UBS Asset Management has launched a US$400m (€334m) strategy to invest in Japanese hotels, focusing on value-add assets and development opportunities in key metropolitan and regional areas.
The firm’s Real Estate & Private Markets business said it would invest in Tokyo, Osaka, Nagoya, Fukuoka and Hokkaido.
Graham Mackie, head of real estate Asia-Pacific at UBS AM, said: “Our investment thesis is underpinned by the clear gap between strong growth in demand for overnight accommodation and the lagging response in supply of new hotel rooms.
“We see a particular window of opportunity in limited service hotels, a sector that accounted for over 40% of all hotel stays in Japan last year.”
UBS AM’s existing joint venture with Mitsubishi Corporation will source and manage the assets through its private fund management arm MCUBS Japan Advisors.
It said the joint venture now had a successful 16-year track record and was one of the largest real estate platforms in Japan.
The main focus will be on the limited-service hotel sector.
UBS AM said the Japanese tourist sector was expanding fast and set for much more growth.
Tourist arrival numbers to the country reached 24m in 2016 and were expected to rise to 40m by 2020, it said, adding that the emerging Asian middle class was the main driver of this growth.
“The evidence is there to demonstrate that tourist arrivals have experienced buoyant growth and that this momentum will continue,” Mackie said.
On top of this, high overnight lodging demand from domestic travellers accounted for six times that of international tourists, he said.
“Supply is just playing catch up here in response to the demand,” he said