While Europe and the US awaited the return of Chinese travellers after the protracted pandemic lockdowns in the country followed by a major passport renewal logjam, something else happened. Chinese travellers looked local and eastward.
As a result, Japan emerged as the top overseas destination for Chinese tourists in 2024, driven by a confluence of economic, cultural, and policy factors. This shift is evident in both tourism numbers and luxury spending patterns, positioning Japan as a key beneficiary of changing Chinese consumer behaviour, with the current economic standoff between China and the Trump administration only likely to forge closer ties.
Major interest on increased tourism
This has led to major hotel brands focusing on development opportunities in Japan’s major cities, attracted by inbound tourists to Japan in 2024 reaching 37 million and comfortably surpassing the previous peak of 32 million in 2019. Hotel ADR continued to rise last year, with Chinese tourists enticed to Japan in part by the weakened Japanese yen, which has made luxury goods more affordable for foreign buyers and has spurred a surge in luxury shopping among Chinese visitors.
In addition, bilateral efforts between China and Japan have led to eased visa regulations, facilitating increased travel at a time when Chinese travellers have balked at the more restrictive visa red tape to visit Europe, the UK and US. In late 2024, Japan introduced a 10-year multiple-entry tourist visa for Chinese citizens and extended the stay period for group visas from 15 to 30 days. Concurrently, China expanded its visa-free arrangements to include Japan until the end of 2025.
The result is that Japan welcomed approximately 36.87 million international visitors in 2024. July alone saw 776,500 Chinese travellers visiting Japan, with Chinese tourists emerging as the top spenders and total expenditures reaching $11.14 billion. It meant the country overtook Thailand, which received over 35.54 million foreign tourists in 2024, with Chinese visitors numbering 6.73 million, making China the largest source market for Thailand, although arrivals have yet to fully recover to pre-pandemic levels, where numbers reached 11 million in 2019.
New deals
The surge in demand has left Japan’s hotel sector playing catch-up. Higher construction costs and labour shortages have created bottlenecks for new supply, contributing to a sustained drop in expected new hotel completions in 2025 and beyond, with constrained hotel supply particularly in major tourist hubs such as Tokyo, Osaka and Kyoto. This is set to benefit existing hotels and those slated for completion, and should contribute to elevate ADRs and hotel asset valuations.
At the end of last year, real estate funds managed by Blackstone agreed to acquire three hotels in Osaka and Okinawa – Ritz Carlton Okinawa (a luxury resort surrounded by an 18-hole championship course overlooking the ocean), the beach-front Kise Beach Palace and city centre Nest Hotel Osaka, taking Blackstone’s hotel portfolio to circa $1.3 billion in the country after the company acquired or signed to buy nearly 20 hotels including an eight-hotel portfolio from Kintetsu Group Holdings.
“We have been one of the most active investors in Japan hotels in the past three years, anchored by our high conviction in hospitality and leisure as an investment theme globally,” said Blackstone Head of Real Estate Japan Daisuke Kitta. “Japan is experiencing strength in both inbound tourism and domestic travel, supported by its robust economic growth.”
In Tokyo, Accor and Nomura Real Estate will open the 217-room Fairmount on 1 July as part of the Shibaura Project, a significant mixed-use development in Tokyo’s Shibaura and Hamamatsucho areas.
“There is much to be excited about with the opening of Fairmont Tokyo, our first property in Japan. In this urban retreat, we have had the opportunity to bring to life a celebratory experience that marries Tokyo’s heritage and culture with a sense of innovation and modernity. This is the perfect home for Fairmont,” Fairmont Hotels & Resorts CEO Omer Acar said.
Other notable openings include the Mitsui Fudosan Group which is set to open in Hakone’s Kowakudani area next year; the Capella Hotel Group's Capella Kyoto set to open at the end of 2025; the Unbound Collection by Hyatt which will debut in a franchise agreement with JR Tokai Hotels in Nara; 1 Hotel Tokyo from SH Hotels & Resorts which will debut as part of Tokyo World Gate Akasaka project; and Lead Real Estate's new Ent Terrace Ginza Premium luxury apartment hotel located in Tokyo’s upscale Ginza district.
“We picked Ginza as the launching pad for our Premium series as we plan to bring other high-end apartment hotels to the market in Japan,” said Lead Real Estate CEO Eiji Nagahara.
The spotlight will be on Osaka especially as it is currently hosting Expo 2025, which opened on 13 April, as well as the development of Japan’s first integrated resort. These developments should generate greater interest in Osaka and cement the city’s presence as a high-end destination.
Beyond the traditional hotspots
The growth in visitors is also expanding Japan’s tourism geographies. Repeat visitors to Japan are more likely to visit beyond the major tourist hubs, which is likely to lead to sustainable growth in regional hospitality markets.
“In 2024, Japan’s hotel market recorded a 19 per cent average growth in revpar nationwide. Approximately 80 per cent of this growth was driven by an increase in ADR, with upscale and luxury hotels in Tokyo and other major cities showing unprecedented growth that exceeded the national average,” Hirofumi Matsunaga, director & head of Japan advisory at Savills said “Japan's hotel market has traditionally performed at a high occupancy rate, and given the increasing labour and operational costs, growth through ADR increases make sense.”
Hotel assets have been highly prized among investors, comprising a historic 20 per cent of total annual real estate transactions according to Savills, with several standout hotel deals taking place. Compared with other major global markets, Japan has a lower supply of upscale and luxury-branded hotels, which is expected to drive more development, branding and value enhancement.
“The market has continued its strong growth this year, with both key cities and major resort markets starting the year with double-digit growth, supported by a weaker Japanese yen. Large-scale events, such as the Osaka-Kansai Expo, will also drive demand,” added Matsunaga.