Tokyo 2020 Olympics: Expectations for the Hotel Industry (EN) 201411

Tokyo 2020 Olympics:
Expectations for the Hotel Industry
Hotels & Hospitality Group | November 2014
Contents
Introduction
03
04
Future Olympic Host City
05
06
London 2012
Beijing 2008
07
08
Conclusion
Former Olympic Host Cities
Tokyo 2020
09
10
Contributors
Tokyo 2020 Olympics: Expectations for the Hotel Industry 3
Introduction
It is just over a year since International Olympic Committee President
Jacques Rogge announced in Buenos Aires that Tokyo had beaten
Madrid and Istanbul to host the 2020 Olympic Games. Around one
year later the question still remains – what will the win mean for Tokyo
and Japan overall?
Most analysts would agree the long term impact of hosting the Games
is generally beneficial to the local economy. Share markets in Sydney,
London and Brazil recorded significant gains in the period following
their successful announcements. Tokyo’s Nikkei also performed
admirably, albeit there are several drivers behind this including
changes to economic policy. What has traditionally followed in all
previous host cities are increased tourism numbers far beyond the
completion of the Games.
Most analysts would agree the long term impact
of hosting the Games is generally beneficial to the
local economy. Share markets in Sydney, London
and Brazil recorded significant gains in the period
following their successful announcements. Tokyo’s
Nikkei also performed admirably, albeit there are
several drivers behind this including changes to
economic policy.
Before hosting the 1964 Olympic Games, Japan completed an
unprecedented number of city (Tokyo) and countrywide improvements
and upgrades, the most notable its public transportation system which
provided a new train network or Shinkansen. Today Japan prides itself
on being near-ready to host the 2020 Games however, the country will
still upgrade a number of large-scale infrastructure projects.
In this paper, JLL and STR Global have specifically considered
previous host cities London and Beijing, identifying what are the key
impacts in terms of tourism and hotel performance before, during and
after the Olympic event, in order to draw conclusions about Tokyo
in 2020. This is the second collaboration by both firms assessing
the influence of the Olympic Games on Tokyo (see Tokyo 2020: The
Olympic Games Effect, released in November 2013).
SHORT TERM IMPACT
Share markets in Sydney, London and Brazil
recorded significant gains in the period
following their successful announcements.
Tokyo’s Nikkei also performed admirably,
albeit there are several drivers behind this
including changes to economic policy.
LONG TERM IMPACT
The long term impact of hosting the
Games is generally beneficial to the
local economy.
JAPAN 2020
Today Japan prides itself on being nearready to host the 2020 Games however,
the country will still upgrade a number of
large-scale infrastructure projects.
4 JLL | Hotels & Hospitality Group
Former Olympic Host Cities
According to industry sources, the 1988 Seoul Games achieved a
78% increase in international visitors to South Korea between 1986
and 1990 (by 2002, up 222% on 1986 levels to 5.3 million international
visitors). The Barcelona Games in 1992 was the second highest in
terms of inbound tourism growth (with Spain as a whole reporting an
increase of 27% between 1990 and 1994).
The Atlanta Games in 1996 saw a 4% rise in international visitors
to the USA between 1994 and 1998 and the 2000 Sydney Games
recorded a 16% increase in international visitors to Australia between
1998 and 2002. However, inbound tourism growth was not recorded
in all previous host cities. The number of foreign visitors to Beijing
in August 2008 declined 7% to 389,000. Over the remainder of the
summer that year, visitor numbers were sharply lower, recording a
30% y-o-y decline. It should be noted that this was also at the peak of
the global financial crisis.
History shows the flow on effects for tourism and the wider economy
generally extend to the whole of the host country and bordering cities,
as was the case in London. In the UK, the Eurostar aided travel to
many European cities for tourists attending the London Games.
It is safe to assume that in 2020, tourism will extend far beyond the city
boundaries of Tokyo with Osaka and Kyoto most likely to see a large
increase in overseas visitors. Kanazawa may also welcome additional
tourists once the Hokuriku-Shinkansen commences operation in 2015.
