Message from the Executive Director

We would like to express our sincere appreciation for your continued support of Hoshino Resorts REIT, Inc.

With the close of the fiscal period ended October 2025 (the 25th fiscal period), we would like to report on our financial results as well as discuss the impact on the overall inbound tourism market of the recent decline in visitors from China.

For the fiscal period ended October 2025, operating revenues amounted to ¥8,696 million, operating income totaled ¥4,325 million, ordinary income was ¥3,556 million, and net income reached ¥3,555 million. As a result, distributions per unit were ¥6,077.

Looking ahead, for the fiscal period ending April 2026 (the 26th fiscal period), we forecast operating revenues of ¥9,162 million and distributions per unit of ¥6,500. Furthermore, for the fiscal period ending October 2026 (the 27th fiscal period), we project operating revenues of ¥9,302 million and distributions per unit of ¥6,660, exceeding the pre-COVID level of ¥6,651.

Next, we turn to the issue of the decline in visitors from China. Following remarks made by Prime Minister Takaichi in the Diet in early November last year, the Chinese government has reportedly called on its citizens to refrain from traveling to Japan and has also begun reducing the number of flights between the two countries. As a result, a decline in Chinese visitors to Japan appears unavoidable.

While it is difficult at present to clearly forecast the magnitude and duration of this decline, its impact on the overall inbound tourism market is likely to remain limited.

There are two main reasons for this assessment.

First, the proportion of Chinese visitors traveling independently—that is, arranging their own travel plans rather than participating in group tours—has been increasing. According to the Japan Tourism Agency’s Inbound Consumption Trend Survey, independent travelers accounted for 83.4% of Chinese visitors during the July–September 2025 period. Independent travelers tend to separate political developments from their personal values and travel decisions, making them less susceptible to changes in diplomatic relations. Past experience also shows that individual travel is relatively resilient to diplomatic tensions.

In contrast, group travel, which is more sensitive to diplomatic relations, once accounted for around 50% of Chinese visitors but has now fallen to 17.6%. This suggests that the current decline in Chinese travelers is likely to be limited in scope.

Second, Japan’s continued attractiveness as a travel destination to foreign visitors overall is expected to offset part of the decline in Chinese arrivals. Examining the relationship between Japan’s real effective exchange rate index—which measures the yen’s external value after adjusting for price changes—and the total number of overnight stays by foreign guests, as well as their shopping expenditures, shows that yen depreciation tends to boost both accommodation demand and retail spending by foreign visitors.

At present, the yen’s real effective exchange rate stands at its lowest level since inbound tourism began expanding in 2010 and is approximately 30% lower than in 2019, prior to the COVID-19 pandemic. As a result, the nationalities and regions of inbound visitors have become increasingly diversified. Particularly noteworthy is the strong growth in arrivals from Europe, North America, and Australia compared with 2019.

On a year-to-date basis, visitor numbers have increased by 91% from the United States, 70% from Australia, and 59% from Europe, exceeding the growth rates for China (+1%), South Korea (+49%), Taiwan (+36%), and Hong Kong (+10%). (Figures are year-to-date through October; for Europe, through August, the latest month for which statistics are available.)

This diversification of inbound demand has reduced Japan’s dependence on Chinese visitors and strengthened the overall resilience of the inbound tourism market to changes in diplomatic relations.
For these reasons, we believe that the decline in visitors from China will have only a limited impact on the inbound tourism market as a whole.

In closing, the Hoshino Resorts REIT will continue to maintain stable financial operations while further strengthening its portfolio and contributing to the development of the tourism industry.
We sincerely ask for the continued support and encouragement of our unitholders.

References
CBRE K.K., December 2025 CBRE Report
“Limited Impact of the Decline in Chinese Visitors on the Hotel and Retail Sectors”