From 8 billion to 20 billion yen – the hotel resale business taking place in Okinawa

From 8 billion to 20 billion yen – the hotel resale business taking place in Okinawa

Sheraton Okinawa Sunmarina Resort that was resold from the Ishin Hotels Group to Mori Trust.

January 12, 2017 Ryukyu Shimpo

By Wu Li Jun

The ownership and management rights of the Sheraton Okinawa Sunmarina Resort, which had renewed itself last year as a global hotel brand, were resold to the domestic real estate development giant, Mori Trust. Ever since Okinawa tourism recovered back in 2013, the foreign-affiliated hotel operator Ishin Hotels Group began to sell off its hotels in Okinawa one after another. This is a hotel revival technique in which they raise the real estate value by renewing old properties and selling them for more than the original price the hotel was acquired at. The resell value, which has not been made public, is close to 21 billion yen, according to Japanese trade magazines that have been reporting on this topic with interest.

Even before the global financial crisis in 2008, which inflicted a crushing blow to the domestic economy, Ishin had been acquiring multiple hotels in Okinawa.

During its golden age, Ishin had possessed land for facilities and buildings, such as: the Okinawa Port Hotel, long-established Grand Ocean in Naha, Renaissance Resort Okinawa, and Coco Garden Resort Okinawa. However, Ishin no longer possesses these properties.

The Sheraton Okinawa Sunmarina Resort is also a long-established hotel, which is 30 years-old having opened its doors in 1987. Ishin had bought it and began managing it in 2006. Starting in late 2015, Ishin put down about 4 billion and began expanding the hotel. The hotel, which was run-down, was drastically improved, and was rebranded as a Sheraton Hotel beginning last June.

The Nikkei Real Estate Market Report published that Ishin had originally acquired the Sunmarina Resort at about eight billion yen, and sold it for more than 20 billion yen to Mori Trust. Regarding Mori Trust entering the Okinawa hotel market, the same magazine analyzed the situation as the Mori Trust Reit Investment Corporation aiming to take on lodging demands that are to swell from a series of efforts. They also plan to go public.

When Ryukyu Shimpo asked about the resale price and plans for development in Okinawa, a Ishin Group representative said, “The person in charge is currently unavailable” and have yet to give us an answer.

Ishin Group is not the only company that is buying and selling hotel ownership and/or management rights. In the past several years, this type of business has become popular. Even the “separation of ownership and management of hotels,” which was common overseas, has become increasingly popular in the last several years.

■ Separation of Ownership and Management

The real estate fund associated company, operated by investment company Morgan Stanley, bought the ownership of the Rihga Royal Gran Okinawa, a hotel in Asahimachi of Naha, from Kanehide Holdings Co., Ltd. The resale price of this was also not made public. However, according to a representative from Kanehide, “(Morgan Stanley) presented a number that was far more than what was expected,” and they decided to sell the hotel.

Professor Keiryu Uechi is a visiting professor at the University of Ryukyus Department of Tourism Science and Industrial Management and has experience in working at hotels. According to him, “Foreign-affiliated corporations generally manage hotels between three to eight years. They must renew the brand and/or renovate the hotel to increase the value to be able to resell it.” He also added, “Since foreign tourists have increased in recent years, it is a good time to resale and/or acquire (hotels). The fact that the buying and selling (of hotels) is happening is good news to Okinawa.”

(English translation by T&CT and Chelsea Ashimine)

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