Why are big asset managers buying Japanese hotels?

investmentnews.com:

A rapid tourism recovery in Japan, bolstered by the return of Chinese visitors, and the highest level of inflation in four decades are fueling a boom in hotel investment in the island nation.

Foreign investors, including Goldman Sachs Group Inc., KKR & Co., Blackstone Inc., have spent a combined $2 billion on hotel deals in Japan so far in 2023, the most compared with any other sector in Asian commercial property, according to MSCI Real Assets. That’s already more than the $1.4 billion seen for all of 2022. 

Robust demand for lodging by visitors and rising prices create an ideal scenario for investment. In an inflationary environment, hotels have the ability to change room rates in real time to adjust pricing — making them more attractive than apartments, offices or warehouses where lower rental prices may be locked in for years. On top of that, a weak yen makes Japan more attractive for tourists, and investors, seeking good deals. 

“We’re actively looking for new acquisition opportunities,” said Kenny Ho, chief executive officer of Taipei-based private equity fund Envision Investment Management, which focuses on value-add real estate investments in Japan and Taiwan. “As Japan’s tourism market attract increasing international arrivals, the hotel market will be able to grow and diversify to fill different types of lodging demand.”

Compared with before the pandemic, visitors to Japan are spending more. Most of that money is going to lodging and hospitality, according to spending data from the Japan Tourism Agency. After years of deflation, core prices excluding energy and fresh food are increasing at the fastest pace since 1981.

These factors suggest there’s more room for the hotel sector to expand. Both the number of