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A man rides a bike past the Corona Hotel in Osaka. Photo: REUTERS/Edgard Garrido
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In Japan, hotels lose out on Olympic delay and coronavirus

26 Comments
By Mari Saito and Sakura Murakami

The Osaka Corona Hotel in western Japan has been eerily quiet and empty the past few weeks.

"Our name is extremely regrettable," Kohei Fujii, the hotel's sales director, said with a sigh as he sat in an empty cafe in the lobby. A sign advertising discounted bottles of Corona beer stood at the front desk, but there haven't been many customers at the hotel to take up the offer.

Spring is usually the hotel's busiest season, Fujii said, with Japanese companies renting out conference space and banquet rooms to hold training seminars and parties for their new hires. The hotel is near the bustling Shin-Osaka Station, a transport hub for western Japan.

But with the coronavirus curtailing travel and disrupting businesses across Japan, room bookings are down to a third of what they were last year, Fujii said. The postponement of the Tokyo Olympic Games, originally scheduled to take place this summer, is also likely to devastate smaller businesses in Japan reliant on tourism and disrupt the economy at large.

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An empty breakfast buffet is seen at the Osaka Corona Hotel in Osaka. Photo: REUTERS/Mari Saito

Hotels with less unfortunate names than the Corona have not been spared either. Across Japan, hotels have seen a drastic fall in bookings as countries restrict travel to stem the spread of the virus and the Japanese government discourages people from unnecessary travel.

A boom in hotel construction and overinvestment in the hospitality sector in recent years had already sparked concerns over the sustainability of the market, even before the spread of the coronavirus.

"There's been so much development in the last few years and we've seen an absurd number of rooms added to the market," Fujii said, as he adjusted the surgical mask he was wearing. "I think there's going to be a lot of places that won't survive this."

After he came to power more than seven years ago, Prime Minister Shinzo Abe rolled out an ambitious economic plan for the country with tourism as a key component. To that end, Abe's government vowed to attract 40 million inbound visitors to Japan by 2020 and 60 million visitors by 2030.

Under his leadership, Japan aggressively bid to host the Olympics, legalized casinos, and courted foreign investment in the hospitality sector. Last year, 31.9 million people visited Japan, spending 4.81 trillion yen.

But the coronavirus, which has now spread to 195 countries and killed more than 16,000 worldwide, and the postponement of the Olympics announced Tuesday, will likely undermine those plans. Many countries have sealed their borders and put entire regions under lockdown.

In February, the number of foreign visitors to Japan plunged nearly 60% from a year earlier and analysts are already predicting a catastrophic year for the tourism sector.

"We had predicted 34 million foreign tourists to visit Japan in 2020, but that's just not happening anymore," said Takayuki Miyajima, a senior economist at Mizuho Research Institute.

As of Tuesday, shares in real estate investment trusts(REITs) focusing on hotel assets like Invincible Investment Corp, Ichigo Hotel Reit Investment Corp, and Japan Hotel Reit Investment Corp have shed some 60% this year, a deeper dive than a 31% drop in the broader REIT Index on the Tokyo Stock Exchange.

EMPTY ROOMS AND QUIET STREETS

The pandemic has been particularly devastating for Japanese cities like Osaka that have grown more dependent on tourists, particularly those from China, to support local employment and midsize businesses.

Investments in real estate in the Tokyo area dipped slightly last year, but continued to rise steadily in Osaka, according to a recent report by JLL, a global real estate broker.

The real estate boom in Osaka had already added 21,000 new hotel rooms between 2015 to 2018. Now many of them, like those at the newly opened Hotel Vista Osaka Namba, are sitting empty.

Hisao Ikawa opened the 121-room hotel last month on the same day Japan encouraged schools to shutter across the country.

Sitting in front of a giant mural of a golden tiger in the lobby of his empty hotel, Ikawa said there was "no point" trying to woo overseas travelers right now.

"We're controlling prices and trying to get even a small number of domestic tourists and business travelers," Ikawa said, a difficult task as Osaka has emerged as one of the clusters of coronavirus cases in Japan.

The Japan City Hotel Association, which represents over 200 mid-range business hotels across the country, said it expects a spate of bankruptcies this year if the outbreak continues through the summer and the government doesn't step in.

