The number of foreign tourists visiting Japan in 2018 reached a record high of 31.19 million, approximately six times the number of six years ago.
In addition, approximately 60%, or 16.1 trillion yen, of the 26.7 trillion yen in travel spending in Japan in 2017 was spent on domestic overnight travel by Japanese.
In addition to the boom in the inbound market, real estate investment in hotels was also increasing in anticipation of the Tokyo Olympics scheduled to be held in 2020.
Among these, the most popular investment was in business hotels, which do not require much specialized know-how, have high rent-bearing capacity, and can be considered from relatively small plots of land.
However, this led to an oversupply of business hotels. In addition, the Corona disaster exacerbated the situation.
The supply of business hotels has greatly increased without any differentiation.
Although the Corona disaster brought this situation to light, there had been an oversupply even before that.
In this issue, we will discuss how the hotel industry is categorized, compare the top hotel chains in Japan and the world, and discuss what is required of the hotel industry in the future. What is required of the hotel industry in the future?
How are hotels classified from four perspectives?
When we hear the word "hotel," everyone associates it with something.
They are used for various purposes, such as travel and business trips.
However, hotels can be divided into many different categories.
First, we will explain how the hotel industry is classified from four perspectives.
Classification by hotel type (1) Classification by function
First, we will introduce the classification of hotels by function.
In terms of function, hotels are classified into three categories in terms of the services they provide and the facilities they own.
Full-service
A full-service hotel is a multi-functional facility that has not only lodging functions but also meals, banquets, and other various functions.
Although not restricted by location, they are often found in the center of cities and are therefore also referred to as city hotels.
It is possible to visit a hotel not for lodging purposes, but for banquets such as wedding receptions and New Year's parties, or to enjoy buffets and afternoon tea at the hotel's restaurant.
Hotels tend to be of a high grade, and many are mid-range or higher.
Limited Service
Limited service, as the name suggests, is limited in function.
In other words, they are hotels that focus mainly on the original lodging function.
It is also known as a "lodging-specialized hotel.
Limited-service hotels are characterized by the fact that they minimize the functions other than lodging in order to keep lodging costs low.
Therefore, services and facilities are minimal, and meals are usually small and self-service.
They are used when only lodging is required, and are often found in budget hotels.
Recently, however, an increasing number of hotels have been making various efforts to differentiate themselves from other hotels, even while keeping their services and facilities to a minimum.
Resorts
Resorts are hotels located in well-known tourist areas and are designed for vacation stays, such as recreation, summer and winter retreats, and vacations.
They offer a full range of facilities such as restaurants, swimming pools, and spas, not to mention lodging functions.
Most hotels are relatively high-priced and are often used when traveling away from home.
The image of a full-service hotel is that of a resort.
Classification by hotel type (2) Classification by price
The following is a classification of hotels by price.
Many people use price as a criterion for lodging, and hotels are classified into seven levels according to functionality, room size, and ADR (Average Daily Rate).
Luxury
Luxury is an English word meaning "luxurious, extravagant.
Luxury hotels are the "highest price point" and are prominent hotel chains that are recognized as global luxury brands.
According to the American Hotel & Motel Association, a luxury hotel is "an establishment that meets international standards for large, luxurious facilities and service, has numerous suites, and is a 1,000-room facility capable of accommodating a large number of guests.
Upper Upscale
If a luxury hotel is a five-star hotel, an upper upscale is a four-star hotel.
Upper Upscale hotels are "upscale price range" hotels and are prominent hotels that are recognized as a global luxury hotel brand.
They are characterized by the fact that they are often the parent companies of well-known hotel chains.
In Japan, the equivalent are the "Imperial Hotel," "Hotel Okura Tokyo," and "Hotel New Otani," which are the "Three Families" of hotels.
Upscale
Upscale hotels are "upper price range" hotels that maintain the luxury and upper upscale feel, but with more efficient functions.
