Japan's Largest Hot Springs Resort Banks on Foreign Tourists

(Bloomberg) -- The city of Beppu in western Japan is famed for its hot springs, with hotels and resorts competing to attract tourists to an area renowned for sights like the "Hells of Beppu," a series of colored and super-hot natural pools.

As the numbers of Japanese visiting the resorts plateaus, local and international hotel chains are expanding to target the boom in foreign tourists.

Tourist numbers dipped in 2016 after an earthquake in nearby Kumamoto, but recovered to a record in 2017. South Koreans have driven the 130 percent increase in foreigners staying in Beppu over the past five years.

In the five years of economic revitalization efforts under Prime Minister Shinzo, the boom in inbound tourism has been a notable success, while other areas like wage growth and inflation have had mixed results. Foreign tourist numbers have increased so much that its helped to shrink the chronic deficits in Japan's services account.

The impact in Beppu is seen clearly in investment in hotels.

InterContinental Hotels Group is one of the businesses looking to take advantage of this. Its joint venture with All Nippon Airways will open a new 89-room luxury hotel next year.

"Beppu is one of the world's most famous hot springs resorts, but it didn't have a luxury hotel of international fame," said Hans Heijligers, the CEO of ING ANA Hotels Group Japan. "The wealthy Japanese market is very attractive, and inbound tourism is also booming."

Luxury domestic hotel chain Hoshino Resorts is building a new hotel, and Oedo Onsen refurbished an older hotel and opened in July last year. The current boom in hotels is going to increase the number of rooms in the city to 5,030 in 2019, from the current 4,400, according to the Beppu City Ryokan and Hotel Association.

With five matches for next year's Rugby World Cup being played in neighboring Oita City, those rooms may be needed.

The largest hotel in the city isn't worried about the new investment and new competition.

"It's an attractive town, and we welcome it. We can make money if they come and make it even more attractive," said Koichi Sasaki, general manager of Suginoi Hotel and Resort, which has 647 rooms. The hotel has had an occupancy rate of 100 percent since 2014, and is renovating its conference space.

--With assistance from James Mayger and Connor Cislo

To contact the reporter on this story: Masahiro Hidaka in Tokyo at mhidaka@bloomberg.net.

To contact the editors responsible for this story: Brett Miller at bmiller30@bloomberg.net, Kyoko Shimodoi at kshimodoi@bloomberg.net, James Mayger

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