๋[Japan] Hoteliers, hit hard by coronavirus, adapt to survive

WEDNESDAY, March 31, 2021

The pandemic has packed a punch, and the hospitality industry is hurting more than most. Seeking to staunch their financial wounds, a stream of hoteliers has been turning to unconventional business models such as long-term stays — and in many cases, even checking out of the traditional hotel sector entirely, converting guest rooms into condos — as part of a larger paradigm shift that is quickly becoming the industry’s new normal.

■ ‘Live’ and ‘Work’

The Imperial Hotel, Tokyo, in Chiyoda Ward, Tokyo began accepting reservations on Feb. 1 for a special 30-night extended stay. Priced at ¥360,000, the campaign offered a nearly 80% discount off the standard room charge. All 99 rooms made available for the package were booked within the day.

The hotel said it expects the rooms to be used as second homes for the wealthy or as remote offices for teleworking corporate executives. Although there will be fewer visits from housekeeping under the plan, guests will be assigned a personal valet during their stay, and have access to swimming pool, saunas, fitness center, and other hotel facilities, the same as other guests.

A popular practice in Europe and North America, long-term hotel stays have been offered by a select handful of realtors in Japan, where such rooms are commonly called “serviced apartments.”

While these arrangements typically require renters to sign a lease agreement, the Imperial Hotel plan saves guests the hassle by capping the duration of stays at a month, which skirts the cut-off stipulated by the Hotel Business Law.

Hotel New Otani, one of Japan’s great luxury triumvirate alongside the Imperial Hotel and Hotel Okura, also began offering a similar long-stay plan last year.

Some within the industry have expressed hesitation about the trend. Slash prices once, no matter how temporarily, and it becomes hard to justify the old price bracket when guest footfall returns to normal. Concerns that the deep discounts might end up tarnishing meticulously polished brand images is another part of the calculus.

Then again, as one hotelier put it, “Someone who can afford to drop several hundred thousand yen on a room is probably already going to be among our regular clientele.”

So far, the service seems to have paid off, and been received favorably by guests.

Mariko Ishii, a hospital executive who booked an extended-stay service at Keio Presso Inn Nihonbashi Kayabacho, in Tokyo, said with a smile: “I don’t need to clean the room and can concentrate on my work. I feel safe here, too, from a security perspective.”

The hotel has even replaced the carpet in its long-stay rooms, so guests can comfortably walk around barefoot.

■ From hospitality to realty

As the pandemic drags on, other operators are hedging their bets and drastically retooling their business models.

Takuto Holdings Co., a prominent real estate agent based in Osaka, has been converting seven of the 12 hospitality-industry properties in its portfolio into condos.

In March, The Sankei Building Co. remodeled two of its hotels, including one in Akihabara, Tokyo, into office buildings.

Kyoto, home to many hotels and ryokan inns, set up a subsidy system last September to support such moves. The city will cover up to ¥3 million for renovations when remodeling a lodging into a residential complex.

About 60 companies, including hotels, are said to have applied for the subsidy.

■ Excessive investment

The situation is especially dire for hotels and inns, as many were opened in anticipation of special demand for the Tokyo Olympics and Paralympics.

According to the Health, Labor and Welfare Ministry, as of March 2020, there were 88,983 accommodation facilities in Japan, up about 13% from five years ago, and some areas are said to be oversupplied. More than 2.5 million people were expected to stay at hotels during the Games, but it was recently decided that spectators from overseas would not be allowed into Japan.

Data compiled by Teikoku Databank Ltd. showed there had been 1,210 corporate bankruptcies triggered by the pandemic as of Friday, of which 84 were hotels and inns. Hotels were the third-most-battered industry, after restaurants and construction.

A number of well-established hotels have also been closing — the Kirishima Kokusai Hotel in Kirishima, Kagoshima Prefecture, will close in May and the Hotel Grand Palace in Tokyo’s Kudan district at the end of June. They apparently found it difficult to adapt their operations, due to their location in tourist areas and aging facilities.