They are recognized as a global luxury hotel brand and are unique in that they are developed under the umbrella of a prominent hotel chain.
Hotel functions range from full-service to limited-service, and there is a wide range of hotel formats.
Representative examples of Japanese hotels include Keio Plaza Hotel and Tokyu Hotel.
Upper Midscale
Upper-midscale hotels are hotels in the "upper to mid-price range" that minimize functions, but offer superior room size and interior design, and more comfort.
This is a segment that offers comfort and a sense of luxury while focusing mainly on lodging functions.
Midscale
Midscale hotels are hotels in the "mid-priced range" that focus on the clientele and functions.
It is characterized by its emphasis on lodging functions and price, rather than on services, facilities, and other features.
They are used by a wide range of customers, including business travelers and families.
Economy
Economy hotels are "virtue price range" hotels with relatively low ADRs.
Compact rooms and minimal facilities. These hotels are for guests who are OK with sleeping and want to spend less, and are less functional than midscale hotels.
Many business chain hotels, such as Tokyu Inn, Sunroute Hotel, and Washington Hotel, fit this category.
Budget
Budget is an English word meaning "low budget.
Budget hotels are "budget" hotels, meaning they are cheaper than economy hotels and have minimal features and facilities.
Budget hotels are the most specialized category of hotels.
They are often located close to train stations and are popular with customers who just want to stay overnight.
The famous Japanese hotel chains APA Hotel, Toyoko Inn, and Route Inn are typical examples of this type of hotel.
Classification by Management Method
Hotels are also classified according to their management system, which consists of four main types of management systems.
As a guest, you may not be familiar with this classification, as you do not need to pay attention to the management system of a hotel when checking out a hotel.
However, if you are involved in the real estate industry or real estate investment, it is an important point to know.
Direct Management
In the direct management method of hotel operation, the operator is responsible for the development of the hotel, including land purchase and hotel construction, and is also in charge of management and operation.
This is the easiest method to understand because the same operator owns, manages, and operates the hotel. In the case of the direct management method, a considerable amount of money is spent to open the hotel, including land purchase and hotel construction costs.
However, the appeal of this method is that it allows for quick decision-making, such as reforming the hotel to meet needs and demands.
It is also socially credible and easy to obtain financing.
Along with the growth of its own brand, there are high expectations for chain expansion.
Typical directly managed hotels in Japan include the Imperial Hotel, Prince Hotel, and Rihga Royal Hotel.
MC (Management Contract)
The management contract method of hotel operation is a method in which management is entrusted to another company. It is also known as a "management contract," and this term is easier to understand.
A company with capital power or a third party constructs, owns, and manages the hotel.
The management company is required to have a certain level of name recognition and specialized management know-how.
On the other hand, the management company bears no management risk, making it easy to develop a chain of hotels.
In some cases, the hotel owner and management jointly establish a hotel management company and outsource management to that company.
Hoshino Resort, Hotel JAL City, and Okura Hotels & Resorts are typical examples of hotels with MC contracts in Japan.
This method is often seen in foreign-affiliated hotels, and the world-famous "Ritz-Carlton" is a hotel brand with many MC contracts.
Lease Contract
The lease contract method of hotel management is also known as the "lease method.
The lease contract is the same method as for general real estate investment, where the hotel is leased from the owner (proprietor), who is in charge of management and operation of the hotel.
Since only the building is leased, the brand of the hotel belongs to the management company.
Similar to leasing a tenant, the management company pays rent to the owner.
In most cases, there will be two types of rent to choose from: the fixed rent method, in which a fixed amount is paid regardless of the hotel's operating performance, and the variable rent method, in which the rent is calculated based on operating performance.
Franchise System
In the franchise method of hotel operation, the hotel owner or manager joins a specific hotel chain and uses its management know-how and brand.
The franchise method is also often seen in convenience store operations.
The owner receives direct income from the sales of the hotel operation, but in return pays franchise fees and brand royalties to the head office.
