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Tokyo’s hotel room rates pacing ahead of pre-pandemic levels

The rise in room rates was preceded by improving occupancy, which came in at 74.8% in December 2022 and dropped slightly in January 2023 (to 69.0%) due to seasonality.

TOKYO — The reopening of Japan’s international border several months ago, along with the National Travel Support campaign, have helped boost Tokyo’s hotel average daily rate (ADR) beyond pre-pandemic comparables for two straight months, according to STR.

The rise in room rates was preceded by improving occupancy, which came in at 74.8% in December 2022 and dropped slightly in January 2023 (to 69.0%) due to seasonality. That January occupancy level was still 11.8% lower than the corresponding month in 2019, but January ADR of JPY20,055.58 beat that pre-pandemic comparable by 14.7%.

“The Tokyo hotel market is structured predominantly under leases, and hoteliers prioritize occupancy over ADR as the way to consistently drive performance and pay those leases,” said Shiori Sakurai, STR business development manager. “Operators are cautious about achieving higher rates at the expense of occupancy and will often let occupancy growth lead before taking the steps to push ADR.”

“For Japan as a whole, the greatest correlation of hotel performance metrics exists between actual occupancy and ADR growth. When occupancy rises, ADR will follow,” Sakurai said. “Recently, that trend has played out thanks to international borders reopening, which allowed a much-needed segment of demand back into the city, as well as the government simultaneously subsidizing domestic tourism. Tokyo was well below pre-pandemic levels in top- and bottom-line performance for much of 2022, but there has been a clear upward trend since the fourth quarter of last year. While there is still a way to go to reach recovery, recent months’ developments have been encouraging.”

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Theodore is the Co-Founder and Managing Editor of TravelDailyNews Media Network; his responsibilities include business development and planning for TravelDailyNews long-term opportunities.

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