Real Estate Real Estate: Hotel Sector - Time for a domestic holiday

We expect the supply-demand balance of the Japan hotel sector to gradually recover, although it is unlikely to return to pre-COVID-19 levels.

01 Jun 2020

Source: MLIT, STR Global and UBS estimates

The bar chart shows the several supply and demand factors and at what percentage each is compared to 2019 levels.

Quantifying economic resumption, policy response, and current risks

The COVID-19 pandemic has hurt the hotel sector over the past four months, first through a sharp decline in visitors to Japan, followed by the postponement of the Olympic Games, Japanese residents opting to stay at home, and hotel operator bankruptcies. The state of emergency has been lifted, but people have been asked to not travel outside their own prefectures until 18 June, raising the possibility of further bankruptcies. However, the government plans to roll out economic measures aimed at stimulating demand for travel within Japan once the calls for self-restraint have been lifted. In this report, we examine these factors in detail and attempt to quantify them in relation to hotel supply-demand.

We expect hotel supply-demand to bottom soon, then start to recover

We currently see the risk of hotel operators facing bankruptcy risk, but expect the impact of the "Go To Travel" campaign to support a gradual recovery in domestic travel demand. In 2021, assuming no further outbreaks of COVID-19, we expect a slight recovery in domestic business-trip demand and inbound demand, and anticipate an  extended  recovery  in  2022.  On  the  supply  side,  we  think  the  competitive  environment could improve because the impact of COVID-19 has resulted in hotel-related companies setting cautious supply plans, the possibility of consolidation, and the closure of some existing hotels. We have quantified these factors as much as possible in this report.

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