The most recent Games in London recorded improved results. In
September 2012, overseas visitors completed 2.6 million visits to
the United Kingdom, or around 1% higher than the previous year. In
the three months July to September 2012, there were 4% less visits
by overseas residents than in the same period in 2011. However,
associated spending on these visits was 6% higher than the previous
year, with a total figure of over GBP 6 billion.
CITIES IMPACTED
History shows the flow on effects for
tourism and the wider economy generally
extend to the whole of the host country
and bordering cities.
EXCEPTIONS
The number of foreign visitors to Beijing
in August 2008 declined 7% to 389,000.
It should be noted that the Beijing Games
were held at the peak of the global
financial crisis.
2020 ASSUMPTIONS
It is safe to assume that in 2020, tourism
will extend far beyond the city boundaries
of Tokyo with Osaka and Kyoto most
likely to see a large increase in overseas
visitors.
Tokyo 2020 Olympics: Expectations for the Hotel Industry 5
Future Olympic Host City
Olympic Cities Room Count Comparison
Room Count of the Olympic Month, (Tokyo July 2014)
Thousands
200
172
180
160
140
116
120
98
100
80
60
40
38
17
20
0
Sydney '00
Athens '04
Beijing '08
London '12
Tokyo '14
Source: STR Global
Government officials recently estimated that the 2020 Games
could boost Japan’s GDP by an additional 0.5%, creating a positive
economic impact estimated to be JPY 4.2 trillion. The 8.5 million
international tourists that the Tokyo metropolitan government estimates
will visit Japan are greater than the total number of foreign visitors to
Japan in 2012. So now, Tokyo’s supply and demand equation to meet
the additional room requirements is imperative.
Whilst accommodating tourists, officials and athletes to the Olympic
and Paralympic Games should not govern overall planning, it is
important to establish whether there is sufficient accommodation
supply to meet total room demand.
GDP BOOST
The 2020 Games could boost Japan’s
GDP by an additional 0.5%, creating a
positive economic impact estimated to be
JPY 4.2 trillion.
According to STR Global, Tokyo is a major international hotel market
with approximately 94,000 available rooms however, it is noted that
this room count does not include the balance of the Greater Tokyo
Area where there are countless traditional accommodation options in
the form of ‘Ryokans’. Additional accomodation options also include
private hostels and unlisted “capsule hotels’. Airbnb has also made
solid development in reinforcing its acceptability over recent years.
The online community marketplace is certain to become a useful
accomodation option in 2020.
In our last report, we noted the International Olympic Committee
reported there were approximately 140,000 rooms within a 50
kilometre radius of the Tokyo CBD. With the anticipated displacement
effect, existing room supply should meet current demand levels. The
forecast increase in international visitors over the next several years
however will justify the building of additional rooms.
When compared to previous host cities, London had approximately
116,000 available rooms in 2012 and Beijing had 172,000 available
rooms in 2008. In contrast, the much smaller host cities of Athens and
Sydney had considerably less room supply – Athens (17,000 available
rooms in 2004) and Sydney (an estimated 38,000 available rooms in
2000).
Since Tokyo’s hotel market is more comparable in size to London and
Beijing, we have analysed the impact of the Games on the most recent
host cities.
INTERNATIONAL TOURISTS
The 8.5 million international tourists
that the Tokyo metropolitan government
estimates will visit Japan during the
Olympics are greater than the total number
of foreign visitors to Japan in 2012.
ADDITIONAL ROOMS
The forecast increase in international
visitors over the next several years
however will justify the building of
additional rooms.
6 JLL | Hotels & Hospitality Group
2008
Beijing 2008
Beijing Olympics – Key Cities
Olympic Month August, One Year Prior & After the Olympic Year
(2008)
CNY
3,000
90%
2,500
80%
2,000
70%
1,500
60%
1,000
50%
40%
500
Mainland
China
Beijing
Shanghai
Xian
Hangzhou Shenzhen Hong Kong
(CNY)
Occupancy:
2007
2008 (Olympic Year)
2009
ADR:
2007
2008 (Olympic Year)
2009
0
Source: STR Global
The chart illustrates the impact of the 2008 Olympics in Beijing relative
to major hotel markets in Mainland China. In Beijing, the city recorded
an 18.8% y-o-y decline in occupancy during the Olympics. The decline
was primarily a result of the government imposed visa restrictions
as a security measure for the Games which led to a 7% decline in
international arrivals.