"We'd built our hotels with the belief that the country was going to shift towards welcoming tourists. But now with the public refusing to go out, we're the ones who are first to fall victim," said Tsuguyoshi Shimizu, the president of the association.

Japan's tourism agency said in 2017 that consumption by international and domestic travelers supported 4.7 million jobs in the country and accounted for 5% of the economy. A recent report by a Japanese corporate research firm said 12 hospitality companies, including a cruise operator, had already gone bankrupt since the outbreak of the virus, with many of these closures focused in western Japan.

Industry groups have sought additional government aid to weather the downturn. Japan is considering stimulus measures of at least $137 billion to combat the economic fallout from the coronavirus, sources say, joining global efforts to cushion the blow from the pandemic.

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A man walks along a street in the Gion district in Kyoto. Photo: REUTERS/Edgard Garrido

In the ancient capital city of Kyoto, the loss of foreign visitors is threatening the very survival of traditional Japanese ryokans, or family-run inns.

Momoka Matsui, a fourth-generation landlady of a ryokan near the famed Nishiki market, has fielded a steady stream of cancellation calls in recent weeks. Matsui's hotel is normally busiest in the spring, when cherry blossoms in full bloom attract visitors from across Japan.

Matsui said almost all the large groups that had reserved rooms years in advance had cancelled or delayed trips due to the virus. Only in a few cases has she been able to collect cancellation fees.

"If this continues through summer, we really don't know how we can hang on," said Matsui. Many of her 100-person staff have been asked to stay home to receive a government subsidy that covers two-thirds of their pay.

Japan's Ryokan and Hotel Association, which oversees 2,500 small to mid-sized inns and hotels, said many small owners had poured most of what they've gained from the recent tourism boom into expensive renovations to upgrade their facilities ahead of the Olympics.

Now, many of them are negotiating with their banks to forestall bankruptcies after a disastrous month of cancellations, said Shigeki Kitahara, who owns a ryokan a few streets away from Matsui in Kyoto, and heads the association.

"In all honesty, for the month of March, it's not even a question about the percentage of customers we've lost," he said. "We've been pretty much wiped out."

© Thomson Reuters 2020.

©2020 GPlusMedia Inc.

26 Comments
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Reading this article make me feel very sad and sorry for the business around Japan, although most of the world is in the same boat, (mine included) this year is going to be a very tough year for businesses, staff, investors, and the work force. jobs hang in the balance and some have already gone, this includes my son who was laid off yesterday, and I have a very restricted income as I can't go out and undertake my work. What also is not going to help is the exchange rate has plummeted, which make any trip to Japan a lot more expensive, which is going to have a knock on effect, lets all hope that this virus is got under control soon and things start to get back to normal, but I can't see it returning back to full steam until next year.

17 ( +17 / -0 )

The frightening thing is that these businesses seem to be run with little in the way of accrued earnings to see them through tough times. I can see how a prolonged period of reduced occupancy could hurt the bottom line, but if a place is going to fold up the tent after a couple of months, you have to question how well it was being managed.

1 ( +6 / -5 )

Tough times and I hope the government provides immediate and direct financial support. I am glad the Olympics was not canceled but rather postponed, and hopefully the economy will recover soon.

9 ( +9 / -0 )

Most small business run on tight margins and few have a surplus to see them through bad times. Hotels, big or small, run on very tight margins, as does most of the hospitality sector. Any customer facing service is in trouble. This is a global problem, it isn't just Japan and it's much worse in many places.

9 ( +10 / -1 )

@luddite, just take a look at Italy, Spain, France those police don't muck around, the government has implemented a lockdown no one is to go out etc, there is plenty of people being videoed in the street being promptly arrested and handcuffed.

5 ( +5 / -0 )

@brian wheway. I do not understand your response to my post.

5 ( +5 / -0 )

The Osaka Corona Hotel in western Japan has been eerily quiet and empty the past few weeks.

I bet you! That one surely has a marketing problem right now.

1 ( +2 / -1 )

Reckon I’d be looking at changing the name of that hotel quick smart. .

4 ( +4 / -0 )

Seriously is this a bad joke: "A sign advertising discounted bottles of Corona beer stood at the front desk, but there haven't been many customers at the hotel to take up the offer." or is this for real?

5 ( +5 / -0 )

Small business need government support and long term loans.