APA Hotel, Super Hotel, and Hotel Sunroute are typical examples of Japanese hotels.
Classification by Location
Hotels are found in a variety of locations, and their location is also a factor in classification.
Although it may be easy to imagine the location of a hotel, here we will again explain the classification by the three types of locations.
Downtown Hotels
The term "downtown hotel" is not so familiar in Japan, but it refers to a "city hotel" located in the city center.
In the U.S., they are also called "urban hotels.
These hotels meet the various lodging needs of families, couples, and business travelers.
They are often located in urban areas and offer a wide range of hotels from budget to luxury price ranges.
However, most hotels are in the luxury category and tend to be "full-service" multifunctional hotels in terms of functionality.
Airport Hotels
Airport hotels are hotels located near or on airport premises.
One can imagine hotels near major international airports such as Narita Airport, Haneda Airport, and Kansai International Airport.
These hotels are often utilized by business travelers and tourists.
Resort Hotels
Resort hotels, as the name implies, are hotels located in prominent tourist destinations that are ideal for vacations.
Many hotels are classified in the luxury category and are characterized by a wide variety of facilities and amenities.
Classification by Purpose of Use
On the other hand, hotels can also be classified by purpose of use.
Let's take a look at hotels by purpose of use from four perspectives.
All-Suite Hotels
An all-suite hotel is a hotel where all rooms are suites with a separate living room and kitchen in addition to the bedroom and bathroom.
They are often found in luxury hotels in the high-end price range and are characterized by their large guestrooms.
Extended-stay hotels
Extended-stay hotels are also known as "residential hotels.
They are generally designed for guests staying for a week or longer and feature larger rooms, more storage space, and kitchen facilities.
Because of the high cost of accommodations for long-term stays, self-service is often introduced.
Some hotels also offer long-term stays of one year or more.
Membership Timeshare Hotels
A membership timeshare hotel is a hotel where membership allows you to use guest rooms and affiliated facilities.
Generally, you are free to stay at the hotel for a fixed number of days per year.
For example, if you often visit Hawaii, you can freely use the hotel like a vacation home if you register at a local membership timeshare hotel.
Famous Hotel Chains from Around the World and Japan
So far, we have provided a detailed classification of hotels from four perspectives.
So, what are the characteristics of the top hotel chains in terms of sales and number of operations?
In this article, we will introduce the three major hotel chains in the world and the five major hotel chains in Japan.
Marriott International
First, let us introduce Marriott International, the world's No. 1 hotel chain.
History/Outline
Marriott International is the world's No. 1 hotel chain with the world-famous "The Ritz-Carlton.
Its business began not with hotels, but with non-alcoholic beer stores.
From here, the business grew steadily, and in 1937, it launched its in-flight catering business.
Serving many airlines, the company successfully expanded overseas.
Finally, the company entered the food industry, and Marriott Corporation was born.
Beyond the booming food industry, the company opened its first hotel in 1957.
By the 1980s, the company had surpassed the 100-hotel mark, and in 1993, it was spun off and its hotel division, Marriott International, emerged.
In 1998, it acquired Ritz-Carlton and then SSPG in 2016.
Today, Marriott International is the No. 1 hotel chain with 30 brands and more than 7,000 hotels in 131 countries and territories worldwide.
Most of the Marriott Group's hotels are located in the United States, with many more in China and Southeast Asia.
Most of the Marriott Group hotels are located in the United States, with many in China and Southeast Asia.
Operating Brands
The Marriott Group has as many as 30 brands, each with its own unique, upscale character.
The following is a list of representative brands.
◼︎The Ritz-Carlton
◼︎Marriott Hotels & Resorts
◼︎JW Marriott Hotels & Resorts
◼︎Sheraton
◼︎Westin, etc.
There is a wide variety of brands to suit every traveler's needs.
Many of the hotels are traditional, which is also attractive.
