Investing in Japan
Swissotel Nankai Osaka K.K. (Christian Schaufelbuehl)
Osaka saw 9 million foreign travelers staying more than one night in the prefecture in 2015, a 50% increase compared to the previous year. Swissôtel Nankai Osaka, a renowned luxury hotel in Minami, Osaka—a popular shopping district for tourists—became one of the first hotels to successfully tap into the demand created by travelers from abroad, doubling its sales over the last three years. We sat with Christian Schaufelbuehl (Representative Director and General Manager) and Daichi Fukao (Director of Business Development) to ask about what brought their success.
Fullsteam sales promotion tageting international travelers to Japan since 2011
Swissôtel (headquartered in Switzerland)* expanded into Japan in 2003. The company’s intensions to enter into the Asian market matched the policy of the owner and operator of the South Tower Hotel, Nankai Railway, to find a major foreign hotel chain and form an alliance. Looking back, Representative Director and General Manager Christian Schaufelbuehl (shown in the picture below) said “We were lucky to be able to form a partnership because at the time it was not as easy for foreign hotel brands to gain credibility as it is today.”
Acknowledging that while he was not involved in forming the alliance at the time, he said that Osaka’s advantage as a test market was one of the factors that influenced the hotel’s decision. He explains that global luxury hotels including The Ritz Carlton, HYATT Regency and ST Regis also chose Osaka to initiate their business in Japan, because if you can deliver in Osaka, a city known as a very challenging market, it’s a promising sign that you can find success elsewhere in the country.
Back in 2003, right after Swissôtel made its first presence in Japan, the ratio of foreign guests of Swissôtel was already at the comparably high level of 50%. Currently, the ratio has grown to the 80-85% level, and is among the highest marked by luxury hotels in Osaka. In terms of the number of the tourists visiting from abroad, Osaka boasts an unshakable status as the second highest city after Tokyo, with a record number of 9 million tourists staying more than one night in 2015, up 50% year-on-year (please refer to the table). The hotel has also been recognized in the industry as a pioneer in marketing to inbound tourists. Daichi Fukao, Director of Business Development, showed his satisfaction with this reputation and said it was made possible by his hotel’s independent sales promotion conducted abroad prior to other major Japanese hotels.
According to Mr. Fukao, Swissôtel has a unique way of marketing to international tourists to Japan. Generally, Japanese hotels offer discount rates to companies and tourist agencies. But Swissôtel turned its back on this business practice intended only to raise occupancy rates. It properly evaluates prices that it can offer to international tourists and presents relevant rates to its customers. In the past, it also engaged in the same kind of business practice to target some corporate customers until it started reviewing discount rates which it had been offering to travel agencies one-by-one. But as a result of the action, Mr. Fukao says “the hotel managed to raise the average fee compared to its counterparts and its sales doubled in the past three years.” Due to his hotel’s excellent performance, he is often asked for advice on business related to inbound tourists.
Including Australia and Vietnam in the target
Although he assumes “if frequency of international airlines to Japan and accommodation for international travelers increase, international tourists coming to Japan will continue to grow,” Mr. Schaufelbuehl is not optimistic about the outlook of business. The reason for this is the possibility that repeaters could go straight to the surrounding local cities without staying overnight in Osaka and the opaque outlook of the Chinese economy. Eyeing these factors, his hotel is busy conducting sales promotion not only in major markets such as China, South Korea, Taiwan and Hong Kong, but also newly emerging markets including Singapore, Thailand, Malaysia, Indonesia and the Philippines. His hotel goes through a review of target countries every year. And recently it included Australia and Vietnam in the list. It is also reviewing their sales promotion methods for Japanese customers, as major companies located in Umeda district are showing interest in accommodations in the Minami area which provides better access to Kansai International Airport. The already announced plan to remodel the high rise building adjacent to the Swissôtel for office use in 2018 is another potential boon for business.
Launching a new operation in Japan is another interest of the company. Mr. Schaufelbuehl says that his hotel is looking for an appropriate property for starting a new location but it is not easy because supply of properties for the hotel business is running short currently. He explains, “Compared to other major foreign hotel chains, we are put under a disadvantageous situation because in Japan our hotel’s umbrella is rather small and our history is rather short. I hope that the situation will be turned around by my hotel’s inclusion in Accor Group, the largest hotel group in France, which is expected to happen in June of this year.”
The current biggest challenge for his hotel is being understaffed. He says with a sigh, “It is often the case that young Japanese disvalue working conditions and tasks such as irregular working hours and room cleaning service and tend to shun working in the hotel business.” He had been posted in Australia, Singapore and other developed countries in the Asia-Pacific before coming to Japan where his experience has already surpassed seven years. “Understaffing in the hotel industry is a worldwide trend but other countries utilize the foreign workforce to fill the gap.” He urged Japan to seriously revisit the system for utilizing foreign workers.
* Swissôtel is one brand of Fairmont Raffles Hotels International, and last December it announced that it agreed to a deal to be acquired by Accor Group, the largest hotel group based in France.
(Table) Table of shift of total number of man-days of foreign tourists staying overnight by prefecture (Top ten prefectures) (unit：man-days)
|Prefecture||2012||2013||2014||2015||Increase from the previous year (%)|
(March 2016 interview)
|2003||Swissotel Osaka Nankai K.K. founded (Swissôtel Hotels & Resorts succeeded the rights of management from its predecessor, Nankai South Tower Hotel Osaka)|
|2006||Transfer of the management rights to Fairmont Raffles Hotels International (FRHI)|
|2013||Winner of World Luxury Hotel Award 2013 in the category “Luxury City Hotels”|
|2014||Winner of World Travel Award 2014 in the category “Japan’s Leading”|
|2012 – 2015||Winner of Trip Advisor® Certificate of Excellence|
Swissotel Osaka Nankai K.K. (Hotel Name: Swissôtel Nankai Osaka)
|Parent company||Fairmont Ruffles Hotels International|