Terrie's Take 923 (Tourism Edition) - Adding Content to Concrete, to Make a Hotel a Destination

Terrie's Take terrie at mailman.japaninc.com
Mon Nov 20 10:19:13 JST 2017

* * * * * * * * TERRIE'S (TOURISM) TAKE - BY TERRIE LLOYD * * * * * *
A bi-weekly focused look at the tourism sector in Japan, by Terrie 
Lloyd, a long-term technology and media entrepreneur living in Japan.

Tourism Sector Edition Sunday, Nov 19 2017, Issue No. 923

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+++ Adding Content to Concrete, to Make a Hotel a Destination

About 15 years ago, the Tokyo real estate team at Morgan Stanley hit on 
a great idea for making money. At the time it was difficult for foreign 
firms to buy prime real estate in major cities (some things never 
change), because the Japanese locals would hear about or create 
opportunities within their social network and have the deal sewn up long 
before the international guys got wind of it.

So Morgan Stanley's counterattack had a two-step approach. Firstly they 
would go after large portfolios of real estate, preferably distressed in 
some parts, that were so massive (in the billions of dollars) none of 
the locals would have enough cash to acquire the entire offering. They'd 
then strip out the best and worst sites and sell these off quickly to 
recover some of the base investment. But the real added value was in the 
fair-to-middling sites which they would run them themselves, improving 
the yields until they were ready to sell. When I first heard about their 
strategy (and btw, this team has long-since dissolved) they were running 
shopping centers in out-of-the-way cities, sites that no one else wanted.

"Managing" the properties is probably an inaccurate description. Rather, 
they were (very) actively operating their shopping center businesses: 
first doing deep market research in the target community to see who 
might value new services and products, then recruiting and curating 
stores to fill or develop those community needs, then creating 
macro-oriented events and marketing to draw in the crowds. They had a 
very energetic marketing team and were always coming up with new ideas 
to keep the local shoppers entertained: super discount days in niche 
stores, kids events, illuminations, exotic food courts, etc. Over time 
they built up repeat customer traffic and were subsequently able to lift 
rents and overall yield on their properties.

I retell this story because it's good to remind ourselves that even as 
we may participate in a fusty industry (real estate, hotels, travel, 
transport, you name it) which is fundamentally about commodity products 
and services, it's all too easy to forget that what makes money is not 
just the barebones offering but also the value-added services that 
inspire or stimulate the customer. In other words, spaces made of 
concrete need creativity and content to make them come alive. By over 
focusing on the bottom-most level of Maslow's Hierarchy of Needs - price 
- something that online shopping sites make us obsess over, we forget 
that as people go up the hierarchy they also want to be entertained and 
socially recognized and will pay for that. Morgan Stanley's team 
understood this and thanks to the drab suburbs they were located in, 
they were able to turn their properties into a destination and not just 
a place to shop.

[Continued below...]

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The hotel business is very similar. For the first 3 years of this 
current Inbound boom, anyone owning a hotel has been having a pretty 
good time financially, but now a ton of new hotels coming on stream 
means that the sector is devolving into a commodity-based market. And 
the challenges the newcomers face are many, including: the hastening 
arrival of late-to-the-party Japanese competitors, sky-high OTA 
(Booking.com, etc.) commissions, low-to-mid-end flooding of room supply 
by Airbnb and the Minpaku sector, an ongoing (and acute) shortage of 
bilingual staff, the painful logistics and time spent building out new 
facilities, the lack of office properties for conversion, and of course 
the highly-anticipated post-Olympics slump expected to hurt everyone's 
30-year business plan.

So to be profitable, today's hoteliers have to be creative and develop 
reliable niches that lift customers up their hierarchy of needs. Here 
are some good examples of hotels that get this:

Hilton Hotel. The Hilton actually has a very stable Inbound travel 
business, by virtue of the fact that each property can tap into the 
brand's massive global customer loyalty program (50m members, 13 brands, 
and 4,600 properties in 100 countries), and of course the pricing 
incentives for those loyal customers. So it would seem that they have 
nothing to worry about. But while the room occupancy side of things may 
be fine, like any major downtown property, space usage is critical to 
profit and not so long ago you could see that their many Food & Beverage 
(F&B) spaces were being wasted between lunchtime and dinner. This of 
course is the same problem facing other hotels and restaurants all over 

