Love Hotel Operator Posts Impressive Results despite earthquake and recession

Alchemy Japan’s Japanese Leisure Hotels’ 2011 revenues grew to JPY2,074 million, a 2% improvement on 2010. EBITDA was on par with previous year, at JPY623 million, despite Japan’s biggest recorded earthquake and tsunami and its disruption on economic growth and consumer confidence.

2011 revenue growth was led by an increase in customer numbers of 6% reaching annual high water mark average occupancy rate of 272%.

In Q1 2011, Japanese GDP contracted by 3.7% (annualized) while Alchemy’s hotels posted 13% EBIDTA growth in Q1 driven by 6% revenue growth. Q2 was heavily impacted by nationwide supply chain problems caused by the 3/11 EQ and tsunami and after-effects which disrupted production and impacted consumer confidence. This also had an adverse direct impact on operations in Kanto area hotels. Q2 revenue slowed but exceeded Q1 by 2.3% and was 3% above previous year, while Q2 EBITDA was 6.8% ahead of Q1 and +3% on PY.

H2 2011 saw Alchemy’s hotels post resilient results, maintaining revenues with year on year growth in customer numbers. Bottom line results were impacted by cost inflation, particularly energy costs.

“Our hotels produced strong counter-cyclical performance achieving market share growth, sales growth and resilient earnings in 2011 despite recessionary and deflationary pressures and substantial external shocks. ” says Alchemy Japan CEO Miro Mijatovic. “While our hotels’ rate of revenue and earnings growth slowed post 3/11, bottoming out in the summer; our strong finish to 2011, with the winter holiday period posting record growth and revenue high water marks at a number of our hotels, established positive forward momentum into 2012 and provides us confidence that we can continue to produce growth in 2012.

“The improved liquidity and contracting caprates in the general Japanese property sector has started to trickle down to operational assets like Leisure Hotels. A number of deals were completed in 2011 with the return of financing to the sector subsequent to the closing of the Japan Leisure Hotels Ltd transaction in June 2011 at historically high caprates, setting a low point for valuations. On the supply side, attractive single turnaround opportunities are available from numerous operators who have not coped well with 2011’s regulatory changes and also portfolio deals where some institutional investors are looking to recycle capital on their long term holdings. We see the current trend for contraction of caprates to continue into 2012.” says Mijatovic.

http://www.propertyfundsworld.com/2012/02/08/161853/alchemy-japan-kk-japanese-leisure-hotels-continues-revenue-growth-2011

April - Japan Hotel's RevPAR Down - Sendai Up

According STR Global, Japanese hotels have reacted with composure in the aftermath of the recent earthquake, tsunami and the related radiation issues from the Fukushima nuclear plant in the Tōhoku region of northeastern Honshu. In solidarity with the Japanese people and business communities, the hotel industry has shown admirable commitment to helping those affected by the disaster.

For example, several of Tokyo's three- and four-star hotels have made themselves available as public shelters to help cope with the influx of displaced people and those seeking to distance themselves from the possibility of radiation exposure. The Grand Prince Akasaka, one of the city's most prestigious addresses, was due to close at the end of March, but has stayed open to offer accommodation to some of the 30,000-plus evacuees from the Fukushima Prefecture. Solare Hotels & Resorts, which manages hotels in 73 destinations across the country, is offering 10,000 roomnights free of charge in its Chisun and Loisir-branded hotels. Additionally, many hotels have waived cancellation fees.

Data from STR Global shows that hotels in Sendai, the city nearest the earthquake's epicenter, Sapporo and Tokyo have borne the brunt of the impact of the disaster. Cities further from the centre of the catastrophe were generally impacted less.

Revenue per available room performance (JPY) and year-on-year percentage change



Occupancy in Japan was down 21.3 percent for March 2011 and 27.6 percent for April 2011 compared with the same months in 2010. Tokyo and Sendai showed greater falls in occupancy of 33.6 percent and 36.7 percent for March, respectively, compared to the nationwide occupancy decrease.

Sendai's RevPAR declined 22.7 percent in March 2011 before increasing by 77.2 percent in April 2011. Demand is expected to remain firm with, firstly, the resumption of the normal operation of the Tohoku Shinkansen express train helping volunteers, relief and reconstruction teams get to the affected area and, secondly, with insurance companies sending plenty of staff to the Sendai area to assess claims.

By comparison Tokyo, some 300 kilometers to the south of Sendai, saw plummeting occupancies that fell from 83 percent in March 2010 to 55 percent in March 2011, as people sought to move away from the threat of radiation exposure. Further south, Osaka saw only a small reduction in occupancy (-2.8 percent) whilst Kobe actually experienced a rise of 6 percent.

"Our deepest sympathies go to those affected by the dramatic earthquake and tsunami in Japan," said Elizabeth Randall, managing director of STR Global. "Declines in RevPAR are nothing against the overall suffering of the country and the loss of life. With the resilience of the Japanese people, the country and industry will surely recover."

http://www.worldpropertychannel.com/international-markets/vacation-leisure-real-estate/japan-earth-quake-nuclear-disaster-in-japan-japan-tsunami-damage-in-japan-from-earthquake-str-global-solare-hotels-resorts-the-grand-prince-akasaka-sendai-disaster-tokyo-hotels-4366.php

Japan's hotels need 2 years to rebound

Japan's hotels are not expected to fully recover from the collapse in revenues that followed the March earthquake and tsunami until the first quarter of 2013, according to a report by agency Jones Lang LaSalle Hotels. 


The agency says the revenue per available room (revPAR) of Tokyo's full-service hotels were down 38 per cent in March compared with the same month last year.


The Japan National Tourism Organisation announced that in March the number of inbound visitors to Japan dropped 50.3 per cent compared with the same month a year ago, to 352,800. Before the March 11 earthquake numbers were up 4 per cent, but plunged by 73 per cent after the twin disasters.
Tomohiko Sawayanagi, managing director at Jones Lang LaSalle Hotels, said most bookings by inbound guests were cancelled in the first 30 days after March 11, hitting international luxury hotels in Tokyo hard. Full-service hotels reported occupancy rates of between 10 per cent and 40 per cent as of April 15.

Many domestic business trips were also cancelled because transport systems were not functioning properly. People also cancelled leisure trips. However, the situation had improved in eastern Japan since April 25, the report noted, since most countries had lifted their travel warnings, public transport was back in operation and sentiment in Japan showed signs of improving.

The firm interviewed several hoteliers in April and found that the domestic business volume, both in the leisure and corporate sectors, had begun to recover.

The domestic corporate business segment was likely to be the first to recover in full, possibly as soon as the second half of this year, though a recovery in inbound leisure visitors could take until next year.
Sawayanagi said the meetings, incentive, convention, and exhibition business and corporate banquet business would face challenges for some time as many Japanese corporations suffered extraordinary losses due to the earthquake. Because of this, he does not expect revPAR for the industry to return to the 2010 level until the first half of 2013.

The Tokyo limited-service hotel market is expected to be the first sector to recover, as these hotels are focused on domestic corporate demand. Even so, in the coming year revPAR would languish at 10 to 15 per cent below that of the previous year, he said. Tokyo's full-service hotel market will experience a 20 to 30 per cent drop in revPAR in the coming year because of the delayed recovery in inbound leisure and meeting and convention bookings.

Sawayanagi said there was a chance of a quick recovery of inbound volume in the short term if Japan could address concerns about radiation leaking from the crippled Fukushima nuclear power station northeast of Tokyo. He noted that the revPAR of New York hotels took three years to recover from the September 11 attacks. 





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