Investor activity to continue upward trend, says new Colliers report. Investment potential, rebounding visitor numbers and strong economic performance continue to drive interest in Japan’s hotel sector with the scene set for a strong 2025.

According to Colliers’ Japan Hospitality Insights report, tourism has surged since Japan relaxed national borders, reinstated visa-free travel and relaunched a travel discount scheme. As a result, the hotel investment market has thrived over the last 18-24 months supported by the weaker Japanese yen (JPY) and persistently low interest rates which have provided an ideal platform for inbound investment.

“The market has roared to life and foreign visitors have returned – last year’s tourism figures surpassed their 2019 level, and they are on course to do the same this year,” Kei Sumiyoshi, Colliers’ Senior Director and Head of Hotels & Hospitality in Japan, said.

Shaman Chellaram, Senior Director Asia, Hotel Advisory, added: “With Japan being one of the few markets offering a positive yield spread and evident inbound tourism growth, significant foreign capital has flowed into the country.”

According to Colliers, Japan’s robust domestic tourism continues to outstrip the inbound market and is also experiencing significant growth. In 2024 H1, overnight guests reached 304.7 million,

7.5% higher than the same period in 2023 (283.4 million). 17.78 million visitors entered the country in H1 2024, with a projected 33.1 million for the entire year (against the pre-pandemic high of 31.88 million in 2019). From January to July 2024, the top five inbound visitor source markets were South Korea (5.2 million), China (3.84 million), Taiwan (3.55 million), the United States (1.59 million) and Hong Kong SAR (1.55 million).

The sector’s contribution to the economy is expected to reach nearly JPY44.6 trillion (roughly USD314 billion) in 2024, up 5.7% from the 2019 peak. Visitor spending is projected to hit almost JPY24.9 trillion (roughly USD175 billion), surpassing 2019 levels by 2%.

Mr Sumiyoshi said there was keen interest from investors and operators to further develop Japan’s hotel market, with new brands entering Tokyo, Kyoto, Osaka, and other key leisure and resort destinations as demand across the sectors, especially luxury and lifestyle, continued to rise.

Colliers’ report found hotel investment volumes in the first half of 2024 neared USD 2.9 billion, up over 30% from the same period the previous year. Since 2017, annual investment volume has trended in the USD 2.8 billion to 4 billion range with 2019 being the standout year at USD 5.4 billion.

“With the recovery of hotel demand in Japan’s post-pandemic era, performance indicators are improving, especially in areas that attract affluent domestic and international travelers, such as Tokyo, Kyoto and Niseko on Hokkaido,” Mr Sumiyoshi said.

Mr Chellaram added: “More international operators are looking for a foothold, with brands such as Ace, Aman, Centara Grand, Mercure, Yotel, Garner, Janu and Kimpton entering the market.

“The ryokan (traditional Japanese-style inn) sector is also garnering increasing investment interest as the appetite for experience-driven travel swells. Hyatt and Kiraku entered into a strategic joint venture to launch the new Atona brand – a collection of modern-style hot spring ryokans targeting global travelers.”

As more brands enter the Japan hotel market, Mr Sumiyoshi said there would be an even greater need for investors and operators to differentiate their hotels from the competition.

“The Japanese market has immense potential as it looks to attract 60 million inbound visitors annually by 2030,” he said.

“This, coupled with the strong domestic market, presents an ongoing opportunity for investors and operators. On the outbound front, major Japanese hotel groups are also looking to expand further internationally as they look to bring the unique Japanese hospitality offering to a broader market.”