How Japan’s Tourism Surge is Reshaping Business Travel

Picture this: After a whirlwind of meetings in the bustling heart of Tokyo, Yoshiki Kojima’s IT team retreats to a capsule hotel. Once a quirky, budget-friendly solution, these compact lodgings are now bursting at the seams—not just literally, but financially. As Japan experiences an unprecedented surge in tourism, traditional hotel rooms have become prohibitively expensive for business travelers, compelling companies like Kojima’s to seek creative alternatives.

A weakened yen has turned Japan into a magnet for international visitors. The latest national tourism figures for 2024, released Wednesday, are projected to eclipse 2019’s record of nearly 32 million arrivals. While this influx is a boon for the Japanese economy—boosting sectors from hospitality to retail—it’s also putting a strain on local businesses that rely on affordable accommodations for their employees.

“Capsule hotels have always been a staple for budget-conscious travelers,” Kojima explains, adjusting his tie in his Tokyo office. “But with the current tourism boom, the prices have skyrocketed, making it challenging for us to manage our travel budgets.”

Capsule hotels, known for their minimalist, bed-sized pods stacked in rows, have long been an economical choice for both tourists and locals. However, Kojima acknowledges their limitations. “They’ve got a bit of a ‘shabby’ reputation,” he admits. Determined to provide his team with better amenities, he opted for a more upscale capsule hotel. This establishment boasts high-end mattresses, individual TVs in each pod, and even a traditional shared bathhouse—features that have made it a hit among his employees.

“It’s clean, convenient, and has a traditional shared bathhouse. My employees say it’s fun,” Kojima shares with a smile. A night in a standard capsule here starts at around 5,000 yen (approximately $35), a price that’s still considerably lower than the average 20,048 yen ($140) for a basic private room at a Tokyo business hotel in November. This is a sharp rise from the pre-pandemic peak of 12,926 yen ($80) in April 2019, according to Tokyo Hotel Kai, a consortium of roughly 200 hotels.

Kojima isn’t alone in his struggles. The increased demand for accommodations is a double-edged sword. “I’m thrilled that Japan is welcoming so many visitors,” he confides, “but every day, I grapple with how to keep our business running smoothly amidst these rising costs.”

The broader business community is feeling the pinch. Takuto Yasuda, an analyst at the NLI Research Institute, points out that while the tourism surge creates jobs and stimulates the economy, it also leads to overtourism. “Japanese people are finding it harder to travel domestically, and everyday life is being affected,” Yasuda explains. “The labor shortages and rising costs for hotel supplies are only adding to the problem.”

Local business owners are feeling the impact too. Keisuke Morimoto, who runs a traditional kimono shop in Nara, took to X (formerly Twitter) in frustration after discovering that a two-night stay in a Tokyo hotel would set him back 60,000 yen ($420). “Seriously, what do I do for the hotel for my business trip?” he tweeted. Morimoto is now considering alternatives like Airbnb, which offers more affordable options but lacks the consistency and reliability of traditional hotels.

The ripple effects of overtourism extend beyond Tokyo. Kyoto, Japan’s ancient capital, has seen its own share of challenges. Residents have reported incidents of visitors harassing geisha and disrupting the city’s cultural fabric. In response, Kyoto plans to hike accommodation taxes, potentially increasing rates by up to tenfold for high-end hotels, Mayor [Name] announced Tuesday. This move aims to curb the influx of tourists and protect the city’s heritage.

Japan’s ambitious goal to welcome 60 million visitors annually by 2030 underscores the urgency of addressing these issues. Government data reveals that foreign visitors to Tokyo have doubled since 2019, while Osaka has seen a 1.5-fold increase. To mitigate the pressure on major cities, the government is encouraging tourists to explore lesser-known destinations, promoting stays of at least two nights in rural areas.

Yasuda agrees that diversifying tourist destinations is crucial. “Redirecting visitors to smaller regions can help balance hotel occupancy rates and alleviate the strain on major urban centers,” he notes. In 2024, business hotels in Tokyo managed by major operator Fujita Kanko reported an 88 percent occupancy rate, with average rates up 26 percent from the previous year. “We’re hoping to spread demand to cities like Sapporo, Naha, and other smaller regions,” the company stated.

For Kojima, these developments mean contemplating drastic measures. “I’m thinking of moving our headquarters to Sapporo or organizing meetings in hot spring towns near Tokyo,” he muses. “There are many areas that aren’t flooded with tourists, and we can take advantage of that.”

Kojima’s predicament is emblematic of a larger trend affecting businesses across Japan and beyond. As the tourism industry continues to thrive, companies must navigate the delicate balance between leveraging economic opportunities and managing the logistical challenges that come with them. The rise in business travel costs is a tangible reminder that growth often brings unforeseen hurdles, prompting the need for innovative solutions and strategic planning.

As Japan marches toward its 2030 tourism target, the experiences of business leaders like Kojima highlight the intricate dance between welcoming global visitors and maintaining sustainable, cost-effective operations. For the international business community observing Japan’s journey, it serves as a case study in adapting to rapid economic changes while striving to preserve both corporate integrity and cultural heritage.