Because of the earthquake and the subsequent radiation concerns in Fukushima, Japan saw 73% drop in inbound visitation during March 12th to 30th as compared to the previous year. Together with suspension of domestic travelling, Tokyo Full-service Hotel market saw 38% drop in Revenue Per Available Room (“RevPAR”) in March 2011.
In case of the 9-11 Incident, it took three years for New York City to recover RevPAR to the level of 2000, a year before the incident. If Japan can quickly address the radiation concerns, there is a good chance on a quicker recovery of inbound volume.
The valuation of a hotel asset will be affected mainly by a change in income projections, not by discount/capitalization rate movement. Balance-sheet lenders would take a wait-and-see attitude, therefore, there won’t be many forced hotel assets for sale in the next six months.