IHG's Sandilya on Japan Strategy, Weaker Yen

Let's discuss this with Abija Sandilia, Japan and Micronesia Managing Director at IHG Hotels and Resorts. Great to have you here in the Tokyo studio. Thank you, Sherry, and thank you for having me. Let's discuss a little bit how the cheap Japanese yen is leading to perhaps some changes within your corporation. Are you seeing more attention within IHG group in this region? Absolutely. Japan is, is a global priority market for IG and in many ways it's, it's, it's driven by multiple very strong fundamentals. Japan is the third largest hotel market in the world with over 1.7 million rooms. And you couple that with where currently cost of capital sits, it's a very strong market from a, from a, from a scale point of view capital markets. And then as you discuss more, most recently, it's from a consumer point of view and driven by a very, very strong desire from the Japanese government. In 2016, Japan announced their tourism vision to get to 60 million arrivals by 20-30. And you put all those factors together and it's aligning the stars for our tourism industry where we see robust demand, robust capital and ultimately that's driving a lot of our decisions to make Japan a priority market. Are you seeing any changes in the way that people are approaching your business? And by that, I mean, how does it compare when it comes to domestic tourists and foreign visitors who stay at your hotels? Yeah. I mean, naturally we're seeing Japan had historically quite under penetration of international brands compared to other global markets like the US and Australia, for example, branded supply makes up 40, you know, between 40 and 50% where in Japan that number is below 5%. So we're seeing a propensity for consumers to shift the brands because they recognize our brands from overseas. And then to answer your question around what's changing, I think we're also having to, we're seeing changes within, within our arrivals, within our hotels. So in in Tokyo, for example, some most of on most weeks because of because of the two rooms arrivals, we see 70 to 80% of our guests being inbound guests. Abhijay, the the former head of IHG said the plan was to double the number of hotels and rooms within three to five years. I'm just wondering is that still the plan and and can you give us any more detail on that? That's definitely still the plan. And I think we've we've seen significant growth so far year to date, we've had our busiest year of sign, busiest year of signings, new hotels. We recently announced our a new Holiday Inn in Curry's Hour and a new Holiday Inn in Kyoto. And that's the first Kyoto was the first market that we brought the brand to outside of the US in 1973. So our our flagship brand, our largest brand family, the Holiday Inn family continues to drive our scale, but we're seeing growth at at all segments in across our business. Earlier this this year we announced Garner our our latest brand is coming to Japan and the same next few months we announced 6 Senses Kyoto had just opened. So we're seeing growth across all segments and certainly that gives us strong hopes to continue our Japan growth story. Yes, certainly seems like every other person you talk to in Sydney these days is planning a trip to Japan because of that weak yen. But eventually that currency is going to strengthen again. Japan's going to look like an expensive destination again. Is there a risk that when that happens, there might be a little bit of overcapacity in Japan? I, I don't believe so. I think we, if you look at the data from 2019 versus 2024, where we've seen our record arrivals volumes are broadly similar and the per capita spend in U.S. dollar terms was broadly similar. So I think people come to Japan and especially a lot of Sydney siders are up or would come to Japan because of the unique dimensions Japan offers. We know you could be strolling through Meiji Jingu in Tokyo and land up in Harajuku. There's not many, there's not many countries in the world and not many cities in the world that offer that level of depth and that level of diversity that Japan does. So I think the long term prognosis for tourism continues to remain solid, at least from our perspective. Given that we're seeing so many foreign visitors, we have felt some sort of exhaustion coming from local communities. How do you deal with that as a brand, especially when you're located in these major tourist hotspots? Do you partner with some of these people who may not be too happy with the inflows? Yeah, that's, that's a great question. And we get that off in. I think you have to put that in perspective. Japan currently is on track to get to 3030 odd million arrivals. We're 31 in 2019 and this year we're forecasting to beat that. So there are some pockets, Kyoto, for example, where we've seen famous scenes. But I think where our success would be as a, as a tourism economy would be to spread that tourists out into, into, into some of our smaller destinations that need the benefit of tourism and need the benefit in that local economy. For example, we opened a onset resort in Oita Prefecture in Beppu and that market has never seen historically hasn't seen luxury tourism in the onset space. And if you compare that to, you know, five years ago, we wouldn't imagine luxury travellers, international inbound travellers in, in those markets. So, and that's when really the benefits of tourism can get seen. So I think there's there's a piece of destination awareness because there's so much to be seen across Japan. What's the strategy if those inbound flows start to dry up with the yen becoming a bit stronger, which is the expectation for next year? Yeah. I think if you look at our domestic base, Japan and then one of the reasons why we're so excited about Japan as a, as a tourism market is we've got a very, very strong domestic consumer base in itself. We don't forecast that the are inbound poor because of rising inflation though, but they're still paying for hotel rooms in JP wires. We're opening a fantastic intercontinental and supporter next year and that's another example where it will be the first luxury hotel in the city. So I think there's a lot on offer even for our domestic tourists and our domestic tourism numbers are already back above or in line with 2019 numbers. We have initial offerings as well, right. Pet friendly hotels. I love the Kington's brand. Absolutely. Thanks. Thanks for pulling that out. Yeah, we know. We, we believe we have a travel, travel and stay for everyone. And if you, if you go to our Kim Chin and Chinjuku, most of our room guests are, are, are visitors, foreign visitors. But if you go to our F&B outlets, they're pretty much 100% Japanese domestic travels. And a lot of them actually come with their pets.