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Foreign Hotel Chains Rush into Tokyo (November 24, 2005)

The Mandarin Oriental Tokyo (top left), Conrad Tokyo (top right), and Imperial Hotel (bottom) (Jiji)
Foreign-owned "ultra-luxury hotels," with rates 20%–50% higher than most of their Japanese competitors, continue to open in downtown Tokyo. This recent expansion effort purportedly reflects a business strategy that targets affluent seniors; if so, with the baby boomers born after World War II set to retire in the next few years, these new hotels should have few problems attracting guests. Meanwhile, well-established domestic hotels are busily preparing to counter this new competition by adding special "luxury floors" and other amenities to preexisting facilities. A battle among hotels to win over the wealthy consumer has begun in Tokyo.

Luxurious Rooms, Luxurious Prices
In July 2005, the Conrad Tokyo opened and now occupies floors 28 to 37 of a newly built high-rise in Shiodome, an area bustling with tourists in Tokyo's Minato Ward. Conrad Hotels, named after the founder of Hilton Hotels Corporation, is the company's upscale, luxury brand. The lobby of the Conrad Tokyo, located on the twenty-eighth floor, features an expansive eight-meter-high window that commands a view of Tokyo Bay and nearby Hamarikyu Garden. The average rate for one of the hotel's 290 rooms is around �40,000 ($348 at �115 to the dollar), and even standard rooms boast a spacious 48 square meters of floor space. In its first month of operation the hotel achieved a respectable occupancy ratio of around 40% to 50%. This figure exceeded expectations since business demand typically dips in the summer months.

This December the Hong Kong-based Mandarin Oriental Hotel Group will open its first hotel in Japan. Situated in the Nihonbashi district, the Mandarin Oriental Tokyo contains 179 rooms, the smallest of which measures an ample 50 square meters. Rates begin at around �60,000 ($522) per night.

The competition, however, is close behind. The upscale American hotel brand The Ritz Carlton will establish its first hotel in Tokyo on the site of the former Japan Defense Agency in the popular Roppongi area. Meanwhile, The Peninsula Hotels, from Hong Kong, will open its first hotel in Japan in Tokyo's Hibiya district. Both plan to launch in 2007.

The reason behind this influx of ultra-luxury hotels into downtown Tokyo is that there are so few hotels with rates averaging over ¥40,000 ($348) per night. Even rates for Japan's "Big Three" luxury hotels - the Imperial Hotel, Hotel Okura Tokyo, and Hotel New Otani - do not exceed ¥30,000 ($261). Thus, it appears that the current shortage of rooms in the ultra-luxury price range will not disappear any time soon.

Japanese Hotels Get a Luxury Makeover
Hotel executives outside of Japan first took notice of Tokyo's lack of ultra-luxury hotels when they heard about the success of a new "Big Three" comprising non-Japanese hotel chains. These were the Four Seasons Hotel Tokyo at Chinzan-so, opened in 1992, and the Park Hyatt Tokyo and The Westin Tokyo, both opened in 1994. The high marks given to the new "Big Three" led other international luxury hotel brands to reconsider the Tokyo market.

In response to the bold entry foreign hotels have made into Tokyo, established domestic hotels are intent on carrying out renovations in order to meet a new, higher standard of luxury. In 2003, the 115-year-old Imperial Hotel embarked on a large-scale, five-year renovation project at a cost of ¥17 billion ($148 million). Hotel Okura Tokyo is pursuing similar improvements.

The first wave of foreign, ultra-luxury hotel expansion into Tokyo will have finished by 2007, but even now other prominent hotel chains are setting their sights on Tokyo. Moreover, investment groups are seeking to buy out hotels that cannot cope with the competition. The rush to offer luxury accommodations previously unavailable in Tokyo is certain to alter the landscape of the metropolis' hotel market.

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Copyright (c) 2005 Web Japan. Edited by Japan Echo Inc. based on domestic Japanese news sources. Articles presented here are offered for reference purposes and do not necessarily represent the policy or views of the Japanese Government.

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