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By Ryota Dei

HAGATNA, Guam (Pacific Daily News, April 11) – It might not be apparent from the posh lobbies and friendly receptionists, but hotel row is in for more changes that could benefit tourism and help sustain jobs on Guam’s Tumon Bay.

The Guam Marriott Resort, after being sold by the Nauru government to Marriott International, is being sold again, this time to Australian investors.

Negotiations are being made to transfer the ownership of the Pacific Islands Club to a Japanese conglomerate.

The Guam Reef Hotel was sold recently from a Japanese company to another Japanese company.

The owners of the Hotel Okura Guam and Hotel Nikko Guam have plans to sell their properties as well.

And in what could be the single largest signal of renewed confidence in Guam's economy, local developer Tanota Partners is reviving its plan to build another hotel, this time a 28-story, $80 million project next to its 600-room Outrigger Guam Resort.

While expressing her concern about the impact of the recent ownership change at the Guam Reef Hotel, housekeeper Amparo Lomibao voiced hope that the new owner would bring positive changes.

Lomibao hopes there will be more employees hired, saying she has to clean about 18 rooms a day because of a shortage of housekeepers.

"I also want to see some renovations. The furniture at the Ocean Tower are very old. Carpets need to be changed, too," she said.

Several major hotels and some smaller hotels on the island are either actively or less actively being sold, said Nick Captain, president of real estate consulting firm The Captain Company and Captain Realty Advisors.

The Holiday Inn Resort Guam and the Hilton Guam Resort & Spa were among Tumon Bay properties that sold in the last several months.

Because most hotel buyers these days have renovation plans, he said, the more hotels are sold, the higher the chances of cash infusion into the island for renovation and construction projects.

"You will also have a fresh perspective from a new owner. A new owner will obviously be optimistic, whereas sellers are probably pessimistic about future operation," he said.

The island also would further benefit with higher quality property that will be a better attraction for tourists, and more tourists help reassure hotel workers the industry can sustain their jobs.

Shigeharu Toyama, operation manager of the Guam Reef, also expressed his hope for renovations.

"There has been a plan to undergo major renovation of the hotel, but it was denied by the (previous Guam Reef owner) because soft renovation does not help attract more customers. It just restores the condition of the hotel property," he said in Japanese. "I hope we will see some major renovation under the new owner."

But while a number of hotels are under negotiations for possible sale, Captain expressed doubt about whether those talks would lead to a sale for most of the hotels in the near future.

"It really depends on whether hotel owners have price expectations that are in line with current market conditions," he said, referring to a wide gap between an asking price and the market price.

The real estate market started rebounding about two years ago because of the changing dynamics in the marketplace and the financial situation of individual owners.

"Many owners have very high investments ... into these hotel properties," Captain explained. "Because of the downturn following the Asian economic crisis, the operating result promised owners were very, very small returns, in some cases, negative returns."

Some of the island's hotels have yet to fully recover from the two devastating storms that hit the island in 2002, and the situation was mentioned by Captain as one of the reasons for the losses.

Ownership of hotels in Tumon Bay, once dominated by Japanese companies and individual owners, now is made up of a mixture of local, international and Japanese owners since Japan's bubble economy burst in the late 1980s.

Perspective from Japan

The decline of Japanese-owned hotel franchises is not a trend unique to Guam, said Masanori Ito, professor of economics at the Women's University of Kyoto, adding that most hotels in Japan are taken over by foreign hotel franchises.

"It's not that Japanese companies have not extensively been into hotel management around the world," he said. "Perhaps those who have invested on hotels aren't as financially stable as before," he added.

The Guam Reef Hotel was sold to a Japanese company on March 18, according to a report by the Jiji Tsushin, a wire news service in Japan.

Under financial pressure in Japan, the Reef's former owner, Towa Real Estate Development Co., sold the hotel property to Unimat Holdings for an undisclosed amount of money.

