Hotel Rooms Filling Up Again in Japan, but Recovery Stunted by Labor Shortages

The Yomiuri Shimbun
A restaurant in the Shinagawa Prince Hotel in Minato Ward, Tokyo, bustles with hotel guests on Friday.

Occupancy rates at hotels and other accommodations have been making a steady recovery, reaching 55.6% in April according to preliminary Tourism Agency statistics, which marks more than a four-fold increase from the lowest point of the coronavirus pandemic.

Labor shortages, however, continue to plague the industry, keeping from getting the recovery onto solid footing.

April marked the third consecutive month that the occupancy rate has exceeded 50%. In fact, since the government’s nationwide travel discount program to stimulate demand began in October, the rate has steadily remained above 50% with the exception of January, when many people return home instead of staying at hotels and inns.

The rate seems on track to returning to the pre-pandemic 60% range.

During the pandemic, the occupancy rate fell to 13.2% in May 2020, when a national state of emergency was declared. In the period from 2020 to 2021, it hovered in the 20%-40% range. In addition to restrictions on movement, the disappearance of foreign visitors to Japan due to the tightened border control measures had a major impact.

With the relaxation of border control measures and other factors, the occupancy rate remained high at 57% in March and 55% in April. The rapid increase in foreign visitors has bolstered underlying demand.

Seibu Holdings Inc., the operator of Prince Hotels and others, has seen occupancies in its domestic hotel business increase more than 20% year-on-year since September.

“Demand from overseas travelers is rising,” a Seibu spokesperson said.

Labor Shortage

While hotels and inns continue to fill up with guests, the industry has to deal with another concern. There is a severe labor shortage.

During the pandemic, many operators were forced to cut their staffs due to the sharp plunge in occupancy rates. Even with the resumption of economic activity, they now find it difficult to secure the necessary manpower.

In a Japan Hotel Association survey conducted in January, the majority of hotels responded that “the labor shortage is having an effect on their operation,” with about 16% of them putting limits on room availability. They are struggling to strike a balance between maintaining the quality of their services and higher room occupancy rates.

The labor shortage is becoming serious in a wide range of service industries beyond hotels.

“The lack of available labor has kept many hotels from increasing occupancy rates even if they wanted to,” said researcher Takuto Yasuda of the NLI Research Institute. “It will take time to return to pre-pandemic levels.”