Expanding in Japan
In 2005, the brand's first resort hotel in Japan was opened in Okinawa.
In addition to its extensive facilities, it offers a wide range of activities on its private beach.
In 2019, the company also announced plans to open as many as 34 facilities in Japan over the next four years.
Aloft Ginza opened in the spring of 2020, followed by AC Hotel by Marriott Ginza in the summer.
Marriott's rapid expansion in Japan is due to the increase in the number of foreign visitors to Japan.
Basically, this style of development is based on MC contracts, with Marriott taking sole responsibility for operations.
Marriott, with its long history and high level of expertise, is popular among owners, and due to its name recognition and scale, there are also Japanese partner companies.
Hotels of the World] Hilton Hotels & Resorts
The next hotel in the world we will introduce is Hilton Hotels & Resorts, which is also well known in Japan.
Although second only to Marriott, Hilton Hotels & Resorts boasts the No. 1 sales position for the brand alone.
History/Overview
Hilton celebrates its 100th anniversary in 2019.
Its history began when its founder, Conrad Hilton, purchased hotels in rural areas.
The first hotel purchased was The Mobley, a hotel in Cisco, Texas.
Over the next few years, he purchased several more hotels in Texas, and business was good.
In 1925, he opened the Dallas Hilton, the first hotel to bear his name, Hilton.
Then, in 1943, he purchased other brands of hotels, making it the first hotel group in the United States.
Three years later, he founded Hilton Hotels Corporation.
In the 1960s, the current Hilton Tokyo opened in Japan as the first foreign-owned hotel chain.
Since then, the company's global expansion has continued unabated, and today it has 18 brands and approximately 6,100 hotels and resorts in 118 countries worldwide.
Operational Brands
Although Hilton Tokyo currently operates 18 brands, the most well-known brands are Hilton and Conrad, which bear the name of the company's founder.
Even within Hilton, the lineup is further divided, and there is a wide variety to choose from in terms of purpose of use and price range.
We will pick up a few operating brands below.
◼︎ Hilton
◼︎Conrad
◼︎DoubleTree by Hilton
◼︎ Hilton Garden Inn
◼︎ Curio
◼︎ Tapestry Collection and more
Expansion in Japan
The Hilton Japan chain is one of the largest foreign-affiliated hotel chains in Japan, with locations from Hokkaido in the north to Okinawa in the south.
In particular, there are seven Hilton-branded hotels in the Kanto region and five in Okinawa.
The Hilton Nagasaki is scheduled to open in 2021, the DoubleTree by Hilton Toyama in 2022, and the Hilton Sapporo Park Hotel in 2023.
Accor Hotels] Accor Hotels
Accor Hotels, the third largest hotel company in the world, is not a major player in Japan.
The third and final hotel chain in the world, Accor Hotels, is not a major player in Japan, but it has several brands in Japan and is a strong hotel chain in Europe and Southeast Asia.
History/Overview
Accor Hotels is the largest large hotel chain in Europe and operates worldwide.
It was established in France in 1967.
It is characterized by its unique hotel brands with different concepts and targets.
It boasts a considerable number of operations in France, where it is based, among other European countries.
The majority of its sales come from the European market, as other major hotel chains are concentrated in North America.
While Europe is its main market, the company has more than 3,500 hotels under 14 distinct brands in more than 90 countries worldwide.
Operating Brands
Accor Hotels, which offers a wide range of high-end, mid-range, and budget hotels, acquired FRHI in 2016 and added the luxury brands of Fairmont, Raffles, and Swissôtel.
Below are the main brands
◼︎ Softil
◼︎Pullman
◼︎M Gallery
◼︎Mercure
◼︎ Ibis, etc.
The fact that there are not only luxury hotels but also budget hotels priced at less than 5,000 yen per night is unique among major hotel chains.
Accor Hotels is probably the only company that offers brands in such a wide range of categories.
