Ascott sets sights on Japan market to fuel growth

THE Ascott Limited, CapitaLand Investment : 9CI 0%’s (CLI) lodging business unit, sees strong potential coming from Japan, a market poised for further growth post-pandemic.  

Ascott has some 2,900 units in 22 operating properties spanning five cities in Japan. This is more than double the size of its previous portfolio of Japanese properties, before its acquisition of serviced apartment provider Oakwood Worldwide from Mapletree Investments in the second half of 2022. 

Today, around 80 per cent of Ascott’s properties are in the Asia-Pacific region, and the company is a “big contributor” to CLI’s fee-based income, Beh Siew Kim, CLI’s chief financial and sustainability officer for lodging, told the press on Thursday (Jan 18). 

Growth is especially evident in Japan, noted Beh, who is also the managing director for Japan and Korea at Ascott.

Christian Baudat, Ascott country general manager for Japan, said outbound travel to Japan is also one of the lodging business’ largest source markets, especially from markets such as China, Thailand and Vietnam. “This has been consistently so even before the pandemic.” 

Beh attributed much of Ascott’s growth in Japan to the company’s asset-light strategy, focusing on managing quality hospitality assets for third-party owners rather than owning the property. “(In doing so), you don’t actually put in any capital at all,” she said.

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Today, 80 per cent of Ascott’s properties are owned by third parties, being under management and franchise contracts, up from 43 per cent a decade ago.

Average daily rates (ADR) in Japan are also one of the highest in Asia, thanks in part to high demand for accommodation, said Baudat.

There are also increased utility costs and growing inflationary pressures, which need to be taken into consideration when rooms are priced, he noted. 

Ascott’s Japan ADR have risen with the company’s Oakwood acquisition, said Beh. Rates rose 9 per cent between 2019 and 2023, while revenue surged by 72 per cent. Revenue from short stays specifically increased by 43 per cent in the same period.

After all remaining travel restrictions were lifted in Q4 2022, Ascott’s revenue per available unit for its Japanese properties skyrocketed by 146 per cent year on year.

Meanwhile, the average occupancy of its Japan properties last year was 80 per cent – close to pre-pandemic levels of 81 per cent.

Based on estimates by the Japan National Tourism Organization released on Wednesday, the country welcomed 25.1 million tourists last year – around 79 per cent of pre-pandemic levels. December 2023 also marked the seventh straight month in which there were more than two million foreign visitors.  

Japanese travel agency JTB Corp predicted that the country will see a record high of 33.1 million visitors this year with the return of more mainland Chinese tourists. 

Even with the open borders, Baudat noted that some Japanese are opting to remain in the country due to the weaker yen. Domestic tourists make up 20 per cent of guests across Ascott’s properties in Japan on average, and up to 70 per cent for some properties, such as the 175-room Oakwood Suites Yokohama, he said. 

With ADR for shorter stays higher than long stays, short stays accounted for about 65 per cent of Ascott’s revenue in Japan last year, even though long stays made for 60 per cent of room nights, said Baudat.

Beh said that is why Ascott is looking to offer more short-stay accommodations across its portfolio of properties under a “flex-hybrid hotel-in-residence” model. The model allows guests to stay for varying lengths at serviced apartments with the facilities and amenities of a hotel. 

Still, long-stay accommodations provide base income. “The ultimate aim is to give owners the best returns and confidence that (their) base income is protected,” she said.

Ascott will be keeping its eyes peeled for new opportunities – for example, in the western city of Osaka, where the country’s first casino will be built along with a conference centre and other facilities. The integrated resort is scheduled to open in 2029 and is expected to attract domestic and international tourist spending. 

Ascott’s parent CLI will continue investing in Japan. “Japan is one of the most investable markets right now for real estate investments,” said Beh, citing the country’s immense popularity as a travel destination and rebound in tourism.  

Beyond Japan, Beh said Ascott is looking to expand its footprint in the United States, where the lodging business has 16 properties and more than 6,200 units.

The company will also continue pursuing both organic and inorganic growth opportunities, for instance by broadening into more asset classes or through mergers and acquisitions, she said. “Historically, we acquire companies that are mid-sized (with) 5,000 or up to 15,000 units. They can’t really scale up anymore, or maybe they are looking for an exit opportunity.”

Another avenue for organic growth is in franchise management, which Ascott intends to expand, said Beh. This will enable others to use its brands or leverage its extensive network for a fee. The exact framework is being set up but it covers selected brands for now, and will hopefully expand to cover all of Ascott’s brands eventually, she said.

Since its inception in 1984, Ascott has grown from a single serviced residence along Scotts Road in Singapore to having more than 940 properties yielding over 162,000 units in more than 40 countries. These include serviced residences, co-living properties, hotels and independent senior living apartments.