Starwood Hotels looks to expand its Tokyo foothold

By Brett Cole
Bloomberg News Service

TOKYO — Starwood Hotels & Resorts Worldwide Inc. may take stakes in as many as five new hotels in central Tokyo, as part of an expansion in the Asia-Pacific region by the world's largest innkeeper.

Few hotels in Tokyo offer the facilities and services demanded by international business travelers, said Akio Hirao, managing director for Guam, Korea and Japan at Starwood, which runs the Westin Hotel Tokyo and Sheraton Grand Tokyo Bay Hotel.

Starwood, Ripplewood Holdings, Soros Real Estate Partners and other foreign investors are targeting Japan's leisure industry as the country's third recession in a decade pushes prices down and as a growing population of retirees begins to travel more.

"There may be acquisition opportunities as Japanese hotel operators need cash," said Jon Tanaka, a director at DB Real Estate, a unit of Deutsche Bank AG.

Starwood may buy stakes of up to 20 percent in hotels to meet its goal of managing as many as 35 properties in Japan, Micronesia and South Korea in the next three years. In Tokyo, Starwood targets hotels with 400 rooms, three restaurants, banquet space and spas, Hirao said. He declined to name the target hotels.

"This city can absorb more hotels," Hirao said in an interview. "People think the economy is bad, but if you go into Tokyo the restaurants are full."

Starwood estimates that 10 million of Japan's 120 million people will retire in the next 10 years and that Japanese over 60 have saved about 65 trillion yen ($527 billion).

Starwood chairman Barry Sternlicht says the Asia-Pacific area is the future and that the company is planning a budget for investments in the region, according to Hirao.

Mori Trust Co. and Sumitomo Realty & Development Co. will spend more than $1 billion building a St. Regis hotel in Shiodome, a former railway marshalling yard near Tokyo Bay under development as a commercial and business center. Starwood will manage the hotel, without taking a stake, Hirao said.

Starwood's Tokyo Westin has about 80 percent occupancy and its Sheraton about 90 percent, he said.

Within a two-hour drive of Tokyo, Starwood sees opportunities to manage hotels at hot springs and may look at managing resorts on Japan's northernmost island of Hokkaido and its southernmost territory, Okinawa, Hirao said.

In Korea, Starwood manages four hotels and may increase that to 15 within three years, he said. The company manages one hotel in Guam and wants four more in Micronesia.