Japan's independent business hotels lean toward alliances

28 Feb 2010

Once seen as insular and focused exclusively on the domestic market, Japanese hotels are shifting toward international alliances to win a greater share of global corporate business.

Faced with a stagnant local market and the gradual expansion of foreign-managed hotels, Japanese hoteliers are seeking new ways to reach out to foreign business travellers.

For decades, Japan’s hotel industry was almost exclusively Japanese in both ownership and management. However, this has began to change, especially as result of Japan’s financial crisis and the bursting of its real-estate bubble in the late 1990s.

Japan also has a reputation, mostly exaggerated these days, of being expensive, lacking foreign-language services and being culturally impenetrable. No matter how much the country has changed, these misconceptions still persist and have been among the reasons why foreign business travellers sought alternatives to Japanese-managed hotels.

The first in the new wave of major foreign hotels in Tokyo was the Four Seasons Tokyo at Marunouchi, which opened in 2002. The Conrad and the Mandarin Oriental opened in 2005, and The Ritz-Carlton and The Peninsula in 2007. The Shangri-La Hotel is the most recent overseas name to appear, opening its doors last year. Toward the end of this year, a St Regis will open in Osaka, Japan’s second largest city and a significant commercial centre.

The single most ambitious foreign intervention happened in late 2006, when IHG partnered with ANA to establish a joint venture. IHG ANA Hotels Group Japan leapt to become the largest international hotel management company in Japan, with 41 hotels and over 12,000 guest rooms.

Sensing the market shift, many independent hotels are linking up with international hotel alliances to boost their share of corporate travel and take advantage of joint reservation, training and marketing opportunities as well as to tap into the managed travel segment of corporate accounts and related business meetings.

Preferred Hotels, WORLDHOTELS, and the Leading Hotels of the World (LHW) are leading this major transformation of Japan’s hospitality sector, according to Yutaka Nakamura, president of the Japan Hotel Association and chairman of Royal Park Hotel. Currently Preferred Hotels has eight properties in Japan, three of them part of the Royal Park group, Leading Hotels of the World has six and WORLDHOTELS represents four properties. All are currently seeking to expand.

In Nakamura’s view, this heightened awareness of the need to appeal to international corporate travellers demands a major shift in how Japanese-owned hotels cater to the quite different needs of overseas business people

“In the past, Japanese business travellers were generally happy with a tiny room, in a hotel with few amenities and facilities. One restaurant would be enough. However, foreign business travellers look for something quite different. Larger rooms, especially for those on long trips or assignments, more business facilities and a choice of food and beverage outlets.

“The arrival of foreign hotels with different facilities and services has forced many Japanese hotels to rethink what they offer to business people,” says Nakamura.

Traditionally many of Japan’s business hotels were linked to railway and airline companies.

The Japan Railways JR Hotel Group, for example, has around 60 properties in all the key cities of Japan. These operate in regional brand clusters. Granvia has eight properties in the major cities of western Japan, such as Osaka, Kyoto, Kobe and Hiroshima and are located within, or adjacent to, mainline railway stations. In the eastern part of Japan, particularly around Greater Tokyo and Yokohama, the Metropolitan and Mets hotel brands predominate. There are also JR-branded hotels.

Nakamura’s own group, Royal Park, has three large hotels in Tokyo. He was one of the first Japanese hoteliers to see the advantages of working in international alliances, becoming a founder member of the Summit group nearly two decades ago and now part of Preferred Hotels.

Nakamura says: “About 15 percent of our business is coming through Preferred Hotels.”

A major advantage, says Kaori Yamaguchi, Preferred Hotel’s director, global sales – Japan, is that the group handles around 300 corporate accounts globally, and can deliver a significant volume of business travellers to the eight hotels it currently has in its Tokyo portfolio.

Another network that is aggressively expanding its presence in Japan is WORLDHOTELS. Currently the alliance has one hotel in Kobe and four hotels in Tokyo, the most recent being the JR Hotel Group-owned Hotel Metropolitan Tokyo.

Roland Jegge, vice-president (Asia Pacific) for WORLDHOTELS, says: “The hotel is superbly located in the heart of the city, offers fantastic value and is ideal for both business and leisure travellers to Tokyo.”

The group is also poised to widen its footprint in the country.

“WORLDHOTELS is looking into expanding our office in Japan in 2010 from one to four staff – two of whom will represent our training and technology division. Our website was launched in Japanese last April and our Gateway CRS technology is currently being translated into Japanese.  We are also about to expand our portfolio with new properties in Osaka, Sapporo, Kyoto and Hiroshima,” Jegge said.

Royal Park’s Nakamura expects that with Japan Airlines (JAL) facing serious financial problems the airline will likely look to divest itself of its hotel interests, although the hotel arm is structured independently of the airline itself. Its main brands are Nikko Hotels International and JAL City

Should these properties be hived off or put into a joint venture, as with ANA’s properties, this could trigger another seismic shift in the country’s hotel culture.

Kenny Coyle

Loading comments...
Be up-to-date
Magazine Subscription
To see our latest subscription offers for Business Traveller editions worldwide, click on the Subscribe & Save link below