In a Japanese hotel market that remains very fragmented, Hoshino Resorts aims to bring back “ryokan” hospitality, together with the best of Western-style hospitality, as it begins to see growth in both Japan and globally.
KARIUZAWA, Japan—Despite opening its first hotel in 1914, Japan’s Hoshino Resorts has only very recently started to branch out globally.
And at the top of its to-do list is to offer a blend of Japanese and Western hospitality, with a definite nod towards Japan’s famed “ryokan” hot-spring and inn offerings.
Last year the company opened its first international property—Hotel Kia Ora Resort & Spa in French Polynesia—through a management agreement. In early 2017, Hoshino’s luxury Hoshinoya brand will welcome its first foreign new build with an asset in Bali, Indonesia.
Hoshino’s other 33 properties are all in Japan, including eight standalone properties, but company executives said there are definite plans to open more both domestically and internationally.
Founded in 1904 by Kuniji Hoshino, Hoshino Resorts has also had interests in forestry, silk and hydroelectric power.
Hoshino has three brands, Hoshinoya, Kai and Risonare, with Hoshinoya and a few Kai properties seeing the lion’s share of foreign guests, said Yoshiharu Hoshino, CEO of Hoshino Resorts, who represents the fourth generation of his family running the company.
Hoshinoya is a contemporary resort brand dedicated to upholding the standard of Japanese hospitality, Hoshino said, and Kai is a collection of ryokan, traditional Japanese inns with hot springs and fewer than 50 rooms. Risonare is a premier resort offering family entertainment and leisure.
The ryokans, and the Hoshinoya brand, especially, Hoshino said, offer “an authentic world of ryokan and the spirit of Japan’s ‘omotenashi,’ or traditional hospitality.
Japan on the rise
Hoshino said tourism in Japan is still generated mostly inside the country and is the country’s fifth-largest industry.
“Travel consumption now hit the record of 24.8 trillion (Japanese) yen ($223 billion) in 2015,” Hoshino said. “About 85% is generated domestically, and domestic demands remain stable even against the background of slight population decline. In addition, the governmental effort boosting consumption by inbound tourists will support this gradual increase in the tourism industry for the foreseeable future.”
According to STR, the parent company of Hotel News Now, the devaluation of the Japanese yen has positively affected the country’s hotel industry, spurring “four consecutive years of double-digit percentage growth in gross operating profit per available room.”
Japan reported a 4.3% year-over-year increase in revenue per available room through the first ten months of 2016. Although occupancy declined by 1.7% to 82.4%, a 6.2% increase in average daily rate to 15,339 Japanese yen ($138.46) pushed the country’s RevPAR growth.
Hoshino said the Japanese hotel market remains fragmented and still has many independent hotels. However, foreign capital and robust competition from inside and outside Japan might limit how long independent hotels could stay that way, he said, especially as many have a limited number of guestrooms.
“It is difficult for these properties to optimize their costs,” he said. “Therefore, we as a pure-play hotel management company have tried to achieve economies of scale in order to optimize productivity and remain competitive.”
Hoshino Resorts is increasingly becoming a full management company, with the assets mostly held by individual investors and an affiliated real estate investment trust founded in 2013.
“Pure-play hotel management companies benefit by not owning hotels, because they are able to expand their businesses rapidly without incurring the debt associated with hotel ownership on the balance sheet,” Hoshino said. “We chose to focus on management because we see it as the most viable and least risky way to survive as a small, local firm in the current market.”
Eventually the REIT will own all the Hoshinoya, Kai and Risonare properties, Hoshino said.
“We have shifted ownership to the REIT, which allow us to focus on growth, including opening hotels overseas,” he said.
Organic growth is key, Hoshino said.
“One of our philosophies is not to have any plans,” he said. “If we can manage the hotels more efficiently, and if we can provide better work for our employees and higher customer service from our competitors, I think our facilities will continue to grow. We would like to focus on sustainability and improvement of our core management skills, instead of growing too rapidly.”
Hoshino said few hotel accommodations are as defined by the culture from which they originated as the ryokan.
But this unique offering—which includes hot springs bathing and relaxation facilities, augmented by such highlights as “agari-kamachi” (lobbies where guests leave their shoes); “shoji” (sliding paper doors); “tatami” (reed-mat flooring); sushi and sashimi restaurants and futon-style beds that “disappear” during the day time—is quickly disappearing from many places in Japan, Hoshino said. Japanese guest preferences have evolved more toward Western lodging options, he added.
“Everything about a ryokan—architecture, aesthetics, amenities, services and food—are unmistakably Japanese. … Modernization has not been kind to the ryokan industry,” he said. “Ryokans have practically vanished from the cities and, every year, are shrinking in number in more remote areas as well. Taking their place are Western-style business hotels, which (do) continue to evolve.”
Hoshino intends to correct this trend.
“At some point the ryokan stopped evolving,” he said. “I want it to evolve and transform into a hotel that maintains its distinctively Japanese approach to hospitality, while offering functionality and intuitiveness that rival even that of Western hotels.
“This evolution will take place at (the existing) Hoshinoya Tokyo, where I intend to establish the ryokan as an entirely new approach to hotel concept and management. I want to create a market that sees the ryokan not as an aesthetic homage to Japan but as a specific type of lodging that offers impeccable comfort and service.”