As the first phase, Nittetsu Kowa Real Estate will open a 145-room hotel in Tokyo's Ueno neighborhood in March 2024 under the "&Here" brand.

Room rates will be set at 30,000-50,000 yen per night for a room of around 40 sq. meters for up to four people, and 100,000-120,000 yen for a suite accommodating up to six people. Reservations are already underway, with 80% said to be from overseas visitors.

Nittetsu Kowa Real Estate also plans to open hotels in Tokyo's Shinjuku and Osaka's Namba district in fiscal 2025. "The ratio of overseas tourists is expected to be around 70%," said company president Masahiro Miwa.

The company plans to operate the hotels with small staffs of 15 people by using unstaffed check-in machines and outsourcing cleaning services.

Meanwhile, NTT Urban Development plans to open a total of 526 hotel rooms in Kyoto, Osaka and Hokkaido between 2024 and 2026, representing a 50% increase on the number of new rooms opened during the 2017-2019 period.

Foreign hoteliers such as Singapore's luxury Capella group and a Hyatt affiliate from the U.S. will be invited to operate the hotels. To attract foreign guests, the hotels will be located near such attractions as Osaka Castle and places where the traditional culture of Kyoto can be experienced.

Mitsui Fudosan, another real estate company, will develop around 1,000 new hotel rooms, including those located overseas, increasing current levels by almost 10%. Occupancy rates, which fell to 40% in 2020 during the pandemic, recovered to over 80% in April-June 2023, with demand from overseas tourists expected to continue growing.

Fellow property developer Hulic is planning to open a luxury ryokan -- a traditional Japanese inn -- in Tokyo's ritzy Ginza neighborhood in 2025.

Investment in hotels in Japan increased 70% on the year to 203.4 billion yen in the first six months of 2023, according to U.S. real-estate services provider JLL. While the amount is only 70% of 2019 levels for the same period, foreign investment has grown to 128.5 billion yen, 3.6 times higher.

"The weak yen, coupled with low interest rates, has created a favorable financing environment, attracting foreign investment money," says James Yukio Abe, a managing director at JLL.

The number of hotel and ryokan guests in August recovered to 62.27 million, almost the same level as August 2019. Of those, 10.34 million were foreigners, higher than pre-pandemic levels. The ban on Chinese group tours has also been lifted, and further increases in the number of visitors are expected.

Elsewhere in the real estate industry, the number of new housing starts is declining, and office buildings -- which have been supplied in large numbers in recent years -- are at risk of suffering from falling rental incomes.

With uncertainty surrounding the residential and office outlooks, companies are pinning their hopes for growth on the hotel business.

There are risks, however.

"If construction costs increase due to longer completion periods caused by labor shortages at work sites, there could be an impact, especially in areas outside the major metro areas where it is more difficult to increase average room rates compared to urban centers," Abe says.