INVESTMENT
percentage of room nights were sold to inbound guests , such as Kyoto with 67.8 % in 2019 , Osaka with 37.9 %, Sapporo with 38.2 %, and Tokyo with 44.8 %, are taking longer to recover since the Japanese government still has a cap on the number of inbound visitors allowed into the country at 20,000 people per day and since these are the markets which had seen the newest supply over the past five years or so . However , the government is moving towards aligning COVID restrictions with the rest of the G7 and other East Asian nations aside from China . Limited-service hotels and fullservice hotels in more domestically oriented markets have seen occupancies recover to around 80 % of 2019 levels .
Japan is a very desired destination and ranked # 1 in The World Economic Forum , Travel & Tourism Development Index 2021 for destinations people want to travel to . We believe that the resurgence should be very strong .
H : What are the expectations for hotel performance over the next 18 months in Japan and elsewhere where Fortress owns hotels ? SY : Japan has lagged other G7 nations in terms of forming public perceptions that COVID-19 is now endemic . The government has been cautious about lifting restrictions but has signaled that it will start doing so shortly .
With the expected reopening of Japan in autumn 2022 , we believe that international business travel and higher-end FIT will lead the recovery in inbound . LCC-dependent lower-rate inbound FIT and mass tour groups will take longer to recover , in line with the recovery pace for air capacity .
A positive factor is that many airports such as Haneda Tokyo International Airport , Ishigaki
FORTRESS HAS THE ADVANTAGE OF BEING ABLE TO TURN AROUND ASSETS THROUGH AGGRESSIVE RENOVATION AND OPERATIONAL TURN-AROUND PLANS MADE POSSIBLE BY THE EXPERTISE OF MYSTAYS HOTEL MANAGEMENT ( MHM ), OUR IN-HOUSE HOTEL MANAGEMENT PLATFORM .
– SHUNSUKE YAMAMOTO
Airport , Kumamoto Airport , and others , had significantly increased capacity immediately prior to the pandemic .
The weak yen will be a driver for increased interest in Japan as a travel destination .
H : What can you tell us about your active pipeline , and what is your forecast for M & A for the remainder of the year ? SY : We have been very active buyers this year having closed on three transactions ( 32 hotels ) and with six deals under exclusivity .
The three deals closed in 2022 include Kanpo no Yado portfolio with 30 assets acquired from Japan Post ; the View Hotel Narita and View Hotel Irago acquired from a subsidiary of Hulic ; and the Riverside Kumamoto ( expected to close at the end of August ), where the seller is an owner-operator .
We continue to like resorts but are actively looking for attractively priced opportunities in all hotel types and markets .
The distress in the market is still more operational rather than financial . Many of our recent
acquisitions have been assets that were under-managed or badly in need of renovation CapEx . Lenders have largely been extending the loan maturities for assets owned by investment firms and developers . So , Japan has seen fewer lender-led distressed sales compared to other markets .
Fortress has the advantage of being able to turn around assets through aggressive renovation and operational turn-around plans made possible by the expertise of Mystays Hotel Management ( MHM ), our inhouse hotel management platform .
H : What are your hotel investment criteria and how has it evolved in the last 24 months ? SY : We have always looked to acquire assets at a low basis , usually below replacement cost . We have done a handful of new developments over the past 11 years , but in those cases , we had a low basis in the land .
We have always looked for opportunities where we could enhance the asset ’ s performance , through a combination of renovation and operational improvement .
44 hotelsmag . com October 2022