Japan Airlines decision to sell a majority stake of 79.6% in its JAL Hotels division to Okura Hotels and Resorts will see two of the country's biggest domestic-owned operators raise their international profiles.
The 24-strong Okura Hotels and Resorts, which operates luxury hotels predominantly in Japan, but with sites in Korea, China, Hawaii and one in the Netherlands, will now join forces with the 57-strong JAL Hotels, one of the few hotel groups in Japan to develop a truly global presence.
JAL Hotel's global reach – 18 of its hotels are overseas – was one of the attractions to Okura Hotels and Resorts, which has increased its international expansion in recent years and currently has three hotels in the pipeline: in Taipei, Macau and Bangkok.
JAL commented: "Both hotel groups share the same vision and motivation to raise their competitive edges and perform well on the global stage by establishing internationally renowned hotel chains of outstanding quality".
The decision by JAL to sell the stake was driven by "intense competition" in the hotel industry, with declining customer numbers combining with new operators in the country to hit the group's hotel business.
JAL said that, with "new overseas hotel operators and start-ups from various industries", it had become "urgently necessary to improve profitability through further service improvements and cost reductions".
The sale marked ongoing efforts by JAL to strengthen its financial position after filing for bankruptcy protection in January.
JAL, which will retain an 11.1% stake in JAL Hotels, is due to file an official rehabilitation plan with the country's government at the end of this month. It is expected to show an increased focus on its core airline business after 40 years in the hotel market.
As part of efforts to expand its global profile, Okura Hotels and Resorts signed a marketing alliance in 2007 with Taj Hotels Resorts & Palaces, which saw the two parties reciprocate points in each other's loyalty programmes and take bookings for each other's hotels, creating awareness in their respective domestic markets of Japan and India.
Okura Hotels and Resorts and JAL Hotels will retain the Hotel Nikko and Hotel JAL City brands, allowing Okura greater scope outside the luxury domain. The Nikko brand is more closely aligned to Okura's current luxury portfolio, however, the Hotel JAL City is focused towards business travellers, with properties found around airports or the business districts of major cities.
JAL Hotels is due to launch six new hotels in Asia – five in China and one in Vietnam all under the Nikko brand name with the exception of a resort site. Outside Asia, the five star Hotel JAL Tower Dubai will become the first major Japanese-managed hotel in the United Arab Emirates when it opens this year.
HA Perspective: Nikko was one of the juiciest hotel chains to become available as a result of the current recession. The fact that it has gone to a domestic rival will only add to Japan's reputation as a difficult market to enter.
There would certainly have been international interest in Nikko. Until 2006, Le Meridien had been partnered with the brand and had enjoyed a considerable boost from the strong outbound market in Japan.
Whether Okura is the best partner for Nikko remains to be seen. It will certainly be worth noting how ANA's relationship with InterContinental works out in comparison.