Towa will limit its operation to condominium management and withdraw from resort and golf course operation, according to the Nikkan Kogyo Shinbun in Japan.

Bart Jackson, general manager of the Pacific Islands Club, said the negotiation between the current owner and the interested buyer of PIC has not been finalized.

The current owner, Toyo Real Estate Development Inc., purchased the hotel in 1989. It also owns the Mangilao Golf Course and co-owns the Hotel Nikko Guam. It has been interested in selling the property to Orix Corp.

Orix Corp. is an integrated financial services group based in Japan. With operations in 24 countries and regions worldwide, Orix's activities include leasing; corporate finance; real-estate-related finance and development; and investment and retail banking.

The Pacific Islands Club manages the hotel, Bart Jackson, general manager of the PIC, said.

"We don't own the hotel anymore. It was sold in 1989," Jackson said. "As far as I know, there hasn't been any sale completed, otherwise they would tell me."

Nakane Sachiko, manager of public relations with Orix Corp. in Japan, said the company was not able to release any information regarding the PIC Guam as of press time.

Hotel Nikko is likely to be on the market in the near future, Captain said. Japan Airlines, which sold Cocos Island to a Japanese billionaire, has one-third ownership in the hotel. Toyo Real Estate Development Co. and Nomura Real Estate also own one-third each.

"I haven't heard of anything official, but two of the three owners -- Japan Airlines and Toyo Real Estate Development Co. -- are in the disposition mode, so it wouldn't surprise me to see that asset come on line," Captain said.

Also, Guam Hotel Okura is reportedly for sale for $30 million, said Captain, adding that the amount has not been confirmed.

Kenji Takayanagi, Okura's president and general manager, declined to comment on the ownership status of the hotel.

While laughing that it is nothing more than a rumor, he added he will explain publicly if anything concrete develops.

Marriot International also is putting the Guam Marriot Resort and Spa on the market for sale, said Captain, adding that interested buyers are Australian investors.

The general manager of Marriot Guam Resort was not available for comment as of press time.

The Sherwood Resort Guam is unlikely to open soon.

Peter Lin, a representative of 334-room Sherwood, said its headquarters in Taipei has not made any decision to sell or renovate the hotel, which has been closed since April 2001.

Captain said the sale of real estate properties increases at the peak and lowest points of the market while the middle transition period is typically a slow period. He added that there were no hotels sold between 1990 and 2000 on Guam.

Guam has been at the bottom of the market in the last couple of years, he said, which is why the real estate transactions have seen an upsurge.

The island's economy has improved since 2004.

Positive signs can be seen from Japan, whose economy has a significant impact on Guam's economy.

"Not only has Japan shown a steady recovery in the last three years, but also Japanese corporations and companies have been raising the largest profits in the history in the last few years," economist Ito said. "However, the people in Japan and the world may not recognize such positive signs because companies are very cautious about making investments and taking a step forward to improve their capitals."

Visitor arrivals in 2004 have exceeded 1.1 million, an increase of more than 30 percent last year. And the Guam Visitors Bureau is looking to welcome more than 1.3 million visitors this year.

Precarious global market

Despite improvement in the island's economy, however, Captain said the worldwide tourism market is precarious because of the volatility for global terrorism and natural disasters.

Considering general corporate performances in Japan in the past few years, Ito said there is no reason for Japanese companies to withdraw from Guam's hotel industry any time soon. However, he added Japanese companies are looking more into Asia, especially China, as an investment destination, and Guam and Saipan may no longer be as attractive as in the past.

There remain a lot of uncertainties in Japan's economy in the next few years though, Ito said, because Japan's economy also depends on the U.S. economy, which is heavily burdened by enormous expenditures on wars and accumulating trade and financial deficits.

"I was worried that if the U.S, economy goes down, Japan's economy will return to recession again. But it is kind of surprising to see that the U.S. economy has been holding its ground with its huge deficits," he said. "But since many uncertain factors come into play, I can't really say what will happen in the future."

April 11, 2005

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