Revitalizing Japan’s Regional Tourism: Mitsui Fudosan’s Vision for Balanced Growth

2024 was a remarkable year for Japan’s tourism industry, with nearly 37 million inbound tourists visiting the country. These numbers reaffirm Japan’s status as a highly desirable travel destination. From your perspective, what is driving Japan’s success in tourism, and what makes the country so appealing to visitors?

I believe there are seven key factors driving Japan’s popularity as a travel destination, with food being the most significant. Japan is renowned for its high-quality ingredients, including seafood, meats, vegetables, and fruits. Japanese chefs are like craftsmen, dedicating decades to mastering their skills, which elevates the art of washoku (traditional Japanese cuisine). The country is home to a diverse culinary scene, from world-class sushi, tempura, and kaiseki restaurants to popular fast food options like ramen and gyoza.

The second reason is Japan’s breathtaking natural beauty. Visitors can experience cherry blossoms in spring and vibrant autumn foliage in the fall. The country offers a wide range of landscapes, from powdery snow in Hokkaido to stunning beaches in Okinawa. Additionally, Japan boasts five international national helitage sites and 35 national parks, making it a paradise for nature lovers.

The third reason is Japan’s rich cultural heritage. Traditional temples and shrines are a major draw, and Buddhism has been part of Japanese history for over 1,500 years. There are also 21 cultural heritage sites that allow visitors to immerse themselves in Japan’s long-standing traditions.

The fourth factor is Japan’s safety, cleanliness, and world-class hospitality—often referred to as omotenashi. Japan consistently ranks among the safest and cleanest countries in the world, ensuring a comfortable and welcoming experience for visitors.

The fifth reason is Japan’s globally influential subcultures, including J-pop, manga, and anime, which have captivated fans worldwide and further fueled interest in visiting Japan.

The sixth factor is Japan’s highly efficient transportation network. Despite its compact size, the country has a well-connected system of bullet trains, buses, and domestic flights, making travel seamless. Additionally, Japanese transportation is renowned for its punctuality—for example, the Tokaido Shinkansen has an average annual delay of just 12 seconds.

Finally, the seventh factor is the depreciation of the Japanese yen, which has made Japan a more affordable destination for inbound travelers. Compared to pre-COVID levels, when USD 1 was worth around JPY 100, today’s exchange rate of USD 1 to JPY 150 offers significant savings on accommodations, dining, and transportation, making Japan an even more attractive travel option. These seven factors are why Japan continues to see a steady influx of tourists from around the world.

The Japanese government has set a target of nearly 60 million visitors by 2030. Do you believe this target to be achievable?

I believe the government’s target of 60 million visitors by 2030 is achievable. One of the key reasons is the strong national support for the tourism industry, backed by significant budget allocations.

Last year, Japan welcomed nearly 37 million inbound tourists, raising concerns about whether major airports like Kansai, Haneda, and Narita can handle 60 million visitors. However, Japan has 30 regional airports that can help accommodate the growing number of arrivals. Over the past decade, there has been a shift from government-run airports to private sector operations, allowing private companies to proactively attract airlines. The Mitsui Fudosan Group is currently managing Kumamoto and Hiroshima airports, and we are actively working to bring in more foreign airlines.

Additionally, Japan is seeing more visitors arriving by ship, as the government is pushing to increase the number of large cruise ships docking at Japanese ports.

Reaching 60 million visitors will also depend heavily on repeat travelers. First-time visitors typically follow the Golden Route, visiting destinations such as Ginza, Osaka, Kyoto, and Mt. Fuji. However, returning visitors tend to seek out regional destinations, and we are already seeing a growing influx of travelers exploring lesser-known areas. The infrastructure is in place, so the challenge lies in how effectively we can attract visitors to return for a second, third, or even tenth trip.

I think as for the exchange rate, the current JPY 150 to USD 1 level is an anomaly. I believe it will eventually return closer to JPY 100 to USD 1 over the coming years. However, this adjustment will take time, and I do not see the fluctuating exchange rate as a long-term factor significantly impacting inbound tourism.

Japan has the oldest population in the world, and with its rapidly shrinking workforce, the hotel industry is facing increasing pressure to secure staff. In the mid-segment hotel market, automation provides a practical solution to address labor shortages. However, in the high-end and luxury hotel sector, where personalized service is key, excessive automation risks diminishing the human touch that defines the luxury experience. How is your company navigating Japan’s demographic challenges and labor shortages while ensuring that service quality remains uncompromised?

