What does the future look like for Japan’s hotel sector?

The outlook for existing asset performance remains promising.

According to a recently released Savills report, Japan’s hotel sector has maintained robust momentum over the past half year, as reflected in the unabated growth in ADR and RevPar. Occupancy rates are steadily climbing back to pre-pandemic high levels.

“The labour shortage is easing, and the use of technology has improved operational efficiency, paving the way for higher occupancy, and in turn, stronger RevPAR growth moving forward. With limited new supply, the outlook for existing asset performance remains promising,” the report said.

Here’s more from Savills:

Inbound arrivals in 1H/2025 reached 21.5 million, comfortably surpassing the same period last year, and putting Japan on track to exceed 40 million by year-end. The Expo 2025 in Osaka is progressing well and is expected to hit its target of 28 million visitors by the end of the event in October. Expo attendees are also likely to explore the Greater Osaka areas, boosting demand for hotels across the region.

In addition, the opening of Junglia Okinawa, a major nature adventure park, highlights the strong potential of Okinawa as a resort destination and is expected to drive hotel demand by appealing to both local and overseas tourists in the prefecture.

That said, there are headwinds such as the ongoing global political and economic uncertainties and intensifying competition from other Asian destinations stepping up their promotions. The appeal of Japan’s high value for money may also wane if the weak yen begins to recover. These factors may somewhat slow the pace of inbound tourism growth in Japan.

That said, regional destinations offer untapped potential. With strong local government support and innovative efforts to attract more tourists underway, there are still ample opportunities, pointing to promising growth prospects for the hotel sector in regional markets. Overall, Japan is expected to see strong tourism growth, though perhaps not at spectacular levels.