Foreign investors looking to buy up hotels in Okinawa as corona-related losses force many to sell

Foreign investors looking to buy up hotels in Okinawa as corona-related losses force many to sell

The Star Resorts new M&A website with listings for those who are looking to sell their hotel.

June 9, 2020 Ryukyu Shimpo
By Yuki Nakamura

The tourism industry took a big hit from the effects of COVID-19, and there are increasing stories of those who are looking to sell their hotels despite the drop in price, as well as foreign firms and investors who are looking to purchase lodging facilities. Those involved in the industry in Okinawa have felt an increasing danger, commenting, “There is a good chance that a large portion of Okinawa’s real estate and tourism revenue ends up in the hands of parties from outside the prefecture or the country.”

Star Resort (Naha), a company that manages hotels, launched a website on June 5 for those looking to engage in mergers and acquisitions in the hospitality industry.

The postings on the website include facilities such as: a hotel near a private beach on Miyakojima (with 10-30 guest rooms) listed for 2 billion yen; and a hotel on Okinawa’s main island that includes a pool, comes with all the electrical appliances and furniture, and an ocean view (under 10 guest rooms) listed for 484 million yen. A representative from Star Resort said, “There are those who want to sell their hotel, and get cash in hand quickly, and we expect that the number of listing will increase.”

Similarly, the number of inquiries about purchasing a hotel have been increasing since May, with over 60 companies making an inquiry in the past month. According to Star Resort, the buyers are mostly major real estate developers and individual investors from outside of the prefecture. With the decline in tourism, the operating ratio of Okinawan lodging facilities has dropped greatly, however while the current foreign travel bans are expected to continue for some time, there are many who are forecasting that Okinawa will be a prime destination for domestic travel.

According to Takashi Fujimoto, CEO of RYUZ Okinawa, a tourism consulting company in Okinawa, said that the number of private investors from outside of Okinawa or outside of Japan were calling to discuss purchasing a “private residence that can be used as vacation rentals.” Locations on Okinawa’s main island near the beaches in both the north and south such as in Nakijin, Motobu, and Nanjo are popular. For these vacation rental properties, reservations can be made online and guests can check in with a digital key, which means that it can be done without having to interact with another person, which has become a highly desirable way of travelling.

The deficits being caused by the decrease in tourism have now stretched for a lengthy period, and with the decrease in cash flow, there are many companies that are unavoidably looking into selling their lodging facilities. Investors are predicting that tourism will rebound in Okinawa in the long-term, and believe that the Okinawan real estate being put up for sale is a very worthwhile investment. Fujimoto noted his concern of this situation, saying, “These strong assets are being taken up by parties outside of Okinawa, and it is possible that these profit never make their way back to Okinawa.”

One man who runs a real estate agency in Okinawa commented anonymously that he has been approached about a deal for the city hotel in Naha. He has spoken with a Taiwanese investor who is interested in buying the Okinawan hotel. He said, “Since the sale involves the movement of hundreds of millions of yen, the contract period will take about six months. It is possible that the number of hotels up for sale will have increased after that six-month period.”
(English translation by T&CT and Sam Grieb)

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