With the hotel industry becoming increasingly lucrative, many real estate companies are now investing in hotel development, leading to a growing number of accommodations targeting the 2030 tourism boom. As a result, reaching 60 million visitors will not be an issue. However, as you pointed out, the biggest challenge facing the industry is manpower shortages—a problem that some hotels are already struggling with today.

There are two key solutions to this issue. The first is to increase salaries for hotel staff. With the industry becoming more profitable, hotels now have the ability to invest more in employee compensation, making hospitality careers more attractive.

The second solution is to welcome more foreign workers into the industry. Until now, the depreciation of the yen has made Japan a less attractive labor market. However, the hospitality sector remains highly appealing, as many people are eager to work in Japan to gain firsthand experience with its world-class service standards.

Currently, at Mitsui Garden Hotels, we employ staff from 18 different countries, including those from Asia, France, Spain, Russia, and Afghanistan. Many of these employees aspire to bring the hospitality skills they learn in Japan back to their home countries in the future. This diverse and international workforce not only helps mitigate labor shortages but also enhances the global appeal of our hospitality services.

Since we last met in 2023, we have seen a significant expansion in hotel capacity across Japan. This trend is driven by two key types of new entrants. First, we are seeing traditional real estate companies entering the hotel sector. On the other hand, we are also witnessing a surge of foreign brands investing in Japan, particularly in the high-end and luxury segments. Given these two new waves of competition, how do you plan to differentiate your brand, both with Mitsui Garden Hotels and The Celestine Hotels, which compete more directly with these foreign luxury brands?

We welcome the entry of foreign hotel brands into the Japanese market, as their presence will only help attract more international visitors and further elevate Japan’s hospitality standards. Competition between local hotels like ours and global brands will drive higher service levels, benefiting both the industry and travelers.

In many parts of the world travelers tend to rely on trusted global brands like Hilton, Marriott, and Sheraton for security and consistency. However, in a safe country like Japan, local hotel brands are recognized for their exceptional hospitality, often ranking among the best in the world. As a result, we are seeing a growing number of guests who actively choose Japanese hotel brands for an authentic experience of Japan’s renowned service culture.

One of the key strengths of local brands, including our own, is the culinary experience we provide. We focus on locally sourced ingredients, prepared in the authentic Japanese style, offering guests a true taste of Japan.

For example, at The Celestine Hotel Kyoto Gion, a top-tier luxury hotel, we partner with Endo, a highly regarded Kyoto tempura restaurant, to provide a Michelin Key-awarded breakfast. Similarly, in Kanazawa, we collaborate with a distinguished traditional cuisine restaurant to offer an exceptional breakfast experience.

Our business model differs from that of global hotel chains—rather than operating in-house restaurants, we curate partnerships with already distinguished Japanese establishments to provide high-quality, locally authentic dining. This approach is a defining characteristic of Japanese hotel brands, setting us apart from international competitors.

You just mentioned how local hotels showcase regional cuisine, offering guests a taste of Japan’s diverse culinary heritage. From a business strategy perspective, how important are your partnerships with small restaurants and local farmers in maintaining the authenticity and quality of your offerings?

We leverage the Mitsui Fudosan Group network to enhance our offerings. Within our group, there is a dedicated division for commercial facilities, which specializes in restaurants and apparel shops. We rely on their expertise and connections to carefully select the optimal restaurant partners for our hotels.

Another key differentiator for us is our large public baths, available in both indoor and outdoor settings—a feature that is rarely found in other hotel brands. Japanese guests deeply value bathing culture, and for foreign visitors, it offers a unique and immersive experience. Being able to enjoy a traditional Japanese bath adds a special touch to their stay, further enriching their time at our hotels.

At The Celestine Kyoto, we offer special guided tours exclusively for our guests, including a hidden back-alley tour that allows visitors to discover a different side of Kyoto. Another well-received service we provide is surprise event planning—for example, we arrange champagne and flowers for marriage proposals, creating memorable experiences for our guests. This level of attention to detail reflects the Japanese hospitality mindset, something that both foreign and domestic guests deeply appreciate.

