Private equity investment group Blackstone made a series of investments in the Japanese hotel market at the end of 2024, making clear its belief that the sector has a bright future.
Three additions, all cemented in late December 2024, take the investor’s commitment to hotels in Japan up to USD1.3 billion, making Blackstone one of the largest foreign investors in Japanese hospitality. “Japan is experiencing strength in both inbound tourism and domestic travel, supported by its robust economic growth,” said Daisuke Kitta, head of Japanese real estate at Blackstone. “We will apply our operational expertise and use the full breadth and depth of our global resources to support these hotels for long-term success.”
Record breaking tourism numbers
Inbound tourism to Japan hit a record in 2024, with the final figure for the year expected to be close to 35 million, well above pre-pandemic levels. The government has set a target of attracting 60 million visitors by 2030, providing plenty of optimism among those backing hotel investment and development. With new foreign investors taking the place of Japanese real estate investors, there will also be greater opportunities for international brands to make more headway into the Japanese market.
First, there was a two hotel deal agreed with seller Kanehide Holdings, with combined transaction value reckoned at around USD130m. The first of the hotels was the Ritz-Carlton hotel in Okinawa. The hotel has 97 rooms, and is surrounded on three sides by an 18 hole championship golf course that overlooks the sea, and commentators suggest that the property is ripe for enhancement that will drive stronger room rates. Next to be acquired was the Kise Beach Palace hotel, which has 162 rooms.
The third property to be bought is the Nest Hotel in Osaka, a property sold by Ichigo Hotel REIT which had owned it since 2016. The 302 room budget hotel is around 40 years old, and is said to have changed hands for around USD50m. According to local media, there may be an opportunity to rebrand the property, perhaps under the Travelodge brand.
The deals follow a larger, mixed use deal at the beginning of December which saw Blackstone buy the Tokyo Garden Terrace Kioicho in Tokyo. The real estate block traded for USD2.6bn, and included two office towers, 135 apartments, a 250 room hotel with conference and wedding facilities, and retail space.
Building on a strong base
Previous acquisitions by Blackstone included a portfolio deal with Kintetsu Group Holdings, which saw eight hotels transferred in 2021. These included some substantial properties, including a 988 room hotel in Kyoto, and the 456 room Universal City hotel adjacent to Universal Studios in Osaka.
Part of the government’s plan to increase tourism is to encourage visitors to travel to regional cities and destinations, away from major conurbations such as Tokyo. The aim is to have at least one luxury resort hotel in each of the country’s 35 national parks, within the next six years, and developers are being encouraged to look to these rural destinations for their next hotel projects.