2 ( +3 / -1 )

Pls do not worry abt yr name, anyone that had travelled knows yrs is the name of a beer. Was yr hotel clean & neat before the corona v ???. If it is, no worry, think abt fukushima, what id yr hotel was fukushima hotel ???. I was told by a friend that his son stayed at yr hotel just last week.

-1 ( +0 / -1 )

Having a huge event in the pipeline for next year, after things return to normal could be a great thing for those facilities looking to get financing to tide them over during the dead zone. Not much help for those already in the bubble who were relying on the fast injection of inflated prices to stay afloat. Hopefully most (or at very least the best) of them can get interest free government loans to see them through the drought. Once things lighten up, there should be pent up surge of domestic travel ahead of the full international free-for-all that will happen the minute a vaccine becomes readily available.

-1 ( +0 / -1 )

8pm tonight, Emergency Announcement of Coronavirus meaning stay home. Largest reported infection in one day confirmed.

Avoid going out this weekend Tokyo area.

2 ( +3 / -1 )

I would imagine that the Corona Motel is probably the cleanest place to stay at in Japan. I'm sure that the staff are making sure the rooms are EXTRA clean! Plus, its all good for likes on Facebook and Instagram if you stay there!

1 ( +1 / -0 )

Sad story being replayed the world over unfortunately...hundreds of thousand jobs lost worldwide already...may it pass in the next few months.

1 ( +1 / -0 )

@Brian Wheway, your comment about the exchange rate is something the seriousness of this pandemic has shoved into the closet of people's minds. That rate of exchange is indeed punishing for tourists from many parts of the globe, me included.

2 ( +3 / -1 )

Yes, it is unfortunate for Japan that the Olympics were postponed. However, the economic impact and unemployment are a worldwide problem. For example, a million people have lost their jobs in Australia in the last 72 hours and more are set to come with talks of a full nationwide shutdown later this week. Japan has yet to take proactive action against the spread of this virus. It's clear that asking, urging and suggesting are doing nothing to stop the spread of the virus. They did close schools, but studies have shown that closing schools has very little impact on the spread of the virus. Japan is a densely populated and small country. If the J-gov do not take drastic and proactive action now, the infections and death toll will surpass Italy very quickly and keep growing. People must stay home indefinitely in order to break the infection cycle. That is all there is to it!

1 ( +1 / -0 )

What could go wrong when overcapacity in hotels suffers from a massive fall in customers?

And there is no plan B?

We are looking at it...

2 ( +2 / -0 )

My aunt and uncle live in Corona, CA and they aren't exactly escaping the city. I was surprised going back to Cali a couple months ago, Corona Beer has 2 new types now.

0 ( +1 / -1 )

Small business need government support and long term loans.

Absolutely. It's frightening to think of all those people losing their livelihoods.

2 ( +2 / -0 )

Corona Hotel LOL The virus has forever ruined the perfectly good name!

2 ( +2 / -0 )

Such a lovely place (Such a lovely place), such a lovely face... plenty of room at the Hotel Osaka Corona.

1 ( +1 / -0 )

I like Corona Hotel. Cheer up, the current crisis could turn a promotion.

More depressing are around small-scale ryokan and minpaku businesses. Potential demands can be found among proper Japanese people rather than international visitors.

1 ( +1 / -0 )

Yeah, one of my cousins was laid off last weekend. He works at a pub I was tell me that half of the pubs and restaurants in Portland Oregon, where he lives, are gonna be closing down too.

This definitely looks like it’s a worldwide problem. And in the US at least, our Congress is finally debating, and will be voting on a stimulus package to help cushion the blow. I mean they have to, as well as with government worldwide.

1 ( +1 / -0 )

The frightening thing is that these businesses seem to be run with little in the way of accrued earnings to see them through tough times. I can see how a prolonged period of reduced occupancy could hurt the bottom line, but if a place is going to fold up the tent after a couple of months, you have to question how well it was being managed.

This is not just a Japan problem..it's like this all over the world. I have relatives in finance/commercial banking and many client's cannot last a week without immediate relief. They have been seduced by "easy money", cheap borrowing costs and greedy dreams.

So many forgot the old phrase "cash is king" and became servants to their debt.

2 ( +2 / -0 )

Yes...that name is very unfortunate...should really consider changing it. i wonder how Corona beer sales are doing too.

2 ( +2 / -0 )

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