smaller scale available to any individual. How would you do that? There are some patterns that would make you run a hotel business but a common point is that you have to purchase a suitable property. No matter if you acquired a newly built or a pre-owned one, next step is deciding if you run the hotel by yourself or lease the property. Some major business hotel chains may consider renting your property, especially if it's close to a station or lays in a popular area like Umeda in Osaka or Shinjuku in Tokyo.

Even smaller scale investment pattern is acquiring a property to run a private lodging or Airbnb. Both require registration and a lot of updates to fit the legal requirements, still in case of Airbnb you may lease your property to anyone who would be able to register and manage it instead of you.

Would you give it a try while the market climate is so good for investments?