2 Source: International Monetary Fund (2024) 3 Source: CNBC (2024) 4 Source: CNN (2024) 5 Source: Japan National Tourism Organization (2024) 6 Source: Savills (2023 and 2024) 7 RevPAU excludes rental housing properties, and Hotel WBF Kitasemba East and Hotel WBF Kitasemba West which were closed. 8 Excluding Somerset Azabu East Tokyo which was divested in December 2020. 9 Source: Deloitte Global Economics Research Center (2024) 10 Source: JTB (2023) 11 Source: Seasia.co (2024) 12 Source: Japan Property Central (2024) 2023 REVIEW On a full year basis, Japan’s GDP grew 1.9% in 20232, higher than the 1.1% growth in 2022. The key factors that supported activity included a depreciated Yen, pent-up inbound travel, and recovery in business investment following earlier delays in implementing projects2, partially offset by a weaker second half, due to soft domestic demand3. The contraction in 2H 2023 was despite a sharp rise in inbound consumption, which included tourist spending4. In terms of visitor arrivals, Japan started off the year on a strong positive note, on the back of its full reopening to independent travellers in October 2022. More than 25 million visitors had travelled to Japan in 2023, almost 80% of 2019 levels5. In 4Q 2023 alone, the number of inbound travellers surpassed 2019 levels, even with the number of Chinese tourists at less than half of pre-pandemic levels, showing strong potential for further growth6. Due to the surge in inbound travel, the majority of Japan's hotels registered RevPARs at or above prepandemic levels, mainly driven by ADR growth. Occupancies improved at a slower pace. Many hotels prioritised raising room rates over occupancies due to labour shortages6. In line with the market, CLAS’ serviced residences under management contracts reflected a robust performance. In the first quarter alone, RevPAU7 jumped by 351% YoY, exceeding pre-COVID-19 same-store8 levels by 5%, driven by pent-up demand. International leisure demand was strong, particularly during the cherry blossom season from late-March to April and autumn leaf season from mid-October to November. For the full year, RevPAU7 increased 180% YoY in JPY terms. RevPAU7 for 4Q 2023 exceeded pre-COVID-19 same-store8 levels by 39%, mainly driven by higher ADR, which surpassed pre-pandemic levels by more than 30%. CLAS’ properties under master leases continued to provide stable income. In 2023, the three hotels received variable rent in addition to fixed rent due to stronger performance, while the student accommodation property received fixed rent. CLAS' rental housing properties registered high stable average occupancies of over 95% in 2023, continuing to offer resilience to the portfolio. 2024 OUTLOOK In 2024, Japan’s GDP growth is forecasted to decelerate to 0.9%, as the one-off factors which supported activity in 2023 are expected to taper off2. Domestic demand and private consumption are expected to either remain subdued or continue to decline, as inflation outpaces wage growth as of 1Q 2024. Expectations are that by 2H 2024, moderating inflation, supported by a tighter monetary policy, and accelerating wages should allow for a stronger recovery to take hold9. A record high of 33.1 million inbound travellers are forecasted to travel to Japan in 2024, about 4% higher than 2019 levels and about 31% higher than in 2023. The positive outlook is largely due to factors such as the increased ease of travelling to Japan, and a sense of better value for money due to the cheaper Yen and relatively low prices compared with other destinations10. In terms of source markets, the volume of visitors from South Korea, Taiwan, the United States and Hong Kong have exceeded or recovered close to pre-COVID-19 levels, and are expected to further increase and reach a record high in 202410. Amongst Southeast Asians, Japan is also the most favoured holiday destination, with over a quarter of respondents in a study done across the region selecting Japan as their most preferred11. Although the return of visitors from China has been significantly slower than other regions, at 25% of 2019 levels in 202312, the number of visitors is slowly increasing and expected to recover further in 2024. New hotel room supply in Japan has been slowing down significantly and is forecasted to be at its lowest since 2015, hence boding well for the sector6. CLAS’ serviced residences under management contracts are expected to continue to benefit from the robust international visitor demand in 2024. The hotels under master leases are also expected to capture the potential upside from the continued momentum in 2024 given the variable rent components, while the fixed rent components provide downside protection for CLAS. CLAS’ rental housing properties, which mainly cater to domestic corporate long stays, are expected to register stable performance, given the long leases. In December 2023, CLAS entered into agreements to divest three hotels in Osaka – Hotel WBF Honmachi, Hotel WBF Kitasemba East and Hotel WBF Kitasemba West. The divestments were completed in March 2024. In January 2024, the turnkey acquisition of a rental housing property in Fukuoka, Teriha Ocean Stage, which was entered into in FY 2022, was completed. Post-completion of the divestments and with the inclusion of Teriha Ocean Stage, CLAS now has 30 properties in Japan. ANNUAL REPORT 2023 37 Overview Leadership Portfolio & Performance Sustainability & Governance Financial Statements and Other Information
RkJQdWJsaXNoZXIy NTkwNzg=