These were the notable hotel investment transactions in Japan in H1

Japan hotel transaction volumes in H1 were 40% lower than the previous year.

According to a Savills report, Japan’s hotel transaction volumes hit record high in 2024, reaching an impressive JPY1.2 trillion, while surpassing the previous year by more than 50%. The 2024 volume was also 80% higher than 2019 levels and more than 2.5 times the 10-year average between 2014 and 2023.

“Following the trend seen across the real estate market in Japan, hotel transactions got off to a slower start in 1H/2025 due to limited opportunities and global uncertainties,” the report said.

Here’s more from Savills:

Hotel transaction volumes in 1H/2025 are about 40% lower than those of 1H/2024, though these figures are preliminary and likely to increase. Despite this, hotels remain highly sought after by overseas investors, who accounted for over half of all hotel deals in 1H/2025, while J-REITs and other listed companies comprised roughly one-third of the total transactions.

Several landmark transactions have involved hotel assets in 1H/2025. In May 2025, MUFG acquired the mixed-use hotel, office and retail property, Osaka Dojimahama Tower for more than JPY100 billion. The hotel portion comprises more than half of the building, spanning over 25,000 sq m of net rentable area with 548 guestrooms. Earlier this year, Brookfield Asset management acquired a 30% stake in the iconic Meguro Gajoen, which is a mixed-use property including a 60-room luxury hotel, for over JPY160 billion.

Another notable deal involved CapitaLand Investment acquiring mixed-use Hundred Circus East Tower in Tokyo for JPY30.0 billion. The building has a total GFA of 30,700 sq m with close to half of the space occupied by Hundred Stay Tokyo Shinjuku, a residential hotel with 106 guestrooms.

J-REITs have remained active over the past half year. Notably, Kasumigaseki Hotel REIT, sponsored by Kasumigaseki Capital, received listing approval in July 2025 and is set to become Japan’s first listed REIT specialising in developer-affiliated hotels. With an initial asset under management of approximately JPY50 billion, the new entrant marks the first REIT listing on Tokyo Stock Exchange in four years, signalling a positive outlook for the broader J-REIT market.

Looking at recent J-REIT transactions, Orix JREIT acquired Hotel Universal Port Vita, an official hotel of Universal Studios Japan with 428 guestrooms in Osaka for JPY35.0 billion. United Urban REIT acquired 296-guestroom Smile Hotel Premium Osaka Hommachi for JPY8.7 billion. One REIT acquired the 240-guestroom Comfort Inn Nagoya Sakae for JPY7.7 billion.

With high hotel price tags supported by robust demand, investors are increasingly shifting from passive asset holding to value-add strategies that maximise hotel value. While major tourist hubs like Kyoto are grappling with overtourism, regional areas are striving to capture a greater share of inbound travel. As Japan targets 60 million annual visitors by 2030, these regional destinations are emerging as the next growth frontier, particularly among repeat travellers seeking new experiences.

Meanwhile, the new limited supply, exacerbated by delayed or cancelled developments, adds further pressure to the market. Many existing hotels may offer untapped potential through repositioning, reflagging, or rescaling. Some properties suffer from weak or absent branding, and many hotel stocks consist primarily of small double rooms, with very limited inventory suitable for group travellers. This persistent supply-demand imbalance presents compelling opportunities for innovative operators and developers willing to respond to evolving market needs.

Some investors are repositioning underutilised assets through refurbishment, concept renewal or operation overhaul. For instance, the recent acquisition of a portion of Oakwood Suites Yokohama by Lone Star Funds at an approximate price of JPY60 million per key demonstrates strong potential as an upscale branded hotel, especially in Yokohama where luxury hotels achieve exorbitant rates. Despite its proximity to Tokyo, Yokohama remains underutilised by inbound tourists which presents opportunities for it to transform into a key overnight destination of international travellers.

Another approach involves reflagging assets to accommodate market demand. The acquisition of Nest Hotel Osaka Umeda by Mitsubishi Jisho Investment Advisors for JPY45 million per key illustrates how reflagging an asset can potentially enhance profitability. With the current management contract ending soon and an increase in inbound group tourism, rebranding to a recognised hotel with larger rooms could drive stronger returns. Osaka’s rising global profile, driven by Expo 2025 and the upcoming integrated resort in 2030, further strengthens the asset’s upside potential.

Lastly, less well-known regional markets that can benefit from infrastructure improvements, government incentives, and destination marketing, could potentially face lower competition and offer more attractive entry points. The acquisition of the 392-guestroom Budget Kanazawa Ekimae by CapitaLand Ascott Trust for JPY5.0 billion, translating to about JPY13 million per key, highlights growing international investor interest in emerging markets like Kanazawa, which has gained popularity following the Shinkansen extension.

Overall, the hospitality sector remains bullish, backed by strong consistent fundamentals such as growing inbound tourism and limited new hotel supply. Several brand new hotels are scheduled to come online this year and next. Some of these properties may change hands as part of capital recycling strategies, enabling owners to unlock value and reinvest in further development. This wave of new supply, while adding short-term competition, also creates opportunities for investors and developers to acquire high-quality assets and reposition portfolios in line with shifting market dynamics.