- The number of inbound tourists reached 21.5 million by June 2025, putting Japan on track to surpass 40 million arrivals by year-end.
- ADRs have continued to strengthen in 1H/2025, and occupancy is also gradually climbing back to pre-pandemic levels, which is in turn supporting a higher RevPAR index.
- With a shift away from luxury shopping towards experienced-based travel, inbound tourists are expected to drive stronger hotel demand in regional areas offering unique and genuine experiences.
- Hotel investment volumes reached a record JPY1.2 trillion in 2024, 50% higher than 2023 levels. Preliminary hotel transaction volumes in 1H/2025 are about 40% lower than the same period last year, mainly due to limited opportunities, though these figures are provisional and likely to increase.
- New domestic players also continue to enter the market, with Kasumigaseki Hotel REIT set to be listed in August and MUFG acquiring a large mixed-use building with over 500 hotel rooms to package as investment products for retail and institutional investors.
- Expo 2025 is driving a major tourism boost in Osaka, reaching 10 million visitors in July and targeting 28 million by the end of the event in October, while the opening of Junglia Okinawa highlights the strong potential of Okinawa as a resort destination.
Inbound demand drives Japan’s hotel sector forward
Japan’s hotel sector maintained robust momentum in 1H/2025, supported by record-breaking ADR and RevPAR growth driven by strong inflows of inbound tourism, which reached 21.5 million visitors in the first half of the year. While occupancy remains slightly below pre-pandemic ultra-tight levels due to labour shortages, improvements in hiring and the adoption of technology to improve operational efficiency point to further upside potential. While active promotion by neighbouring tourist destinations may temper Japan’s growth to some extent, demand is likely to rise in regional centres as repeat travellers seek authentic local experiences. Overall, growth in Japan is expected to remain firm, albeit not spectacular.
Savills Research & Consultancy