Ritz Opening Raises Concerns Over Room Glut

<I>Osaka</I> - The Ritz-Carlton Osaka added 292 hotel rooms to an already overbuilt city when it opened its first Japanese property late last month.

Although business travel to Osaka is on the rise, demand is not meeting the number of available hotel rooms.

No doubt, the opening of the Ritz is expected to benefit buyers and business travelers alike, who will be able to take advantage of a steady stream of promotions being offered by hotels in Japan's second largest metropolis.

"The Osaka market is growing, so I think it can accommodate hotel rooms, but there's a major concern that if we haven't already exceeded the five-star hotel room limit, we may soon do so," said Gary Collins, director of international sales, western region, for New Otani Hotels.

The Ritz, meanwhile, occupies 20 floors of a mixed-use complex and has 262 guest rooms, 30 suites and 25,500 square feet of meeting space.

"For business travelers it's a great address," said James Schultenover, vice president, sales & marketing for Ritz-Carlton Hotel Company. "We're in the heart of the Umeda business district and the focal point of a mixed-use development.

The Ritz-Carlton Club has 56 guest rooms and eight suites, is accessible by special key and features five complimentary food and beverage presentations daily.

A special introductory Executive Experience package, offered through September 1, will include deluxe room, a $40 food and beverage credit, a personal escort to nearby rail and subway stations for transport assistance, 100 business cards in Japanese and English, complimentary clothes pressing upon arrival and a free newspaper. The package is priced at $320.

But the Ritz faces some tough neighbors who are competing for business travel dollars.

"The Imperial opened last year, and now there's the Ritz-Carlton,' said the New Otani's Collins. "Although the five-star hotels are in different places and they offer a slightly different product, they're still competing against each other," he said. "The hotels that are mostly affected, however, are the Westin and Hilton because of their location in the vicinity of the Ritz-Carlton. Most business travelers to Japan book a hotel by its location.

"The market for Osaka hotels in general is increasing," Collins added, "but it's not increasing to the point where we can keep the same occupancies, which averaged about 75 percent for the city as a whole last year. The U.S. market has increased about 5 to 8 percent per year, but growth depends on the strength of the yen."

The New Otani, meanwhile, recently kicked off a special promotion in May which will continue until Dec. 15. All passengers who fly on United Airlines through Los Angeles to Kansai or Kansai to L.A. in business or first class can stay in a deluxe castle-view room for about $79. The usual price would be about $275.

Equally appealing to business travelers staying at the Otani is that a new subway line, Japan Railway's Nagahori Tsurumi Ryukuchi Line, opened a station just outside the hotel late last year. "Before it was a bit of a problem to get downtown, but now you can make it in less than 10 minutes," Collins said.

Meanwhile, Hans E. Koch, general manager of the Osaka Hilton sees the opening of the Ritz-Carlton as a mixed blessing. "The Ritz Carlton adds 292 rooms and suites as well as a considerable-sized banquet operation to a hotel market that already suffers from an oversupply of hotel rooms and banquet facilities. On the other hand, with the Ritz-Carlton's proximity to the Osaka Hilton and its being part of a new shopping and office complex, additional traffic is attracted to the area, which is expected to benefit both hotels in the mid to long term."

Koch also has seen a slight rise in U.S. business. "The share of American business travelers at the Osaka Hilton has shown slight increases from 6.7 percent in 1995, 6.8 percent in 1996 and 7.4 percent year-to-date. The increase in 1997 is attributable to a more attractive exchange rate between the U.S. dollar and Japanese yen," as well as to more favorable business environment for U.S. corporations, particularly, in the Kansai area, he said.

The Imperial Hotel--which opened in March, 1966, and is managed by the same company that operates the Imperial Tokyo, Japan's oldest and one of its most prestigious hotels--is another Osaka five-star property. "We don't know what affect the opening of the Ritz will have on our hotel's business yet," said Koichiro Aoki, the Imperial's Los Angeles-based director of sales. Although the Imperial hasn't offered any special promotions to the general public, it has offered a 50 percent discount to its Imperial Club members since the hotel opened. Aoki estimates there are 13,000 member travelers based in the United States.

While the New Otani and Imperial may be wary about another five-story hotel, ANA hotel officials feel it's no threat. "Both hotels are delighted that a hotel of that caliber has opened in Osaka, because it raises hotel standards," said Jean Rosano, director of sales of ANA International Hotels in Los Angeles. "Even though there's obviously a room glut, we haven't noticed it. We feel it won't have any effect on our guests. We're not of the same caliber as the Ritz Carlton. ANA Osaka is a four-star hotel with a very good business base." ANA also operates the ANA Gate Tower, located on top of an office building adjacent Kansai International Airport. Most of the guests at that hotel are Asian-based travelers continuing on to other parts of the region, she added.

To boost corporate traffic, local officials are working hard to increase business in the area. In April, the regional government opened an office in San Francisco to promote U.S. business and help U.S. companies set up operations in Osaka. The West Coast office (415-288-3920), complements the Osaka city office in Chicago.