While Osaka and Kyoto have long been the undisputed stars of Japan’s Kansai region, a new trend is reshaping the travel landscape. A recent report from a global real estate services firm reveals that international hotel investors are increasingly looking beyond these tourism hotspots, setting their sights on the region’s “secondary cities.” This strategic shift towards destinations like Kobe, Nara, and Wakayama signals a new era for tourism in Kansai, promising more diverse and authentic experiences for travelers.
The Driving Forces: Saturation and a Quest for Authenticity
For years, the story of tourism in Osaka and Kyoto has been one of explosive growth. With Japan’s inbound tourism recovering at a staggering pace—surpassing pre-pandemic levels in early 2024—the demand for accommodation has soared. However, this success has created new challenges that are now fueling the expansion into neighboring areas.
Reaching the Limit in Osaka and Kyoto
The primary driver behind this investment shift is market saturation. Prime locations for new hotels in central Osaka and Kyoto are becoming scarce, and land prices have skyrocketed. For instance, commercial land prices in popular districts of Osaka have seen significant year-on-year increases, making new developments incredibly expensive.
Hotel occupancy rates in both cities frequently exceed 80%, and sometimes even 90% during peak seasons. This intense competition and high operational costs are pushing developers to seek opportunities where they can offer unique value without the extreme financial pressures of the major urban centers.
The Rise of the ‘Off-the-Beaten-Path’ Traveler
Simultaneously, traveler preferences are evolving. Many international visitors, especially repeat travelers to Japan, are looking to escape the crowds of the “Golden Route” (Tokyo-Kyoto-Osaka). They are searching for deeper, more authentic cultural experiences that are harder to find in heavily touristed areas. This growing demand for “off-the-beaten-path” destinations aligns perfectly with what Kansai’s secondary cities can offer.
Spotlight on Emerging Destinations
Developers are not simply building standard hotels in these new locations. The focus is on creating boutique hotels and luxury resorts that reflect the unique character and natural beauty of each city, offering travelers a distinct reason to visit and stay.
Kobe: Cosmopolitan Charm and Culinary Delights
Famous for its marbled beef, historic port, and stunning night views, Kobe offers a unique blend of Japanese and international culture. New hotel developments are expected to leverage its reputation as a sophisticated city, with a focus on high-end culinary experiences and wellness retreats in nearby Arima Onsen, one of Japan’s oldest hot spring towns.
Nara: Ancient Capital of Tranquility
While most visitors experience Nara as a day trip from Kyoto or Osaka to see the Great Buddha and its friendly deer, its true charm lies in its tranquil atmosphere. Investors are seeing potential in developing luxury ryokans (traditional inns) and boutique hotels that allow guests to immerse themselves in the serene, ancient capital away from the daytime crowds.
Wakayama: Nature, Spirituality, and Coastal Beauty
For travelers seeking nature and spiritual rejuvenation, Wakayama is a treasure trove. It is home to the sacred Kumano Kodo pilgrimage trails, stunning coastal scenery, and abundant hot springs. The new wave of investment here is focused on eco-resorts and wellness-focused properties that connect guests with the prefecture’s rich natural and spiritual heritage.
The Future of Kansai Tourism: What This Shift Means for You
This trend is more than just a real estate story; it’s set to fundamentally enhance the travel experience in the Kansai region.
For travelers, this means a wider array of accommodation choices. Soon, you’ll be able to easily combine a vibrant city stay in Osaka with a peaceful temple-side retreat in Nara or a refreshing coastal getaway in Wakayama. This will encourage longer, more immersive itineraries that go beyond the typical tourist trail.
For the region, this dispersal of tourism brings significant economic benefits to local communities that have previously seen little impact from the tourism boom. It promotes a more sustainable model of tourism, easing the pressures of overtourism in Osaka and Kyoto while celebrating the unique cultural assets of the entire Kansai area. As you plan your next trip, consider looking just beyond the bright lights of Dotonbori—you might discover your new favorite place in Kansai.