Expansion in Japan
Although Accor Hotels is not well known, it has many operations in Japan.
In particular, the Mercure and Ibis brands are widely deployed, and there are hotels scheduled to open in Nagoya and Kyoto in the future.
Many of the hotels are in the price range where guests can easily stay, and they are well-liked by many customers.
Hotels in Japan: Prince Hotel
From here, we would like to tell you about hotels in Japan.
Although most hotels in Japan are business hotels, resort and leisure hotels surprisingly account for a large share of sales.
Here we would like to introduce you to the hotels in Japan.
Although most of the hotels in Japan seem to be business hotels, resort/leisure hotels are unexpectedly accounting for a large share of sales.
History/Outline
Prince Hotel was established in 1920.
It began as Hakone Land Corporation (formerly Kokudo Corporation), and its main focus was to expand into tourist areas such as Hakone and Karuizawa.
And the current company name and brand name "Prince Hotel" originated from the postwar purchase of land from the former imperial family and the opening of the hotel.
Today, as a hotel and leisure business within the Seibu Group, it operates not only hotels but also ski resorts, golf courses, and other leisure facilities.
It is the largest in the hotel and leisure industry in Japan.
The total revenue of the hotel business, Prince Hotel Co., Ltd. was 202.1 billion yen in fiscal 2018.
Number of rooms operated
The company operates 76 locations in Japan and abroad, with a total of more than 21,000 rooms.
In Japan, the company has 43 hotels and four brands.
◼︎The Prince
◼︎Grand Prince
◼︎ Prince Hotel
◼︎ Prince Smart Inn
Worldwide Expansion
From five brands, we have 33 hotels worldwide.
With the addition of Stay Well Holdings Pty Ltd, which operates 25 hotels mainly in Australia, as a subsidiary, the company is expanding more rapidly globally.
Japanese Hotel] Resort Trust
Next, we introduce Japan's second largest hotel chain, Resort Trust.
History/Outline
In 1973, Takarazuka Enterprises, Ltd. was established in Nagoya City.
The following year, the company opened its first membership resort hotel, Sun Members Hirugano.
Since then, the business has continued to grow steadily, opening hotels in various locations and becoming a comprehensive resort company in Japan.
Hotels are the main business, and the mainstay of this business is membership hotels. The company boasts the largest share of resort memberships in Japan.
Net sales for the fiscal year ending March 2020 are 159.1 billion yen. The main business is hotel-related, although it also includes non-hotel business.
Number of rooms under management
The company operates 48 resort hotels in Japan with more than 170,000 members.
Since its establishment 45 years ago, the company has been a leader in the market for members-only luxury resort clubs.
Although there is no definite information on the number of rooms managed, it is likely that the number of rooms managed is quite large, given the scale of its domestic operations and the number of members.
Global Expansion
Since Resort Trust's main focus is on domestic expansion, it has only one location in Hawaii in the world.
The brand under which it operates is The Kahala Hotels & Resorts, which was acquired by Resort Trust in 2014.
Route Inn Japan
Next is Route Inn Japan, the third largest hotel chain in Japan.
History/Outline
Route Inn Japan operates hotels, restaurants, golf facilities, hot spring facilities, and ski resorts. Among them, Hotel Route-Inn is a well-known brand of business hotel chain.
In 1977, in Nagano Prefecture, Nagayama Kosan Co.
In 1996, the company changed its name to the current Route-Inn Japan Co.
The company's main business is business hotels, but it also operates resort hotels and city hotels.
It has many subsidiaries and operates not only hotels but also various other facilities.
As of March 2019, sales were approximately 130 billion yen.
Number of rooms managed
As for the number of facilities, the company operates a total of 359 facilities.
Of these, 321 facilities are hotels. It operates hotels in a variety of formats, including business hotels, resort hotels, and city hotels.
