Click to zoom. Shiori Sakurai, business development manager at STR for Japan, sharing her findings on the hospitality industry during a session titled “Hospitality: The Revival of Domestic Tourism in Japan.”

ULI MEMBER-ONLY CONTENT: After the lockdown phase of late winter and early spring of 2020, global recovery in the hospitality sector has been showing signs of plateauing in recent months. But some segments of the market are faring better than others across Australia, China, and Japan, said a hospitality expert speaking at the ULI Asia Pacific Leadership Convivium, a ULI full member event held virtually in November.

Shiori Sakurai, business development manager at STR for Japan, shared her findings on the hospitality industry during a session titled “Hospitality: The Revival of Domestic Tourism in Japan.” Focusing on Japanese hospitality market trends, in the midst of a government-sponsored domestic travel campaign, Sakurai also touched on global recovery trends.

This session is available on demand for ULI full members in Knowledge Finder.

“There are signs we may be plateauing in all regions,” she said, noting absolute rolling seven-day occupancy statistics that point to two months of “consistency” in September and October, as recovery in the United States and Middle East markets is flattening, while Europe is trending downward after new waves of virus infections.

In the Asia Pacific region, Sakurai said that growth in China’s hospitality sector had been “well established” for months with the resumption of business travel and events, and occupancy averaging between 50 and 75 percent since mid-July. Meanwhile, recovery for the region has been slow, especially in emerging markets, with Australia trailing China and ahead of Japan in its recovery.

“Japan has finally [picked up] the speed of recovery from September, with the government’s travel campaign, after passing over the peak of the second wave for daily new cases in August,” said Sakurai.

The Go To Travel campaign, which started on July 22 and is expected to run until January 31, 2021, allows Japan residents to enjoy domestic travel subsidies of up to 50 percent, on transportation, accommodations, sightseeing, and shopping for both day and overnight trips. Health officials in Japan were looking to roll the campaign back in some areas that had high infection rates, according to Reuters.

The belated recovery is due to the second wave of rising daily COVID-19 cases that peaked in August before subsiding in September and October.

This can be seen in the monthly revenue per available room (RevPAR) in August, indexed against the same period in 2019, finally achieving pre-March levels, before the onset of the pandemic. The same metric trended upward the following month, but the figures for both August and September were well short of 50 percent of the levels year-on-year.

“September saw a significant increase in the monthly occupancy recovery pace,” Sakurai said after examining monthly occupancy point discrepancies compared with the preceding month. In fact, the same month saw occupancy daily data finally come close to attaining the 70 percent level.

She attributed this to the effect of the travel campaign, coupled with the Silver Week holidays and a steady drop in daily COVID-19 cases, and noted that October has seen a continued gentle recovery, mainly led by weekend business, with less volatility.

In terms of accommodation type, demand for ryokan (a type of traditional Japanese inn) has outpaced that for hostels, guest houses, and hotels during the pandemic. However, hotels still contribute the highest proportion in absolute occupancy percentage.

In terms of region, Hokkaido was a major beneficiary of the travel campaign, joining Tohoku and Chugoku/Shikoku as the only three major domestic travel markets to exceed 50 percent occupancy in September.

Conversely, the big cities of Tokyo, Kyoto, and Osaka, which have oversupply concerns and greater dependence on international demand, and the island of Okinawa each had less than 35 percent occupancy that month, below the national average level.

In terms of hotel rooms by class, the performance of luxury and upper upscale rooms, which make up 25 percent of total room inventory based on a study of STR participating hotels, had lagged upscale and upper midscale (55 percent) and midscale and economy (20 percent) since June.

The exceptions to this daily occupancy trend were the Obon holiday in August and the Silver Week holidays in September. However, the more sustained impact of the Go To Travel campaign has seen the gap between the classes stay narrow since September.

Based on rolling seven-day daily ADR indexed against last year, luxury and upper upscale rooms also exceeded their 2019 performance in July and August following the start of the campaign, and again in September during the Silver Week.

“Clearly, [these spikes are] the impact from the travel campaign as the overall occupancy remains low compared to 2019,” said Sakurai.

In summary, she said that Japanese hotels have been managing “quite well” despite the unprecedented fallout from the pandemic, although the impact of the travel campaign is still limited to holidays and weekends, and luxury and upper upscale ADR.

“In terms of going forward to the next recovery level, the recovery for weekday demand and lower-tier classes is significant,” Sakurai said. “And business travel and events would be expected as the next key demand generator, which has not been encouraged by the current government travel campaign.”

ULI Full members will be able to access these sessions on demand in Knowledge Finder.