• Red Planet eyes evolving Japan

Red Planet Japan has formed a joint venture with GreenOak Investment Management to develop Red Planet-branded hotels in Japan.

The deal came as Marriott International signed 12 Fairfield by Marriott hotels in the country, to take advantage of the “robust” growth in visitors to the country.

At Red Planet, joint venture will see GreenOak invest up to Yen5bn and Red Planet up to just over Yen55m, giving it Yen22.2bn to finance up to six new hotels in Japan over the next two years.

Both parties expected to expand the scope of the venture over the following two years to keep pace with the rapidly-growing Japanese travel market.

Red Planet Japan’s CEO, Tim Hansing, said: “This partnership enables major expansion of our hotel footprint across Japan’s urban centres, solidifying our position as the leading Asian budget hotel chain to meet increasing demand from, above all, the booming tourism surge into Japan. We are particularly pleased to be be able to showcase our guest-facing technology which is transforming the stay experience. None of our competitors have been able to implement anything like this.”

GreenOak has operated in Japan since 2010 and has USD10.6bn in assets under management worldwide. GreenOak partner Dan Klebes, said: “Through this venture, GreenOak seeks to invest in a sought-after asset class with a brand which appeals to the regional value-seeking traveller visiting Japan today. The Japanese hospitality market enjoys high occupancy rates and rising rooms rates, providing high yields and substantial asset appreciation.”

Hansing told Hotel Analyst: “We opened our first hotel in Japan in 2013 and we’ve been building up slowly ever since. The market for business, or budget hotels, was operating at 85% occupancy with a declining average rate which attracted us. The available room stock was very poor and there was an opportunity.

“Then the country’s tourism started to build and we’ve been in a great space ever since. One of the interesting things that happened was the role that Airbnb played. When you drive tourism there is usually a supply lag because you cannot build hotels fast enough, but here the floodgates opened. There were an overwhelming number of visitors, a lot of the locals didn’t like that there were so many tourists around.

“Then last year legislation bought in around Airbnb meant that the supply suddenly halved. Since then we haven’t seen occupancy decline below 85% to 90% and rates are fairly solid.

“We’ve grown fairly rapidly  – we’ve got 30 hotels open and we’ve built all but two of them, and we’ve got eight hotels under construction. It’s very easy to build hotels in Japan, everything comes in on time and on budget.”

The company has a pipeline of five hotels in the Philippines, two in Japan and one in Thailand.

Hansing said: “We’ve now reached a point in our lifecycle where we can do management contracts and leases. We’ve got a product which is honed and we felt that it was time to do a joint venture. We’re now actively looking outside Japan for management.”

The deal was made as Marriott International announced an agreement with Sekisui House to bring its Fairfield by Marriott brand to Japan, with an anticipated 15 hotels signed by next year, all of which are expected to open by 2021, with the first dozen hotels scheduled to open in late 2020.

The hotels will be situated in locations near roadside rest stations called “Michi-no-Eki”.

“Japan has been experiencing robust growth in inbound tourist arrivals in recent years,” said Craig Smith, president and managing director, Asia Pacific, Marriott International. “This year alone, Japan has welcomed more than 20 million international travellers and is on track to reaching its goal of 30 million visitors by 2020. We see that, while there is an increasing demand to explore destinations outside of the popular gateway cities, there is currently a limited amount of accommodations in these more remote areas.

“Together with Sekisui House, we believe in the potential of capturing this growing trend with the simplicity and reliability of Fairfield by Marriott hotels to showcase our commitment to providing warm hospitality in emerging destinations across Japan.”

Commenting on the growth, Hansing said: “At the moment we’re the only budget operator in Japan – so the more the merrier.”

HA Perspective [by Katherine Doggrell]: The operators have been eyeing Japan warily for some time, but the past year has seen increased commitment, most recently with Dusit looking to grow in the country.

Whereas previous enthusiasm has been at the high end, the, as Hansing noted, parlous level of stock towards the other end of the market presents an opportunity for those who wish to swoop in and opportunity knocks. Comments about the ease of building can only be pricking up the ears of developers and the brands’ beauty parades could well get ugly. Favourable terms are more than likely.

It was also, we note, good of Airbnb to take one for the team, helping to maintain traveller demand while hotels could be built, before being hacked back itself. Nascent destinations, take note.

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