- The number of inbound tourists in 2024 reached 37 million, comfortably surpassing the previous peak level of 32 million in 2019, with further growth in sight.
- ADR has continued to rise in 2024, and occupancy has recovered due to greater hiring activity, which has supported a higher RevPAR index.
- Elevated construction costs and labour shortages create bottlenecks for new supply, contributing to the notable and sustained drop in expected new hotel completions in 2025 and beyond.
- Constrained hotel supply, particularly in major tourist hubs, Tokyo, Osaka, and Kyoto, benefits existing hotels, and should contribute to elevated ADRs and hotel asset valuations.
- Repeat visitors to Japan are more likely to visit beyond the major tourist hubs, which will likely lead to sustainable growth in regional hospitality markets.
- Hotel assets have been highly prized among investors, with preliminary investment volumes reaching a record JPY1.1 trillion in 2024, comprising a historic 20% of total annual real estate transactions in Japan, with several standout individual hotel transactions taking place.
- A large pipeline of international luxury hotels has emerged across Japan, due to high levels of demand for luxury travel experiences.
- The spotlight will be on Osaka in 2025, with Expo 2025, as well as the development of Japan’s first Integrated Resort. These developments should generate greater interest in Osaka, and cement the city’s presence as a high-end destination.
Hotel sector goes from strength to strength
The hotel sector shone brightly in 2024, as record numbers of inbound tourists contributed to further growth in ADR and RevPAR. This robust momentum shows little sign of slowing down into 2025. Looking ahead, new hotel supply will be limited from 2025 due to high construction costs and labour shortages, on top of project cancellations related to the pandemic, which will benefit existing hotels. Meanwhile, Japan’s luxury sector continues to emerge, as a handful of iconic international luxury hotel chains further establish themselves across Japan. Positivity abounds, transaction volumes have been at record levels, and we anticipate further large deals in the coming year.
Savills Research & Consultancy