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Article in the Nikkei this morning:

July occupancy for major Tokyo hotels improved 0.4 percentage points (ppt) year on year (yoy) to 72.7%, the first turn to positive figures in 32 months.  It appears that inbound travelers from Asia who had put off plans to Japan due to swine flu have returned.

The Osaka major hotels were still down 3.5% yoy, with room rates yet to recover so the full economic effect of a hotel rebound is still ahead of us.

The Japan Nikkei News undertook a study of 21 major hotels in Tokyo and 18 in Osaka.  According to the study, Tokyo hotels came back above the 70% occupancy line, which is generally thought among the industry to be the break-even line for Tokyo hotels.  Especially strong were figures from the Keio Plaza in Shinjuku, which has been effective in attracting Asian leisure travelers.  The recent increases in Hong Kong and Taiwanese guests was noted.

The Keio Plaza occupancy for July improved 6.4 ppt over last year to 95.0%.   Guests from Hong Kong increased nearly 40% and those from Korea increased more than 10%.   Keio management commented that people who had been putting off travel plans due to swine flu in Japan had finally come through.  Nevertheless, the average daily rate (ADR) is still down 15% from a year ago.

Competitors Hilton Tokyo and Hyatt Regency Tokyo, also in Shinjuku, both are also seeing occupancy recovery.   According to hotel officials, as the Shinjuku hotel rates are about 5000 yen lower than mid-city areas such as Akasaka and Hibiya at  around JPY15,000, it is an area popular with Asian leisure customers.  (Comment:  The Shinjuku figures are likely a proxy leading indicator for the larger Tokyo business hotel submarket)

On the other hand, inbound travelers from Europe and the Americas are still down and the higher star sectors continue to suffer.  Imperial (Teikoku) Hotel Tokyo was down 10.5% yoy to 55.8% occupancy and ADR down 4.3% to JPY28,747.

Osaka July numbers continued down 3.5% to 76.5%, now a 12 month negative trend but the downward trend has slowed and month on month Osaka was up 13.5% – other than the seasonal effect, some influence from passing of the swine flu chaos.  Hotel Nikko Osaka was down 15.7 ppt yoy for June at 59%, but in July those figures came to only -2.5ppt and occupancy of 76.6%.  They stated that the pace is slow but Asian traveler reservations have been recovering from the first half of July and during the second half some effect from a major summer high school event Kinki Mahoroba, pushing occupancy beyond the forecast.

Hotel New Otani Osaka came down 4.9ppts from last year July to 59% occupancy, but that was an improvement of 7.3ppt from the previous month.   Hotel management also reiterated that improvement was seen from settling of the swine flu issue and entrance into the summer season, but that the economic downturn was still felt especially in a slowed recovery of demand from foreign guests.

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