Sporting chance

The pictures painted by sections of the British press - of World Cup fans and footballers being squeezed into capsule hotels, and baffled by offers of "love hotel" accommodation - have not done much for the Japanese hotel industry's image abroad. However, there are hopes that the estimated 560b yen (£3.08b) - compare this with the £1.02b France spent preparing for the 1998 finals - spent since 1996 on stadia, transport, hotels and other facilities will kick-start a demand for hotel services in Japan from a newly admiring world.

Japan does have a battle on its hands. Already, the World Cup has thrown into relief vast differences in prices between its own hotels and those of co-host nation South Korea. The average charge at the six hotels booked by World Cup guests such as footballers and the media is about 20,000 to 25,000 yen (£110 to £138) per night per person, twice the price paid in Korea. There have also been reports of hotels refusing to accept foreign guests because of the formidable language barrier - Japan comes bottom of every English-speaking league in Asia.

This perception has given Japan the unenviable position of being unique among Asian markets in that its tourism sector depends primarily on domestic rather than international demand.

As elsewhere, 11 September has had a big effect, yet Japan is now in the midst of a hotel-building boom, which might suggest that foreign travel to Japan, or domestic demand, was about to explode. Hopes are that the World Cup will start a rise in travel to Japan to fill those newly available rooms. For example, Prince Hotels, with its nationwide chain of 74 properties, expects a 15% to 20% increase in the number of guests at its hotels this year.

Yoshihiro Tatara, a spokesman for Prince Hotels, sees the World Cup as something that will bring long-term gain. "This is a good opportunity for us to boost the attractiveness of Japan among foreign visitors so that they will come back to this country again," he says.

Though some might question the wisdom of a country choosing to add thousands more rooms to its hotel stock in such economically distressed times, Japan remains upbeat about the future, as the current hotel boom suggests. Plummeting land prices, a gift of the current recession, are also fuelling a general construction bonanza, which the government hopes will halt urban decay and revive both the nation's economy and the fortunes of the hotel trade.

Much of the growth in hotel room numbers in Japan has come from the incursion of foreign chains over the past five years, displacing many small and mid-sized hotels operated by domestic companies. In fact, it would appear that the foreign hotel businesses in Japan have suffered little of the agony of their Japanese counterparts and have grown at the expense of Japan's smaller operators and some giant ones.

"Foreign chains have made a good show in Japan thanks to the burst-bubble economy and low interest rates," says Michael Sagild, managing director (Asia-Pacific) of Le Méridien Hotels. "And the investment opportunities there are much more attractive. The Japanese are now much more comfortable with international operators. Before, they were perceived as being unable to operate to Japanese standards. Japan was seen as being unique."

Many of the domestic hotel operators' woes have centred on the performance of their ancillary operations, where demand has fallen off dramatically since the bubble years, Sagild explains. Gone are the ruinously expensive wedding banquets, to be replaced by low-key services. Japan's hotel complexes, once booked out in advance for years, are now going begging as they come to terms with losing much of this business, which used to account for 50% to 70% of all hotel proceeds.

The numbers of corporate functions, also a victim of belt-tightening, have plummeted. The rise of value-conscious customers who are less willing to fork out the extra money needed to stay at a big-name hotel has also come to plague Japanese-run properties.

Conversely, foreign-owned hotels, by emphasising their foreign brand status in a nation obsessed with imported brands, have less to complain about. By focusing on the luxury end of the market, foreign hoteliers have gone from strength to strength since the nation's financial big bang opened the door to international hotel investors and operators a decade ago. Foreign names have poured into the country, taking advantage of record low property prices and low borrowing.

The result is that, for example, Four Seasons Hotels & Resorts plans to open four or five new hotels in Japan over the next decade to add to an existing hotel in Tokyo. And there are at least another four major Tokyo hotels on the cards.

Naturally, all the players are confident that the demand will be there. Major foreign-managed hotels, including the Park Hyatt Tokyo, have been able to maintain occupancy rates of nearly 90%, despite the general downturn in travel and a newly frugal domestic clientele.

Meanwhile, foreign brands are also breathing new life into the flagging domestic industry. Nikko Hotels International and Le Méridien have expanded their global marketing alliance, established in April 2000, to include all 21 Nikko hotels in Japan and its one property in China. With the addition of these properties, the alliance now has a combined portfolio of 169 hotels in 63 countries. The partners expect the inclusion of the 22 Asian hotels to be of further benefit to the alliance, which was formed last year as a way of enabling the two regional groups to compete with larger companies more effectively.

Nikko and Le Méridien report that the alliance, now going on 15 months old, has been a success. Le Méridien has seen an additional 125,000 room nights (a 30% increase) in business at its properties in Japan, while Nikko has added 58 new corporate accounts.

This alliance has greatly increased Nikko's ability to attract international visitors, Sagild says, through the use of Le Méridien's extensive worldwide sales and reservations centres.

Japan is fighting back with its own alliances. Tokyo-based New Otani Hotels has joined four other Asian hotel chains (Thailand's Dusit Hotels, Landis Hotels of Taiwan, Hong Kong's Marco Polo, and Meritus Hotels of Singapore) to form the Asian Hotels Alliance, a marketing association that the partners compare to the airlines' Star Alliance.

Members of the participating customer loyalty programmes will receive membership in all the partner programmes. The founders believe such co-operation will enable their regional companies to compete with larger, international brands. After the smoke has cleared from the World Cup, Japan's hotel trade will never be the same again.

Visitors to Japan

In 2001, foreign visitor arrivals reached 4.77 million, up by 0.3% from 1998. Of these, 2.7 million were leisure travellers, while 1.2 million were travelling on business.

At the end of 1998, the total number of hotel rooms in Japan was 70,000. By the end of March 2000, there were 83,500, a figure forecast to increase by about 5,000 by the end of 2003.