This was exacerbated by the global financial crisis which affected
leisure travel patterns. Nevertheless, the average daily rate recorded a
remarkable increase of 250% y-o-y during the Games period. Average
daily rates in Beijing rose to levels above CNY 2,000 which is typically
recorded only in luxury category hotels.
This was similar to the London Olympics in 2012 which also witnessed
average daily rates rise sharply. Overall, revenue per available room
for Beijing grew by 184.2% for the period. The 2008 Games also had
a positive impact on neighboring Mainland Chinese cities as well
as Hong Kong, which recorded increases in room rates but similar
declines in occupancy.
The 2008 Games also had a positive impact on
neighboring Mainland Chinese cities as well as
Hong Kong, which recorded increases in room rates
but similar declines in occupancy.
OCCUPANCY
In Beijing, the city recorded an 18.8%
y-o-y decline in occupancy during the
Olympics.
AVERAGE DAILY RATES
The average daily rate recorded a
remarkable increase of 250% y-o-y
during the Games period.
REVENUE PER
AVAILABLE ROOM
Revenue per available room for Beijing
grew by 184.2% during the Games period.
Tokyo 2020 Olympics: Expectations for the Hotel Industry 7
London 2012
In London, visitor arrivals and tourism spend benefited substantially,
increasing by 5% and 9% y-o-y respectively. However during the
Games, retail, food and beverage outlets and most major tourist
attractions experienced decline in spending. This is because visitors in
London were essentially there to watch the Games and not for general
sightseeing.
Source: STR Global
The chart above illustrates the daily impact of the 2012 Games
on London hotel occupancy before, during and after the event.
Historically, occupancy levels decline prior to the Olympics in all host
cities. In August 2012 (when the Games’ events were staged), there
was a 5% decline on international visitors to United Kingdom, however
hotel occupancy was still recorded at peak levels of 90.2%, a 7.6%
improvement from August 2011.
The fall in occupancy is due to the displacement of visitors during the
month of the Games, where tourists who are not attending any events
avoid the city and generally the higher costs associated with visiting
an Olympic host city during this period. Inbound tourism attending the
Games still contributes to a significant 9% y-o-y increase in overseas
visitor expenditure during the month, making up for the shortfall of
tourists that stayed away.
Unsurprisingly, average daily room rates in London had increased
over the period the Olympics were staged. The Olympic Games is the
biggest sporting event in the world, so it is inevitable room rates rise. It
is worth noting that London, in comparison to past host cities, had the
lowest percentage increase in room rates.
Overall, the London Olympics boosted visitation and tourism
expenditure in the UK in 2012 (a 1% increase in international visitor
arrivals and a corresponding 4% improvement on visitor spend was
recorded), showing the positive impact of the Olympics on the country.
OCCUPANCY
Hotel occupancy during the London
Olympics recorded peak levels of 90.2%,
a 7.6% improvement from August 2011.
One year post the event, London welcomed a record of 16.8 million
visitors, about one million additional visitors over 2012 while visitor
spend was registered at GBP 11.2 billion (GBP 1 billion more than
2012).
Average daily rates across the UK recorded solid growth patterns
during the Olympic period in 2012 as reflected in the chart above.
Most cities experienced rate growth during this period, with London
outperforming, achieving an 86.6% improvement from the previous
year. In 2013, average daily rates returned to levels that were last
recorded in 2011 (or before the Games).
Large football matches held in Cardiff, Coventry and Manchester
underpinned increases in these cities whilst locations close to Airports
such as Heathrow, Manchester, Edinburgh, Birmingham, Glasgow,
Newcastle, Liverpool and Aberdeen also recorded gains.
