High-End Hotel Brands Make Inroads Into Tokyo
Three global hotel companies—Hilton International, Marriott International and Accor—this winter announced plans to expand their presence in Tokyo with properties at the high end of the business travel market. The timing is not coincidental. Despite chronic costs and other obstacles to development, which kept many global players out of the market, these hotel companies realize that Tokyo has become one of the world's gateway business destinations and that, accordingly, their upscale and deluxe brands need to be represented there. To facilitate this development, both Marriott and Accor are partnering with one leading local real estate company, Mitsui Fudosan, while Hilton has teamed up with a another local developer, Mori Trust.
Travel buyers who do not bring sufficient room nights to Tokyo to warrant having negotiated rates with a Japan-based hotel company will be able to get the coverage they need as part of a larger negotiation with one of their global suppliers. This same negotiation should cover their needs in other markets as well. Aside from the time savings that come from the single negotiation, buyers should be able to drive deeper discounts, given the greater amount of volume they are able to negotiate. Buyers will appreciate any cost savings they can negotiate as Tokyo remains one of the world's most expensive lodging markets. According to 2003 figures released in February by the Deloitte consulting firm, Tokyo hotels had the sixth-highest average daily rate, following Venice, Geneva, Kuwait City, Paris and Florence. Local rates actually have moderated, however. Tokyo hotels' ADR in 2002 was third-highest and second-highest in 2000.
Hilton International next year is scheduled to open a 296-room Conrad hotel, its deluxe brand, in the Shiodome business district. In announcing the project, Koos Klein, president of Hilton's Middle East and Asia Pacific region, acknowledged the importance of Tokyo in Hilton's portfolio, calling it Asia's most strategic city.
The 250-room Marriott project, which will carry the company's deluxe Ritz-Carlton brand when it opens in 2007, will be located in Roppongi, a long-time entertainment hub that has evolved into a business district. "As a global luxury chain, representation in Tokyo is critical for us," said Ritz-Carlton president Simon Cooper.
Both the Conrad and Ritz-Carlton are part of larger, multi-use developments that include commercial, residential and retail components. In this way, they resemble recent projects in other gateway cities, where the cost of land for freestanding hotels can be prohibitive. The Conrad will occupy the top 10 floors of a 37-story tower, the Ritz-Carlton the top nine of a similar size building.
The Accor project, which will carry the Mercure brand and open late this year or early 2005, will not be a new construction. Rather, the 209-room hotel will be a conversion of a former office building. According to David Baffsky, chairman of Accor Asia Pacific, this is the first time this ever has been done in Japan. To ensure the conversion is successful, Paris-based Accor has sent a team of French designers to oversee the buildout.
The hotel is located in Ginza, which is one of Tokyo's most fashionable retail areas. "The building itself sits atop a major railway station, which should make it convenient for business travelers coming and going from the city," Baffsky said. For Accor, the Ginza project is its second Mercure in Japan. It already has a Sofitel in Tokyo.
Considering the increasingly global nature of the hotel business, travel buyers can expect other brands that are intent on expanding to focus on Tokyo. "If you look at Tokyo as a gateway city, it hasn't had the hotels that a New York, London or Paris had. We've all become accustomed to the Japanese-owned hotels' role in the market and now you've got the international chains coming in as well," said John Wallis, senior vice president of Hyatt International.
Among global companies in Tokyo, Hyatt has been something of an exception. The 390-room Grand Hyatt opened last year in Roppongi, while its Park Hyatt Tokyo is established in the Shinjuku district on the other side of the city. "In addition to being an international gateway city, Tokyo is a hub for the whole of Japan," Wallis said, noting that a significant number of business travelers at both hotels are Japanese.
The wave of construction has raised some concerns about overbuilding. "For the next few years, we'll be oversupplied at the upper end, a situation that will take some time to correct," said Patrick Imbardelli, managing director for Asia Pacific for InterContinental Hotels Group, which has an InterContinental in the market at Tokyo Bay. "So many hotel companies have been wanting to enter the local market for so long that when an opportunity came, a number said yes.
"On the other side of the coin," Imbardelli continued, "if a developer is going to build in Roppongi, Ginza or some other expensive area, you have to put up a hotel at an upper upscale or deluxe price point or your rooms will end up being 60 square feet. A midscale hotel simply will not work when you factor in land costs in the desirable locations."
While it is an important business destination, Imbardelli said, "Tokyo's a great city, but not a lot of people go there for four days to catch a show or go dining."
Once the properties open in the next few years, travelers will benefit from the latest design and technology features built into the guest rooms and public spaces. High-speed Internet access, typically a wired solution in guest rooms and wireless in the public spaces, will be standard. With an eye to international travelers, business centers will operate 24 hours a day to allow guests to communicate with their offices back home. Likewise, spas and fitness facilities will be open around the clock to permit jet-lagged travelers to unwind in the middle of the night Tokyo-time.