The following are the main brands operated
◼︎ Route Inn
◼︎ Ark Hotel
◼︎ Granviglio Hotel
◼︎Grantia
◼︎Route Inn Grand
Global Expansion
We have three Granviglio resort hotels, one in Saipan and two in Vietnam.
Japan Hotel] APA Hotel
The next hotel chain we will introduce is APA Hotel, Japan's fourth largest hotel chain and a well-known budget hotel in Japan.
History/Outline
APA was originally a custom-built housing sales company, and in 1980, the hotel business, APA Hotel Co.
The first APA Hotel opened in Kanazawa Katamachi in 1984.
Since then, the chain has steadily expanded throughout Japan, and in 2004, the total number of rooms exceeded 10,000.
By 2015, the total number of rooms had reached 40,000, making it the No. 1 chain with the largest number of buildings in the three wards of central Tokyo.
Behind this growth to such a large scale is the expansion through the branchise business.
Sales disclosed in the financial results for the fiscal year ended November 30, 2019, totaled 137.1 billion yen.
Number of rooms in operation
As of February 2020, the number of rooms under management totaled 100,856, both domestic and international.
Most of the APA hotels are used by businessmen, but the company also has other APA brands.
The following are the brands operated
◼︎ APA Hotel
◼︎ APA VILLA HOTEL
◼︎ apa hotels & resorts
Global Expansion
The company has 40 hotels with 5,028 rooms, mainly in North America, the United States and Canada.
Currently, the company is consolidating its business base in the North American area, centering on APA Group's Coast Hotels, while aiming to expand its business in Asia in the future.
Hotels in Japan] Toyoko Inn
The last hotel we will introduce is Toyoko Inn, a well-known hotel in Japan that can be seen in many places.
History/Outline
Founded in 1986, Toyoko Inn's main business is the operation of economy hotels specializing in overnight stays.
It is a hotel chain that has expanded not only in Japan but also overseas, and its most distinctive feature is its low prices.
It was established in response to requests from businessmen who wanted a reasonably priced hotel near a station that specialized in overnight stays.
After opening its first hotel in Kamata, Tokyo, the company opened a series of hotels mainly in the central Tokyo area.
Between 2002 and 2010, the company opened a high pace of 15 to 25 hotels or more each year.
As of March 2020, sales totaled 94.7 billion yen. It will be the fifth largest in Japan.
Number of rooms in operation
In Japan, 321 hotels are operated in 45 prefectures, excluding Kochi and Saga prefectures.
It boasts 69,675 rooms in operation.
The hotel brands operated include "Toyoko Inn (INN)" and, although the number of hotels is small, "Toyoko Inn Jr.
Global Expansion
Worldwide, Toyoko Inn operates 18 hotels in Korea, Cambodia, Germany, the Philippines, France, and Mongolia.
Of these, the majority are located in South Korea, where there are 13 hotels.
All of our locations around the world are equipped with the same basic equipment and services as in Japan.
Conclusion
In this report, we introduced the top hotel chains in Japan and the world based on the classification of the hotel industry.
It is very interesting to look at the hotel industry from a bird's eye view, and differences can be seen from various perspectives.
For example, in terms of marketing strategy, different brands of the same operator have different strategies in terms of price and features.
For example, in the case of marketing strategy, even within the same management company, the strategy will differ depending on the brand in terms of price and features .
The operational strategies also differ in terms of what they focus on, such as customer satisfaction, cost advantages, and comfort.
In terms of strategy, the hotels introduced here have established marketing and operational strategies for each management company and each brand.
I believe that they are still successful today because of their long history, accumulated know-how, and ability to capture the trends of the times.
In other words, the hotel industry of the future will require more differentiation in management and marketing policies, as well as in the value of the hotel's existence.
This is due to the impact of the Corona disaster and the oversupply of business hotels that has been under the radar since before that time.
We invite you to consider the future of the hotel industry based on the classification of hotels and the trends of successful hotel chains in Japan and abroad.
