Jan. 1, 2006 - TOKYO -- A tourist or a business person visiting Tokyo may be surprised to see so many luxurious foreign hotels springing up in the heart of Japan's busiest city.

Hong Kong-based Mandarin Oriental Hotel Group International Ltd. opened a new luxury hotel in a redeveloped area of Nihombashi, Chuo Ward, in December.

This came after Hilton Hotels Corp.'s high-end brand Conrad Hotel made a flashy debut this summer in the newly developed Shiodome business district in Minato Ward.

In addition, Ritz-Carlton Hotel Co. and Hongkong and Shanghai Hotels Ltd., the operator of Peninsula Hotels, are both scheduled to open hotels in redeveloped areas in Tokyo in the spring and summer of 2007, respectively.

All these foreign hotels have a common distinctive feature -- they target business executives with an average room rate of 50,000 yen or higher, compared with an average rate of up to 30,000 yen at many existing Japanese hotels.

These emerging foreign hotels will compete with Japan's own well-established hotels in Tokyo, including the Imperial Hotel, Hotel New Otani and Hotel Okura, known as the "Big Three." They will also have to compete with the luxurious foreign hotels that cropped up in Tokyo in the early 1990s -- the Westin Tokyo, Park Hyatt Tokyo and Four Seasons Hotel Tokyo at Chinzan-so, known as the "New Big Three." Some hotel industry officials worry about heated competition as there may be excessive room supply compared with actual demand.

According to industry analysts, the overall number of hotel rooms in Tokyo will increase 20-30 percent or more than 20,000 rooms by 2008.

But officials at both the established and new hotels say they are not very concerned about the intensifying competition. There are not enough "good hotels" in Tokyo and more demand can be found, they say.

"We don't think there is an excessive hotel supply," said Chie Hayakawa, director of communications for Mandarin Oriental Hotel, Tokyo. "In fact, Tokyo has been short of five-star hotels like us." She also said room rates are "not particularly expensive," given that the room dimensions are much larger than those in existing hotels.

Moreover, customers in Tokyo feel less uncomfortable with pricy rooms now because the high-end hotel market "has matured thanks to precedent foreign brand hotels," Hayakawa said.

Rie Oshima, marketing communications manager of the Grand Hyatt Tokyo, which opened in 2003 as one of the new foreign hotels, echoed Hayakawa's view.

"There is more demand than supply," Oshima said. "Sometimes our rooms are fully booked and we have to turn down requests from guests." Indeed, the Grand Hyatt Tokyo enjoyed an average occupancy ratio of 94.5 percent as of April 2005, much higher than the 70 percent considered to be the profit line, she said.

The hotel sits right beside Tokyo's new Roppongi Hills business and commercial complex, which provides it with leisure visitors as well as business people.

But industry analysts warned that the situation does not allow for optimism.

"It's true that there aren't many hotels with 50,000 yen-rated rooms around Tokyo," said one analyst who requested anonymity.

"Those new hotels may enjoy initial prosperity since Japanese people like novelties, but capricious guest interest may vanish if hotels become too satisfied with their current situation." He said the key to success depends on how much hotels can attract customers by responding to their demands and how much they can improve and keep their service standards. "They should always be attuned to what guests want and try to make their customers stay there again." Analysts also said hotels should pay attention to Japanese people's liking for staying at hotels just for a relaxing experience.

In particular, there are increasing numbers of young Japanese women who like to "treat themselves to a reward" by getting beauty salon treatment and eating costly meals in a luxurious atmosphere, they said.

"Of course, I like to stay in a gorgeous hotel and feel like a celebrity," Sayo Kono, 23, who works in Tokyo, said. "But I wouldn't go there over and over again unless I truly liked it because it would cost me a lot of money." She also said she would use a hotel if it offered her some privileges such as reward cards or souvenirs.

On the other hand, Keiko Kirioka, 45, a worker and mother of three children, said "I don't care if it costs me 100,000 yen or 200,000 yen for a treat in a luxurious hotel if it makes me feel elegant and relaxed," adding "It's really nice to have an oasis close by." But again, just like Kono, she also said she would use a luxury hotel repeatedly only if she could get something more than expected.

Meanwhile, the Imperial Hotel, one of the "Big Three" well-established Japanese hotels and located near the Ginza district with a 115-year history, said it has not been affected by any of the new hotels. It has been able to maintain its guest numbers, with its room occupancy rate staying above 75 percent.

"The ratio did not show any fall, unlike our initial expectation," said Saeko Yamanaka, manager and public relations deputy director of the hotel operations management division of the Imperial Hotel. "I guess there is still room for more new lodgings." The Imperial Hotel has fared well but this was not achieved easily. It has been under a five-year renovation program since the end of 2003, costing 17 billion yen, which will improve its facilities such as by enlarging bathrooms, bedrooms, and restaurants.

Industry analysts said the hotel offers various new packages, including for students on school trips and suites for well-off VIPs.

"Although we think that offering high quality service and good facilities are crucial factors in winning customers, it is also very important to reflect customer needs," Yamanaka said. "Without these, there would be some hotels dropping out of this competition."

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