That all changed when the Hilton introduced an all-you-can-eat dessert 
buffet, leveraging its own kitchens and expertise. In a market where 
Japanese hotels count every bean and hate giving anything away, the 
Hilton was offering customers an endless supply of sweet morsels at a 
set price. The result has been a huge hit with fashionable Tokyo 
housewives, and now if you go to the Shinjuku Hilton any time in the 
early afternoon (i.e., after lunch), you'll see a long line of 
well-dressed women (yes, over 90% female) looking to spend the afternoon 
chatting over tiers of dessert items stacked on each table. For Hilton, 
the food has been their value-added content.

http://bit.ly/2hFWrOB [TripAdvisor review for the dessert buffet]

Seth Sulkin's new Moxy hotel in conjunction with the Marriott chain is 
another example. Sulkin's Pacifica Capital has just opened its first 
hotel in Kinshicho, a gritty town to the east of Tokyo and an area that 
would never be considered by Japanese hotel developers. But if you're a 
small-but-ambitious player in the hotels development business, you have 
to go where the real estate is affordable, and for Sulkin this meant 
going out to this heavily-concreted bed town.

But Sulkin understands Maslow's Hierarchy of Needs well, and is 
targeting an audience that will appreciate the working class area and 
working class restaurants and bars - meaning he's targeting Millennials. 
He believes they are looking for an authentic immersion in Tokyo, a 
high-contrast experience that can be shared online because it is so 
different to back home. The Moxy concept, which is already barreling 
ahead abroad, involves an interior focusing on luxurious shared 
(community) spaces and affordable rooms, but with the hotel located in 
an "emerging" area of its host city, and of course near public 
transport. With Kinshicho, the Moxy is about 5 minutes form the 
subway/train, and from there about 10-15 minutes to Asakusa, Tokyo Sky 
Tree, and Disneyland.

http://bit.ly/2B1TKjb [Moxy Hotel site]

Hotel Anteroom, Kyoto. One city that is already over-served with hotels 
is Kyoto, and it's pretty hard for a facility to differentiate itself. 
Much like Sulkin's Moxy, the operator of the Anteroom in Kyoto, UDS (a 
design company now owned by Odakyu Rail), decided to operate in the 
suburbs, well away from other hotels, and sell their space by adding 
multi-dimensional "content". Like Moxy, they are all about being an 
experiential hotel (I always stay there when I'm in Kyoto), combining 
art with excellent-quality Western-style buffet breakfast options. There 
are plenty of attractive community spaces; small but cute guestrooms 
complete with art objects; youth-friendly guest amenities such as great 
internet, bicycles, and a fully-stocked bar; AND, they are really 
reasonably priced at the low end (about JPY6,000 including breakfast). 
The art is by local artists, ranging from sculptures and installations 
to paintings and fittings, and they change the exhibitions regularly.

https://hotel-anteroom.com/en/about/ [Hotel Anteroom in Kyoto]

Trunk Hotel, Shibuya. This is another designer hotel that had to 
overcome many challenges. Actually the designers of this hotel visited 
us a few months before they opened, worried about whether foreign 
tourists would want to come and stay there because of their awkward 
location (about 15 minutes walk from both Shibuya and Omotesando 
stations). They also confided that of the 16 rooms they'd planned, the 
Shibuya City Office forced them to make 8 of the rooms single occupancy, 
because of a weird rule in Shibuya designed to discourage the building 
of new hotels...!

Anyway, the Trunk folks decided to theme their hotel as healthy 
eco-chic, which basically means that there are lots of recycled items 
throughout the hotel, from the bicycles to the coat hangers, along with 
a very good restaurant selling healthy food. The atmosphere is earthy 
but super modern with lots of windows, greenery, and wide open community 
spaces. Now after just a year of operation, the hotel is popular with 
both visiting hipster tourists and locals wanting a trendy events 
location as well.

http://bit.ly/2AghOBA [Trunk Hotel in Shibuya, Jingumae]

...The information janitors/

------------- PM/Office Admin Job Vacancy -----------------

Japan Travel is seeking a project management and administration 
coordinator to help deliver projects and assist with office operations 
for its growing travel and media business. The company is a leader in 
the travel writing services space, serving regional governments and 
major corporations all over Japan. Our services extend from planning and 
content creation to software development and producing actual tours.

We are conveniently located in Kojimachi, just seconds from the subway, 
and you will be working with a friendly international team of about 20 
people. Our preference is for a fluent E/J bilingual with strong English 
capability. Ability in Chinese would also be a plus. No serious admin 
experience required, we're most interested in your personality and 
ability to learn.

Interested applicants should email terrie.lloyd at japantravel.com for details


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Written by: Terrie Lloyd (terrie.lloyd at japaninc.com)

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