Tourism boom drives Japan to convert offices into hotels

Wed Jul 29, 2015 6:07pm EDT
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By Junko Fujita

TOKYO (Reuters) - Record tourists to Japan are stretching the ability of hotels to accommodate them in a sector constrained by high costs, forcing developers to think out of the box for means to quickly increase lodging options without breaking the bank. 

Japan is on target this year to beat the record 13.4 million visitors in 2014, helped by a weak yen and easier visa requirements for some Asian countries. The government is aiming to attract 20 million visitors by 2020, when Tokyo hosts the Olympics, to revitalize the world's third-biggest economy.

The rising influx of tourists is already squeezing existing accommodation supply in Tokyo, which has about 100,000 hotel rooms. Just 7,600 rooms are scheduled to be added in the next three years, according to STR Global, a research firm for the hotel industry.  

The slow pace of growth is due to rising land prices and construction costs. One quick solution: convert old office buildings into hotels with tiny but stylish rooms that can rent for under $30 a night, less than half the rate for a cheap business hotel.

"Converting an office building into a hotel is an ideal way to respond to the immediate need for hotel rooms," said Yukari Sasaki, senior managing officer at property developer Sankei Building Co. "Building a hotel from scratch costs too much money now because of high construction costs."

Sankei, a unit of Fuji Media Holdings Inc, which owns the conservative Sankei newspaper, converted a 35-year-old office building in Tokyo's electronics-geek district of Akihabara into a hotel in under a year and for less than $8 million.

The hotel, called Grids, charges 3,300 yen ($27) a night per person for a bunkbed and up to 5,000 yen ($40) for premium rooms with tatami mats.

By comparison, the average room rate at Tokyo's lowest-ranked business hotels has risen 11.7 percent from a year earlier to 9,500 yen, according to STR Global.   Continued...

A waiter works in a bar at First Cabin hotel, which was converted from an old office building, in Tokyo, July 3, 2015. REUTERS/Toru Hanai