Hoshino Resorts Wants to Take Japanese Hospitality Overseas

Yoshiharu Hoshino, the CEO of Hoshino Resorts was named the “master entrepreneur of the year” in Japan by the consultancy EY.

• The accolade has a certain logic. Hoshino is a fourth-generation leader of a family-owned, 109-year-old company. He is becoming a voice representing Japanese hospitality to the world.
• Hoshino’s company — the Japan-based operator of inns, hotels, and resorts — has been an innovator, pioneering the separation of management from ownership in Japan.
• In the past year, it went from running 56 to 64 properties.

The company strives to take a purpose-driven approach to running hotels while also reflecting Japanese culture. Key pillars of the philosophy include:

• The fair distribution of profits with staff and regional tourism workers.
• Environmentally responsible business practices, measured as business goals.
• Combating overtourism. “If you look at the number of prefectures receiving inbound international tourists, the top five, including Tokyo, Osaka, and Kyoto, are welcoming about 65 percent of the total,” Hoshino said. “But we have 47 prefectures in Japan. We need to spread the demand around.”
• Superior, locally infused service. Skift columnist Colin Nagy has written about how Hoshino Resorts takes service to the next level, trying to be true to Japanese culture without being cliche.
• Innovation. The company is testing the subscription model, installment payments, and other responses to consumer tastes.

Hoshino runs five main brands:

• Hoshinoya, a luxury brand that aims to encapsulate omotenashi, the Japanese philosophy of providing extraordinary hospitality. Its ninth location is planned for 2026, namely, the 62-unit Hoshinoya Lodge Niseko, a ski-in, ski-out resort with a mixed-gender rooftop onsen overlooking a village and toward Mount Yotei.
• Kai, a set of 22 inns beside hot springs modeled on onsen ryokan, or traditional Japanese inns, that offer Kaiseki-style meals and premium service. Its property in Yufuin was picked as one of the 100 best new hotels in the world this month by Travel + Leisure.
• Risonare, countryside resorts where guests can enjoy up-close experiences with nature and private saunas.
• Omo, a series of midscale (premium economy) urban lifestyle hotels, launched in 2018. It has been testing offering rooms to business travelers by the hour, not just by the day.
• Beb, which offers a next-generation mindset and a premium economy price, launched in 2019.

Hoshino Resorts handled the pandemic crisis relatively well.

• City hotels struggled during the pandemic. Some owners switched to Hoshino, hiring it because it claims superior skill at extracting margin.
• Most of Hoshino’s properties were in rural and resort and wellness areas, which proved popular with Japanese residents in the pandemic. The company claims it has captured a higher level of demand relative to their industry peers largely because it established “microtourism” demand and the development of custom policies, such as collaboration projects with local tourism stakeholders and businesses.

Hoshino sees an opportunity to try to build outside of the best-known places to encourage tourist dispersal to combat overtourism and let visitors see different sights.

• One example is Beb Tsuchiura, a bicyclist-focused hotel in Ibaraki Prefecture with a bicycle rental shop on the ground floor and amenities in the lounge and guest rooms that welcome cyclists and their gear.
• “It’s not famous at all as a tourist destination, and even many regional residents nearby don’t go there,” Hoshino said. “But there’s a beautiful lake, and local authorities have built a bicycle trail.”
• Hoshino Resorts claims to be having success by marketing a “small luxury” concept, referring to facilities that feature cuisine, culture, scenery, natural surroundings, and activities available during stays — and where staff provides service with a personal touch via a small but upscale product mix.

Six months ago, Hyatt Hotels said it planned to launch a brand, Atona, as part of a 50-50 joint venture with Kiraku, a company that works to apply capital to help preserve the best of Japan’s cultural and natural assets. Atona would compete with traditional ryokans like Hoshino Resorts offers.

• Hoshino said he wasn’t worried.
• “An estimated 80 percent of the tourism consumption in Japan is still by people living in Japan, and we have a reservation system customized for Japanese tastes for payment, such as accepting common local currencies and offering installment payments of up to six months,” Hoshino said. “We also know how to provide service and do local marketing in relevant ways.”
• In Hokkaido, for example, Hoshino Resorts offers discounts to the 5 million people who hold a discount card with Seicomart, a major convenience store.
• Local promotions engage residents. This year, it’s collaborated with Yamaha to have a “LovePiano” travel among its locations. The piano is placed outdoors where locals and guests encounter it, either to play it themselves or to hear guest artists perform.

Hoshino has been testing the subscription model with its Kai brand.

• For seniors (people over 70), Kai offered a “Hot Spring Touring KAI One Year Pass.” The first test offered 100 passes, and they sold out in a week. Its subsequent promotions have also had strong popularity.
• The theory behind the promotion is that the senior demographic tends to have a decline in travel participation rates with age, so the subscription model might encourage more repeat usage.
• It collaborated with HAfH (Home Away from Home) of Kabuk Style, a Japanese company offering travel subscriptions that Skift has profiled before.

Hoshino Resorts usually takes an asset-light approach and doesn’t put capital into projects. An exception is its new project in Guam that opened on April 1.

