A real estate arm of a Japanese media group Fuji Media Holdings edged out a fund run by Morgan Stanley (MS.N) and others to buy a hotel holding company from a Japanese government-controlled fund, people involved in the sale said.

The sale of the company with portfolio of 10 hotels for about 5 billion yen ($41.2 million) comes at a time when competition to buy hotels in Japan has been intensifying and drawing interest from offshore investors because of increasing demand from tourists.

The Regional Economy Vitalization Corporation of Japan, which is funded by the government, said on Friday it had sold Granvista Hotels & Resorts, to Sankei Building Co, which teamed up with a Japanese turnaround fund J-Will Partners.

Other than Morgan Stanley-affiliated fund, financial services provider Orix Corp (8591.T) was also among those interested in acquiring the company. Both declined to comment.

Sankei Building is fully owned by Fuji Media Holdings (4676.T), which owns a television network and the conservative daily newspaper Sankei Shimbun.

The state-owned turnaround fund took control of the properties in 2011 after buying up debt at the company.

A record 13.4 million foreigners visited Japan last year, a 29 percent jump from the previous year, in part because of the weaker yen, according to Japan National Tourism Organization.

CBRE, a global property services company, projects both Tokyo and Osaka will be short of hotel rooms if Japan reaches its goal of attracting 20 million overseas tourists by 2020, the year of the Tokyo Olympics.

Granvista's holdings include two luxury hotels in Sapporo - a hot spot for Asian tourists - as well as a golf course in Hokkaido.