Tokyo hotel rates racing ahead

SINGAPORE, 1 March 2023: The reopening of Japan’s international border several months ago, along with the National Travel Support campaign, helped boost Tokyo’s hotel average daily rate (ADR) beyond pre-pandemic comparables for two straight months, according to STR.

The rise in room rates was preceded by improving occupancy, which came in at 74.8% in December 2022 and dropped slightly in January 2023 (to 69.0%) due to seasonality. That January occupancy level was still 11.8% lower than the corresponding month in 2019, the January ADR of JPY20,055.58 beat that pre-pandemic comparable by 14.7%.

“The Tokyo hotel market is structured predominantly under leases, and hoteliers prioritise occupancy over ADR to consistently drive performance and pay those leases,” said the STR business development manager. Shiori Sakurai. “Operators are cautious about achieving higher rates at the expense of occupancy and will often let occupancy growth lead before taking steps to push ADR.”

“For Japan, the greatest correlation of hotel performance metrics exists between occupancy and ADR growth. When occupancy rises, ADR will follow,” Sakurai said. “Recently, that trend has played out thanks to international borders reopening, which allowed a much-needed segment of demand back into the city and the government simultaneously subsidising domestic tourism. Tokyo was well below pre-pandemic levels in the top and bottom-line performance for much of 2022, but there has been a clear upward trend since the fourth quarter of last year. While there is still a way to go to reach recovery, recent months’ developments have been encouraging.”

About STR

Founded in 1985, STR maintains a presence in 15 countries, with a North American headquarters in Hendersonville, Tennessee, an international headquarters in London, and an Asia Pacific headquarters in Singapore.