Osaka's city hotels have run below 70% occupancy all year, and the Expo base is only half the reason

Osaka's city hotels ran at 62.4% occupancy in June, 19.1 points below the 81.5% of June 2025, according to the second preliminary reading of the Japan Tourism Agency's accommodation survey published on 31 August. It is the weakest June for the prefecture's city hotels since 2022, and it is not an outlier: the line has been 60.4% in January, 64.8% in February, 68.1% in March, 67.5% in April and 69.8% in May. Osaka has not filled seven rooms in ten in any month this year, after a 2025 in which the line never fell below 71%.

The obvious explanation is the base. Expo 2025 ran on Yumeshima from 13 April to 13 October last year, and Osaka's city hotels ran at 83.7% in April, 83.4% in May and 81.5% in June 2025 on the back of it, then 83.6% in August and 86.3% in September. The guest-night split says who has gone: in June, Japanese guest-nights in Osaka fell 28.2% to 1.95 million, foreign guest-nights fell 18.0% to 1.68 million, and the prefecture's total fell 23.8% to 3.64 million, the steepest drop of any prefecture in the agency's table. The domestic Expo crowd, not the foreign one, is the larger missing piece.

Below the pre-Expo floor

The base does not explain everything, because Osaka is now running below the months before the Expo opened as well. In January to March 2025, with no Expo, the prefecture's city hotels were at 74.7%, 76.4% and 73.8%; the same three months this year came in at 60.4%, 64.8% and 68.1%, ten to fourteen points lower. Something other than the fair's absence is holding the number down.

The first candidate is China. Kansai International Airport handled 1.97 million international passengers in July, 11.9% fewer than a year earlier, and 1.86 million in June, 16.4% fewer, on the Osaka Regional Civil Aviation Bureau's monthly count; over April to July the airport's international traffic was 13.1% below 2025. Nationally, Chinese guest-nights at larger lodgings fell 50.9% in June and 43.0% in July, the agency's tables show, following the Chinese government's advisory against travel to Japan that JNTO cited in its own July arrivals release. Kansai's international gateway was more exposed to that market than Tokyo's, and the hotel line is where the exposure shows.

The second is supply. Osaka built rooms for the Expo year, and in our view a share of that inventory is now chasing a smaller pool of guests, which depresses the occupancy percentage even where absolute demand has only partly fallen. The agency's redesign of the survey also matters here: from January 2026 it stratifies the sample by room count rather than employee count, and it warns that year-on-year comparisons may carry some of that change. The size and the persistence of Osaka's gap argue that the redesign is not the story, but the exact points are softer than they look.

Kyoto held its spring, Tokyo held its level

Kyoto tells a different story. Its city hotels ran at 70.8% in June, down 6.5 points from 77.3%, but April and May came in at 83.6% and 83.7%, all but level with the 89.2% and 84.4% of a year earlier. Kyoto's foreign guest-nights fell 19.2% in June, as steeply as Osaka's, while its Japanese guest-nights fell only 9.8%. Tokyo's city hotels were at 76.1% against 76.6%, and the capital's all-facility rate of 75.4% was the highest of any prefecture, up 2.2 points, even as its foreign guest-nights fell 17.0%. Fewer foreign guests, then, is a national condition this year; the empty rooms are a Kansai one.

The national picture is softer than the headlines from Kansai but not alarming. All lodging types together ran at 57.2% in June, 1.6 points down, and at 60.8% in July, 0.4 points down, on the first preliminary July reading. City hotels nationally were at 69.2% in June, 3.3 points lower, and 71.9% in July, 0.3 points higher, while resort hotels and ryokan improved in July. The three metropolitan areas lost 16.8% of their foreign guest-nights in June; the regions lost 7.4%.

Beds down, tills up

For a floor operator the useful contrast is with the shops. The Japan Department Stores Association's July report puts Osaka's department-store sales up 4.1%, Kyoto's up 8.6% and Kobe's up 9.3%, while the prefecture's city hotels, on the latest reading, were running a fifth below a year earlier. The guests who still come are spending more per head, and much of that spending is in high-priced goods rather than nights. In our view that makes the Expo hangover a lodging and airport problem first, and a Shinsaibashi or Umeda problem only if the arrivals decline broadens beyond China, which the August national figure of 9.6% fewer visitors says it has begun to do.

The next reading is the second preliminary July figure on 30 September, which will give the prefecture split for the first full summer month without the Expo. The harder comparison comes in October and November, when the base is the fair's final weeks, 86.3% in September and 83.8% in October. If Osaka is still in the sixties then, the region has a capacity question that no calendar will answer for it.