Thursday, July 29, 2021

The hotel industry in Tokyo gets "headache" because of the strange Olympics

The decision to host the Tokyo Olympics without spectators has dashed hopes for the hospitality industry, but some retail sectors have benefited from this uncanny Olympics.

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Before the Covid-19 outbreak, Japan was expected to welcome more than 40 million foreign visitors in 2020. The Tokyo Olympics was considered a valuable opportunity for the tourism industry to boost Japan's economy. According to Bloomberg, the Japanese hotel industry spent $13.7 billion on upgrading and adding their facilities between 2017 and 2019, a 50% increase from similar expenditures in 2014-2016.

However, the reality is that the Japanese tourism industry continues to face difficulties, starting on July 8 when the Organizing Committee made a decision about the Olympics without spectators. Bloomberg estimates more than 1 million room nights will be canceled, based on 30% of Olympic tickets purchased by visitors outside the Tokyo area.

Small hotels in Tokyo suffered great damage when the 2020 Olympics were without spectators. Source: Noriko Hayashi/Bloomberg

Tobu Hotel Levant in Tokyo saw dozens of booking cancellations, from the night of July 8 to the next morning. "We have not yet fully refunded guests who cancel. So there won't be as many rooms booked in the Olympics as we expected," a representative of this hotel said.

Makiko Furusato, the owner of a small hotel near the Olympic venue in Tokyo, said she had high expectations for the event, but now has to deal with cancellations and the race for discounts. "We opened in October 2019 and was immediately affected by the Covid-19 pandemic. Now we can only hope. Bars and restaurants were in big trouble too, but at least they get some support from the government. No one cares about us."

Hotels try to compete with each other by reducing room rates to attract tourists. Right before the opening ceremony of the Olympic Games, the average price per room for two adults on the booking site Jalan had dropped by about 30%, compared with the end of June. Tobu Hotel Levant in Tokyo has also reduced prices from around $90 /night to less than 63 USD/night for 1 person.

In the central area, the decrease was even deeper. In Shinjuku, for example, the standard adult room rate at Keio Plaza Hotel Tokyo has dropped to $163 per night, from $489 per night a few days earlier. No one knows how much discount will make room occupancy improve.
Many hotels in Japan are forced to reduce room rates to attract guests. Source: Reuters

According to hotel research firm STR, average occupancy at Tokyo hotels fell more than 40% in June, compared with the same period in 2019. The company forecasts occupancy will continue to be low in August if the state of emergency is maintained as it is now.

"This latest blow is likely to cause more bankruptcies," said economist Hideo Kumano at Dai-Ichi Life Research Institute. This Olympics, hotels in Japan will lose about 456 million USD.

Tours during the Tokyo Olympics also take place quietly and strictly. Some international media and press staff are allowed to join the tour after the 14-day quarantine is over. These tours are organized separately, some taking place at night to minimize contact with local people. Attendees must sign a pledge not to separate from the tour, not to speak to residents, and if violated, may be expelled.

Olympic host cities often offer thousands of tours to the media to advertise their tourist attractions. But this time, Japan only tried with a small group, creating a "bubble" to separate foreigners from Tokyo's 14 million residents.

The Associated Press described an "extraordinary" tour to the international press during the Olympics. Accordingly, the first stop is the Hama-rikyu Garden, which international visitors will visit after the garden is closed and the locals have left. The bus then took international visitors to a museum after dark, where people wandered in silence and solitude. Along the way, the streets of Tokyo were empty and quiet, as Tokyo was experiencing another outbreak of the Covid-19 pandemic. At the end of the tour, the car brings the foreigners back with their "Olympic balloons".
Tours during the 2020 Olympics are organized exclusively for the media. Source: Reuters/Molly Darlington

While people can't travel, the fashion and electronics business is growing well. Sales at a store in Shinjuku grew 20%, with watches over $10,000 growing more than doubling from the same period last year. A store representative said that more and more people are buying valuables to make up for the summer holidays they can't attend. At Takashimaya shopping mall, bags and shoes from high-end brands are selling well.

Sales of large-screen TVs also increased in Tokyo, especially OLEDs, which increased by 50% because of their ability to display sharp images when playing fast-moving sports. Bic Camera said that sales of televisions and related equipment increased by about 10% compared to the Rio Olympics in Brazil 2016. According to the Japan Electronics and Information Technology Association, the number of TVs shipped in Japan in the first 6 months of the year increased by more than 20% compared to the same period in 2016.

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