UK Markets Average Daily Rate
Olympic Period 2012 compared YOY to 2011 & 2013
GBP
250
200
150
100
50
0
He on
at
Bir hrow
mi
ng
Ma ham
nc
he
s
Gl ter
as
go
w
Liv
erp
oo
l
Le
ed
s
Br
i
Ab stol
erd
ee
n
Ca
No rdif
ttin f
gh
a
Co m
ve
ntr
Ne
y
wc
as
t
le
Ed
inb
urg
h
Ju
l0
1
Ju
l0
8
Ju
l1
5
Ju
l2
2
Ju
l2
9
Au
g0
5
Au
g1
2
Au
g1
9
Au
g2
6
Se
p0
2
Se
p0
9
Se
p1
6
Se
p2
3
Se
p3
0
Olympics
K
Year 2012
-30%
nd
-20%
Lo
-10%
In the months leading up to the Games, the government implemented
tourism campaigns to boost visitation including a ‘Holidays at Home’
campaign to encourage Britons to take ‘staycations’ and other related
‘Visit England’ initiatives. Despite this, a 5% fall in overseas tourists to
the UK was still recorded as a restrictive visa application policy limited
entry to several nations including Mainland China.
UK
0%
lU
10%
na
London
20%
gio
Daily Comparison – London vs. European Key Markets
Olympic Months, Occ %Change
Re
2012
ADR 2011
ADR 2012
ADR 2013
Source: STR Global
AVERAGE DAILY RATES
Average daily room rates in London and
across the UK increased over the period the
Olympics were staged. It is worth noting that
London, in comparison to past host cities, had
the lowest percentage increase in room rates.
POST 2012 OLYMPICS
One year post the event, London welcomed
a record of 16.8 million visitors, about one
million additional visitors over 2012 while
visitor spend was registered at GBP 11.2
billion (GBP 1 billion more than 2012).
8 JLL | Hotels & Hospitality Group
2020
Tokyo 2020
Tokyo’s hotel pipeline is expected to increase by around 8% or an
additional 7,500 rooms, either under construction or proposed over
the next several years. In addition, some hotels have also announced
expansion plans and refurbishment despite the strong increase in
construction costs the country has faced in recent years.
On trading performance, hotels in Tokyo have recorded a consistent
upward trend in average daily rates since 2012, not only on the back of
the Games, but also a factor of ‘Abenomics’. Tokyo’s average daily rate
in September 2014 has increased by 7.7% since the announcement.
However, rates had been increasing since June 2012, so the rise is not
solely a result of the Olympics win.
Government policy has promoted currency depreciation due to
monetary easement, deregulation of visa requirements for several
Asian countries that support increased inbound visitation, open sky
policy, and the potential legalisation of casino gaming. Japan has
shown a steady recovery which has influenced the local tourism
industry and broader economy after the 2011 earthquake. It is noted
that since the consumption tax increase in April 2014, the level of
growth is now slowing. A second increase planned for late 2015 is
likely to further impact domestic tourism demand.
NEW ROOMS
Tokyo’s hotel pipeline is expected
to increase by around 8% or an
additional 7,500 rooms, either
under construction or proposed
over the next several years.
Tokyo Actual Performance, Supply, Demand, RevPAR
12 month moving average January 2007 to July 2014, in JPY
Millions
40
35
30
25
20
15
10
5
0
Jan 07
Yen
18,000
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
Jan 12 Jan 13 Jan 14 Sept 14
September 07, 2013
Tokyo won bid for Olympics 2020
Jan 08
Jan 09
Supply
Jan 10
Jan 11
Demand
RevPAR
Source: STR Global
On trading performance, hotels in Tokyo have
recorded a consistent upward trend in average daily
rates since 2012, not only on the back of the Games,
but also a factor of ‘Abenomics’.
AVERAGE DAILY RATES
Tokyo’s average daily rate in September 2014
has increased by 7.7% since the announcement.
However, thanks to the ‘Abenomics’ factor, rates
had been increasing since June 2012, so the rise
is not solely a result of the Olympics win.
POLICY IMPACT
Government policies such as: the deregulation
of visa requirements for several Asian countries
that support increased inbound visitation, open
sky policy, and the potential legalisation of casino
gaming could all affect the number of international
arrivals over the near future.
Tokyo 2020 Olympics: Expectations for the Hotel Industry 9
Conclusion
The Japanese government is aiming to increase the number of foreign
visitors per year to 20 million by 2020 and 30 million by 2030. In
2013, international inbound tourists recorded 10.4 million, according
to the Japan National Tourism Organization, making the Japanese
government’s target appear ambitious. Regardless, the Olympic effect
may have already been observed as the number of foreign visitors
between January and July in 2014 is 26% higher than the same period
in 2013.