We also have a strong loyalty program, the MGH Rewards Club, which currently has around one million members, including 150,000 non-Japanese members. Our program offers exclusive benefits, such as free breakfasts for second-time stayers, and our loyal guests frequently choose to stay at our hotels across Japan, including in Sapporo, Fukuoka, Tokyo, and Kyoto.

While the entry of international hotel brands has increased competition in Japan’s hospitality sector, we differentiate ourselves through unique, locally inspired offerings that are difficult to replicate. Our focus on curated experiences, personalized services, and seamless travel solutions ensures that we remain a preferred choice for travelers seeking an authentic Japanese hospitality experience.

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The hospitality industry is embracing technological advancements, with a growing emphasis on IoT and AI-driven solutions to enhance efficiency and guest experiences. For example, your Sequence hotels have implemented facial recognition technology from NEC, and you’ve also introduced AI-powered translation tools. Looking ahead, which technological innovations are you most excited about integrating into your hotels?

We first introduced our facial recognition three years ago. Unfortunately, it was not very well received, so we decided to halt it. However, we may bring it back in the future.

We are currently introducing live translation technology at our front desks, offering both spoken and written translation capabilities. Guests can ask questions verbally, and responses will be displayed in their preferred language. This allows us to accommodate a wide range of international languages, and we plan to implement this system across the majority of our Mitsui Garden Hotels.

Regarding AI integration, generative AI is becoming increasingly important. Traditionally, travelers searched for hotels on Google, but now, platforms like Booking.com and Expedia in the U.S. have already introduced AI-powered search assistants. For example, a user can ask, “Find hotels under JPY 30,000 with public baths,” and the AI will automatically generate a tailored list of recommendations.

Given this shift, we are currently focusing on enhancing our search visibility on platforms like Booking.com, Expedia, and Trip.com to ensure that our hotels remain easily discoverable and well-positioned for travelers using AI-driven booking tools.

Are you actively seeking partnerships to further improve efficiency, strengthen marketing efforts, or accelerate international expansion?

One of the biggest challenges in the hotel industry is reducing reliance on OTAs (Online Travel Agencies), as their commissions erode profit margins. Direct bookings, on the other hand, lead to higher profitability.

To address this, we are currently conducting a study with Google to explore ways to drive traffic directly to the Mitsui Garden Hotel website rather than through OTAs. Google is particularly interested in this project because, while they excel in advertising for consumable goods, they have yet to establish a strong foothold in the hotel sector. Their goal is to create a success story with Mitsui Garden Hotels, which can then be replicated with other hotel chains in the future.

Since 2023, you have expanded your portfolio by opening three new hotels. One was the Minatomirai Premier in Yokohama, while the other two—Kyoto Sanjo Premier and Ginza Tsukiji—were established in areas where you already have a presence. What led to the decision to further expand in these specific locations? What market needs did you identify that drove the development of these new hotels?

First, we decided to open a Mitsui Garden Hotel in Yokohama because, despite its status as a well-known tourist destination, we did not yet have a presence there. Expanding into Yokohama allowed us to tap into its growing visitor demand.

As for Tokyo and Kyoto, they remain two of the most popular travel destinations in Japan. By adding new hotels in these key markets, we can accommodate more guests, strengthen our market position, and ultimately increase our margins.

Looking ahead to 2025 and beyond, do you have any new hotel openings planned? If so, could you share any details about upcoming locations?

We are currently developing new hotels, though only two have been publicly disclosed. The first is a new hotel in Osaka, set to open in Spring 2027. Construction has already begun, and it will belarge-scale mixed-use development project consisting of condominium and a hotel. The second announced project is an international expansion—we will be opening another Mitsui Garden Hotel in Taipei, conveniently located near the airport.

Let’s imagine we return for another interview in 2027. What key objectives do you hope to accomplish in the next two years, and what milestones would you like to have reached by then?

My top priority over the next two years is to refine and enhance our existing capabilities. By investing in comprehensive training programs, we can further develop the skills and talents of our staff, ultimately elevating our overall service standards.

At the same time, this commitment to professional growth will help motivate our employees and foster a work environment where they feel valued and fulfilled. Ensuring that our team takes pride and satisfaction in being part of Mitsui Fudosan Hotel Management is my ultimate goal for the next two years.

For more information, please visit: https://www.mitsuifudosan-hotelmanagement.com/