• Hoshino Resorts has taken over ownership of a property and branded it Risonare.
• “The price wasn’t high,” Hoshino said, declining to reveal more. Hoshino Resorts financed the deal through a low-cost load through one of the large financial institutions in Japan.
• “This is a turnaround project,” Hoshino said. “The owner developed this and owned it for more than 20 years, but Covid-19 hit the area hard. The owner decided to sell their resort and tourism-related businesses and didn’t want to go through a bidding process. So it asked us to take over this facility, which needs a lot of maintenance and probably renovations. The ongoing renovation program will probably take 5 to 6 years.”
• Guam’s inbound tourism market is roughly half Japanese and half Korean and could help introduce new guests to the Hoshino Resorts family of brands.

Hoshino Resorts wants to expand abroad.

• “The Guam project is very, very important to us,” Hoshino said. “We’re still learning how to run the hotels outside of Japan cost-effectively. That is why we took on the risk of ownership in Guam. We are trying to expand our skills in managing properties overseas.”
• The company also owns and manages the boutique Surfjack Hotel & Swim Club in Hawaii.
• “I believe Japanese-themed onsen and ryokans could thrive in the continental U.S. given the growing interest in Japanese culture there and the underutilized hot springs,” Hoshino said. “That’s something we’d definitely like to introduce to the market.”

Hoshino isn’t interested in branded residences in most instances, despite the category being hot with hotel investors.

• “I don’t have any special interest in this branded residence concept yet, mainly because I’m sure there will be some owners who will be really tough personalities to deal with, and I don’t want to deal with that,” Hoshino said.
• But his company made an exception for a project in Niseko, located in a village near Hokkaido in northern Japan, where the operator will manage a new luxury development from Hong Kong-based developer Zekkei Properties.
• “This is a branded resident type of condominium hotel, where owners are allowed to use their units just two weeks during the wintertime, which is the peak season at the area ski resorts, and the rest of the time, they have to put their rooms in a hotel program, which we handle,” Hoshino said.

In Japan, one of the Hoshino family’s landmark moves a decade ago was to put its assets (including its traditional wooden ryokans) into a real-estate investment trust (REIT) a concept that was rare in Japanese hospitality a decade ago.

• It publicly listed the REIT in 2013. It’s run separately from the management company and not touched by Mr Hoshino.
• Between November 2021 and April 30, 2022, the REIT generated a net profit of about $13 million (1.76 million yen), or 24 percent of the revenue of about $40 million (5.4 million yen).
• In the decade since shortly after its listing, the REIT has doubled its distributions to stockholders.

Meanwhile, Hoshino opposes what he calls hotel “brand bloat.“

• The Hoshino Resorts management group wants to focus on its main brands, Hoshinoya, Kai, and Risonare, with just a couple of other brand experiments.
• “The largest hotel group, in general, in the last 30 years, have increased the number of brands they have in a way that’s very difficult for the average guests to understand,” Hoshino said. “They didn’t do it because they really identified new market segments, which would be the right way. They did it because owners and investors tend to like trying new concepts, liking the new marketing plans and new blood coming into the market. But the brand proliferation has created great confusion for consumers.”
• “We try to be loyal to the marketing theories espoused by leading authorities like Philip Kotler and David Aaker,” Hoshino said, referring to concepts such as “purpose-driven branding.”
• “Unless we identify a new market segment, I don’t see us adding another brand,” Hoshino said, noting satisfaction with the current array.
• One behavior Hoshino has noticed is that more and more Japanese are traveling with their cats and small dogs. But rather than create a brand for that, it’s trying to ensure that all of its brands can provide appropriate services.
• “We make sure we understand the main target psychographically and otherwise for each brand and this principle really works for us to grow our performance,” Hoshino said.
• “Brand management is very, very important to us to increase or enhance direct bookings, which are less expensive than getting bookings through third parties,” he said. “We can create a relationship with direct customers much more easily, helping us to suggest activities and restaurants that our guests may like.”
• For example, Hoshino Resorts’ new-ish urban brand Omo was chosen by primary property owners Mitsui Fudosan and DeNA (one of the country’s largest corporations) to operate a hotel in Yokohama City after a multi-year renovation of a heritage building, the former city hall, as part of a multi-use complex next to the JR Kannai Station.

The pandemic revealed that Japanese travel spending abroad has been much larger than realized.

• “Before the pandemic, outbound international spending by the Japanese wasn’t clear,” Hoshino said. But travel restrictions prevented the Japanese from traveling overseas, so they spent roughly the same budget domestically.
• “The consumption of Japanese people spending outside of Japan [before the pandemic] was probably larger than consumption inbound coming to Japan,” Hoshino said.
• This insight has led Hoshino to increase its estimate of the total Japanese market.
• The Japanese still dominate about 80 percent of total tourism consumption in their country. The currently weak yen relative to the U.S. dollar and the euro — plus high airfares because of constrained air capacity — are factors dampening demand for international travel.
• The Japanese government may adopt ambitious targets for inbound tourism to change that. But those targets risk creating overtourism in the best-known places.

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