Just one year after the 2020 Games announcement, several new
full-service hotels have been proposed. However, unlike the Games
of 1964, Tokyo isn’t entering a period of major new hotel development
where the city welcomed several new hotels including the Hotel
Okura, Hotel New Otani and the Hilton Tokyo. Japan’s tourism market
is clearly in recovery but the evidence suggests Tokyo can already
service demand far better than many previous host cities.
As evident by the London and Beijing Games, hotel trading
performance is similarly expected to outperform in Tokyo. Outside of
the capital, several Japanese cities will benefit from Tokyo hosting the
Games, including Osaka and Kyoto which are all within direct train
access and may form part of an ‘Olympic tour package’. These cities
too will witness steep increases in average daily room rates nearer to
2020.
More importantly, Japan will be further elevated into the international
spotlight post the Olympics. London continues to see solid growth in
its tourism industry as a direct result of the Games and Japan too will
receive its fair share of international visitors after 2020.
Japan’s tourism market is clearly in recovery but the
evidence suggests Tokyo can already service demand
far better than many previous host cities.
FOREIGN VISITORS 2013
In 2013, international inbound tourists
recorded 10.4 million, according to the
Japan National Tourism Organization.
FOREIGN VISITORS
2020 & 2030
The Japanese government is aiming to
increase the number of foreign visitors per
year to 20 million by 2020 and 30 million
by 2030.
HOTEL TRADING
PERFORMANCE 2020
Just like London and Beijing, hotel trading
performance is similarly expected to outperform
in Tokyo. Cities such as Kyoto and Osaka are
also expected to witness steep increases in
average daily room rates nearer to 2020.
10 JLL | Hotels & Hospitality Group
Contributors
JLL Hotels & Hospitality Group
Tom Sawayanagi
Managing Director, Japan
+81 3 5501 9241
[email protected]
Frank Sorgiovanni
Vice President
Research & Strategic Advisory
+65 6494 3668
[email protected]
Seow Yu Ping
Senior Associate, Strategic Advisory
+65 6494 3931
[email protected]
About JLL Hotels & Hospitality
JLL’s Hotels & Hospitality Group serves as the hospitality industry’s global leader in real estate services for luxury, upscale, select service and
budget hotels; timeshare and fractional ownership properties; convention centers; mixed-use developments and other hospitality properties. The
firm’s 300 dedicated hotel and hospitality experts partner with investors and owner/operators around the globe to support and shape investment
strategies that deliver maximum value throughout the entire lifecycle of an asset. In the last five years, the team completed more transactions than
any other hotels and hospitality real estate advisor in the world totaling nearly US $36 billion, while also completing approximately 4,000 advisory,
valuation and asset management assignments. The group’s hotels and hospitality specialists provide independent and expert advice to clients,
backed by industry-leading research.
For more news, videos and research from JLL’s Hotels & Hospitality Group, please visit: www.jll.com/hospitality or download the Hotels &
Hospitality Group’s iPhone app or iPad app from the App Store.
Tokyo 2020 Olympics: Expectations for the Hotel Industry 11
STR Global
Elizabeth Randall-Winkle
Managing Director
+44 0 207 922 1968
[email protected]
Naureen Ahmed
Manager, Marketing and Analysis
+44 0 207 922 1965
[email protected]
Megumi Ishida
Business Development Manager
+81 0 80 3396 9092
[email protected]
About STR Global
STR Global provides clients—including hotel operators, developers, financiers, analysts and suppliers to the hotel industry—access to hotel
research with regular and custom reports covering Europe, Middle East, Africa, Asia Pacific and South America. STR Global provides a single
source of global hotel data covering daily and monthly performance data, segmentation data, forecasts, annual profitability, pipeline and census
information. Hotel operators can join the surveys on a complimentary basis and benefit from free industry data. STR Global is part of the STR
family of companies and is proudly associated with STR, STR Analytics and Hotel News Now.
For more information, visit www.strglobal.com
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