Love hotel industry shrugs off recession

Lovers' lodges fill convenient niche luxury inns cannot

by Chris Cooper and Makiko Kitamura

Bloomberg

At 6:30 p.m. on a Friday, Frank Sinatra’s “Strangers in the Night” fills the lobby of the Hotel Mario outside Tokyo. A couple scans a board showing photos of the 50 rooms, which can be rented for a few hours. Only three are left.

Japan’s 25,000 love hotels are making money even as companies such as Sony Corp., NEC Corp. and Nissan Motor Co. cut jobs amid the worst postwar recession. Lovers can get a couple of hours of privacy for as little as ¥3,000, the cost of entry at a Tokyo nightclub, in a country where adults often live with their parents until their 30s.

“It’s a recession-proof industry,” said Steve Mansfield, chief executive officer at New Perspective, which helps manage six hotels owned by Japan Leisure Hotels Ltd. “We’ve even made some rooms more profitable by putting up prices.”

The lovers’ lodges are bucking the industry trend. Hotels in Japan have seen occupancy rates drop for three straight quarters. Sales at Imperial Hotel Ltd., owner of the 119-year-old Tokyo landmark, fell 5 percent last quarter. By contrast, London-listed Japan Leisure bought a sixth hotel last year and is planning further expansion, said Mansfield.

“It’s a tough environment,” said Yutaka Maruyama, an executive vice president at hotel management company The Chartres Lodging Group Japan. “Corporations are cutting down on functions and stays.”

The number of stays at the nation’s hotels slid 3.2 percent in the three months ended December, twice the rate of the previous quarter. Love hotels fare better in this environment, said Martin Schulz, a senior economist in Tokyo at Fujitsu Research Institute.

“It’s not the same as for luxury hotels, which are really in trouble now,” said Schulz. “The overall market for love hotels is not so much economy related. It’s for people escaping very narrow homes.”

More than half Japan’s 127 million people live in metropolitan areas, such as Tokyo, where an apartment for two or three is typically about 60 sq. meters.

Next door to the Mario, on the nation’s busiest highway, the luxury liner-shaped Queen Elizabeth has seen sales soar since it reopened in December, complete with life-size figures of Leonardo DiCaprio and Kate Winslet from the movie “Titanic” on its roof. As well as the intimation of a Leonardo-Kate liaison, Japan’s love hotels lure customers with lower rates, Jacuzzis and even maid-costume rentals.

Customers choose their room from a display with pictures of the suites. There’s no check-in form and you pay a cashier hidden behind a screen.

Many love hotels have abandoned the red velvet sofas, revolving beds and mirrored ceilings that made them famous in the 1960s and ’70s. A renovation at the Bonita hotel in Sendai, recently bought by Japan Leisure, has rooms more akin to a boutique hotel, with 42-inch flat-panel televisions, black modern sofas and king size beds.

“It can feel embarrassing to take people back home and so love hotels are popular,” said Mitsuo Seki, a 32-year-old bartender in Tokyo, who visited love hotels three to four times a month. “They have lots of extras as well that are very entertaining.”

Just over 52 percent of the nation’s leisure hotels predicted sales will be flat or increase this year, according to a survey in January by trade magazine Leisure Hotel.

London-based Japan Leisure didn’t give net income in its earnings statement on May 18. Its earnings before interest, taxes, depreciation, and amortization increased 2.6 percent to ¥491 million at its five Bonita-branded hotels in 2008, after taking out fees for services that include costs for its initial public share sale. Guest numbers at the Bonita hotels rose 1.4 percent, the company said.

Japan Leisure plans to raise £50 million ($76 million) to invest in Japan’s love hotels, the London-based Times reported on May 18. Japan Leisure shares, which trade on London’s Alternative Investment Market, closed unchanged at 57 pence yesterday and have risen 8.6 percent in the last 12 months.

Even at the top end of the lodging market, operators are looking for love to temper sagging business-customer sales.

The Westin Tokyo offers “Romance” packages with sparkling wine and strawberries from ¥50,000 a night with a minimum two-night stay in a deluxe room. The chain is targeting partners at a different stage in their relationship than its cheaper rivals, ones who may be thinking about proposing, said Yumi Kuriyama, a director of sales and marketing at the Westin Tokyo.

“We haven’t been seeing a decline in those bookings,” said Kuriyama. “Couples come to us when they’re serious.”