Shangri-La opens in Tokyo, vows to weather recession

The Shangri-La Hotel group launched its first hotel in Japan on Monday, joining a list of foreign luxury inns that have set up in central Tokyo in recent years.

The new property, part of the Hong Kong-based luxury hotel group Shangri-La Hotels and Resorts, opens its doors near Tokyo Station amid the worst economic slump in almost a century.

Asked how the group plans to weather the global recession, Shangri-La Tokyo General Manager Wolfgang Krueger said it will pursue effective management despite the slump.

“We’re here for the long term and we will make this hotel a success,” he told reporters Thursday, promising not to let the economic conditions affect the hotel’s quality.

Shangri-La’s opening further adds to Tokyo’s already crowded lineup of high-end hotels.

The Mandarin Oriental, which opened in 2005 in the Nihonbashi district, and the Peninsula that debuted in 2007 in the Hibiya district are both within walking distance of the Shangri-La.

Also nearby are the Conrad, which opened in 2005 in the Shiodome district, and the Ritz Carlton, which debuted in 2007 in the Roppongi Midtown complex.

The luxury inns have been hit hard by the recession. Business travelers from overseas have been in shorter supply, as have been curious short-stay domestic customers, industry sources say.

According to some estimates, luxury hotels last year saw as much as a 20 percent drop in sales.

Domestic high-end hotels, including the Imperial Hotel, Hotel Okura and New Otani Hotels tried to minimize falling sales by offering rooms with wide price ranges and various ballrooms to cater to corporate demand.

“Our biggest difference from foreign hotels is that we are ‘a grand hotel,’ whereas foreign capitals are small luxury hotels specializing in accommodations,” said Sohei Togashi, manager of public relations for Imperial Hotel.

He explained that a grand hotel has a wide range of rooms, including luxury and economy types, restaurants and ballrooms.

“Our strengths also include customers with high loyalty. About 90,000 people visit our hotel regularly,” he said.

As a result, the Imperial saw April-December sales ease just 5 percent from a year earlier, he added.

These Japanese hotels have also undertaken large-scale renovations in recent years to survive the competition.

The Imperial spent ¥18 billion for room and restaurant renovations between 2003 and 2007. Hotel Okura spent ¥10 billion to renovate rooms and restaurants and to build a new ballroom with a wooden floor to host musical events.

Analysts say about two-thirds of major Japanese hotels’ sales come from banquets and ceremonies, including weddings.

These services kept sales from tumbling to the level of the foreign luxury hotels, half of whose sales depend on accommodating business travelers.

“Foreign hotels, particularly luxury hotels, saw their occupancy rates tumble by more than 10 percent. Above all, the number of executives who come to Japan from Europe and North America on business trips fell sharply and affected those hotels,” said Ryuji Sawada, a partner of Deloitte Tohmatsu FAS’s tourism, hospitality and leisure group.

A sharp fall in the occupancy rate forced the hotels to lower room rates, resulting in decreased sales.

But despite the slump at the foreign hotels, the Hong-Kong based Shangri-La may have an ace up its sleave, Sawada said.

“In the future, what looks promising is visitors from China,” he said. “That means hotels with Chinese capital whose brands are well-known among Chinese may have an advantage.”

The hotel’s interior indicates it may be targeting Chinese visitors.

The Shangri-La Hotel, Tokyo is the chain’s 61st inn. It is adorned with more than 2,000 Chinese-style artworks and more than 50 Czech chandeliers. It has 202 guest rooms.

They occupy the top 11 floors of the 37-story Marunouchi Trust Tower. It also boasts a 370-sq.-meter grand ballroom, a chapel for weddings and ceremonies, a spa and restaurants.