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The Peninsula Tokyo Enters Tokyo's International High-end Hotel Market:
Competition Stiff for Talented Staff, Faithful Patrons
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By Kaho Shimizu, Japan Times, TokyoMcClatchy-Tribune Regional News

Aug. 29, 2007 - The opening Saturday of The Peninsula Tokyo in Yurakucho, Chiyoda Ward, marks yet another top foreign luxury hotel chain's foray into the capital of the world's second-largest economy. Located near the Imperial Palace and Hibiya Park, The Peninsula Tokyo, with 314 rooms, including 47 suites, five restaurants and a spa, is a quick walk away from the glitzy Ginza shopping district.

"From Sept. 1, we have just one goal: to satisfy customers who will continue to return to the Peninsula Tokyo," General Manager Malcolm Thompson said during a media preview Tuesday. With competition intensifying in Tokyo's international high-end hotel market, luxury inns are under pressure to foster repeat patrons and to ensure they can boast qualified staff at a time when the market is expanding.

Hong Kong-based Peninsula is the second foreign luxury hotel to debut this year, following the March opening of the 248-room Ritz-Carlton in the Tokyo Midtown commercial complex in Roppongi. The last 15 years has witnessed a virtual Tokyo luxury hotel war, as the world's top inns -- whose standard room rates range from ¥50,000 to ¥70,000 -- opened in quick succession, thanks to deregulation and the collapse of the bubble economy, which triggered a fall in property prices and loan interest rates.

The trend became especially conspicuous after 2002, when Four Seasons Hotel Tokyo, with 57 rooms, opened in the Marunouchi business district. In 2003, the Grand Hyatt Tokyo opened in the Roppongi Hills commercial complex with 389 rooms. This was quickly followed by the openings of the 290-room Conrad Tokyo in nearby Shiodome in July 2005, and the Mandarin Oriental Tokyo with 179 rooms in the Nihonbashi financial district in Chuo Ward in December 2005.

The Shangri-La Hotel will make its Tokyo debut with 204 rooms in Marunouchi in March 2009, becoming the last of the foreign luxury entrants. But will there be enough customer demand? "I'm very optimistic," Peninsula's Thompson said. "Tokyo still has a lot of potential. More people are becoming wealthier and more able to utilize international hotels." He also added that many international top-class hotels that have already opened in Tokyo continue to boast high occupancy rates.

While this does not necessarily translate into high profitability, Thompson said foreign high-end hotels in Tokyo enjoy high occupancies without having to lower room rates. The Mandarin Oriental Tokyo is one such example. "Our hotel was not affected by the opening of the Ritz-Carlton. On the contrary, we have better earnings this year than last year," said Mandarin Oriental Tokyo spokeswoman Chie Hayakawa. So far, Hayakawa said, the occupancy rate at Mandarin Oriental Tokyo this year has been well above the 66 percent reported in business 2005, with the average room rate surpassing ¥54,000. The hotel chain did not disclose its latest figures.

"Having new hotels will provide customers with broader options that will lead to stimulating the market," Hayakawa said. Even the foreign hotels that were among the first to enter the market still enjoy high room occupancy rates. The Park Hyatt Hotel in Shinjuku Ward and The Westin Tokyo in Ebisu, Shibuya Ward, both of which opened in 1994, maintained an occupancy rate topping 75 percent between January and June. Mizuho Corporate Bank analyst Masayoshi Yahagi said demand for luxury hotels is still growing thanks to the rising number of foreign visitors to Japan -- which hit an all-time high in 2006 -- and the economic recovery.

The new international luxury inns, however, are posing a threat to long-established top domestic hotels in Tokyo, including the Imperial Hotel, Hotel New Otani and Hotel Okura. The prestigious Imperial, just a short walk from the Peninsula, is now undergoing a ¥17 billion renovation that is slated for completion next year in an apparent effort to survive the fierce competition.

Thompson is meanwhile confident customers will come to his new hotel. "Peninsula and the Imperial Hotel offer different experiences," he said. "I'm sure there will be Peninsula customers who will go to restaurants at the Imperial and customers there will come to our restaurants."

Hotel analyst Mitsuyoshi Horaguchi, however, noted one hurdle that foreign luxury hotel chains here face: a limited number of talented personnel. "All the foreign-run luxury hotels are becoming the same on the hardware side," said Horaguchi, an associate professor of hotel management at Musashino University in Tokyo. "They have spacious rooms decorated with contemporary art and they have spas and restaurants that are similar to each other." That is when qualified staff really comes into play, but ironically, because many foreign luxury hotels have entered the market, it is becoming increasingly difficult to retain good people.

Peninsula's Thompson agrees, saying training personnel is a priority. "We have an obligation, like all hotels, to train and develop more people."

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To see more of the Japan Times or to subscribe to the newspaper, go to http://www.japantimes.co.jp/.

Copyright (c) 2007, Japan Times, Tokyo

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