Based on preliminary data from the Japan National Tourism Organization (JNTO), Japan welcomed around 31.9 million visitors in 2019 (Graph 1). This amounted to only a 2.2% increase year-on-year (YoY), despite the boost to inbound tourism in the run-up to the Rugby World Cup in September. In fact, visitor numbers surprisingly fell 0.6% YoY during the tournament as the disruptive impact of Typhoon Hagibis took hold. Although the positive annual change is welcome – the eighth year in a row – it now means that a growth rate of 25% would be required to hit the 2020 target of 40 million. This is certainly a tough ask, with the estimate made in mid-January by JTB Corporation, Japan’s largest travel agency, of 34 million visitors in 2020 being a case in point.

Major concerns include the large hotel supply, as well as the signifi cant drop in Korean visitors to Japan following the breakdown in relations between the two nations since August 2019. Having experienced a slight decline of 4% YoY for the fi rst seven months of 2019, this figure plummeted to a 60% YoY fall during the latter fi ve months. Yet, there appear to be early signs of some recovery. Inbound tourism from South Korea rebounded in November and December, growing 3.9% and 21.0% 

• The number of annual overseas visitors to Japan has risen for the eighth consecutive year, marking YoY growth of 2.2% for 2019. Unfortunately, the goal of 40 million visitors in 2020 appears out of reach.
• The outbreak of the Novel Coronavirus (COVID-19) is likely to signifi cantly disrupt the hotel market for the time being.
• The number of rooms added in 2020 is anticipated to exceed the previous year, whilst a sharp drop in new supply thereafter should ease some concerns about the overall level of supply.
• The growth in the level of spending on accommodation per night continues to outpace the change in visitor numbers. An emphasis on expanding luxury
• facilities aims to capitalise on this trend, with 50 luxury hotels expected to be built across Japan.
• Inbound tourism from major countries outside of the top five visiting nations, such as Thailand, Singapore and the UK, showed double-digit growth for the
• eighth consecutive year.
• Occupancy remains above 85%, though a dip in hotel performance was observed this period as the sector adapts to market conditions. A cap rate adjustment is expected as a result.
• Hotel investment volumes for 2019 skyrocketed by 74% YoY to around 571 billion yen – the highest level since 2007 – with both overseas and domestic investors purchasing portfolios and large-ticket assets.