How this CEO built an iconic Japanese hotel brand

By | March 16, 2024

Source: Hoshino Resorts.

Source: Hoshino Resorts.

Hoshino Resorts is small but punches above its weight. There are only 68 hotels, but several of them regularly top Conde Nast Traveler and Travel + Leisure’s most recommended lists.

The 110-year-old company started with traditional inns. Since becoming CEO in 1991, CEO Yoshiharu Hoshino has led the company in defending Japanese hospitality against the increasing sameness of global brands.

The group has grown the number of real estate properties by 74% since 2019. There are another 11 in the pipeline. In particular, the company develops hotels throughout the country, and not only in the most famous tourist centers.

Yoshiharu Hoshino, the CEO of Hoshino ResortsYoshiharu Hoshino, the CEO of Hoshino Resorts

Yoshiharu Hoshino, the CEO of Hoshino Resorts

The remarkable brand power of Hoshino Resorts

The strength of the brand is reflected in the fact that “60% to 70%” of Hoshino-branded reservations come directly through the website, with some of the direct distribution exceeding that of global hotel groups.

“One of the reasons we have worked so hard to gain this high brand awareness is to boost our flow of direct bookings, as that is one of the important sources of profitability,” said Hoshino.

Hoshino Resorts’ rising status as an iconic national brand is one of the reasons why the CEO of Hoshino Resorts was named Japan’s “Master Entrepreneur of the Year” by consultancy EY in 2022.

Fast portfolio growth

Hoshino made opportunistic moves during the pandemic. The crisis caused problems for many hotel operators and investors, who sought Hoshino Resorts to take over management or ownership of their properties. The company saw a unique opportunity to claim attractive locations at discounted prices.

In 2019, the company had 3,074 rooms. Since then, 4,010 rooms have been added.

a guest room with an onsen hoshino resorts the kai matsumoto resort in japan source hoshino resortsa guest room with an onsen hoshino resorts the kai matsumoto resort in japan source hoshino resorts

a guest room with an onsen hoshino resorts the kai matsumoto resort in japan source hoshino resorts

Supporting national tourism

Hoshino Resorts has a long-term strategy to spread its presence nationwide.

“In cities and prefectures across the country, manufacturing used to be the main industry,” says Hoshino. “But we expect tourism to become much more important in the coming years.”

Hoshino’s strategy sometimes includes jointly developing projects with the Development Bank of Japan. With ten hotel projects to date, the partnership has provided “risk money” to support revitalization.

For example, in September 2023, Hoshino partnered with DBJ to develop a luxury resort under the Risonare brand in Shimonoseki, a waterfront city in Kanmon whose domestic tourism industry needs to be revived. When the project opens in 2025, all rooms will have ocean views.

This year, the company will open its Omo7 brand in Kochi, a city whose tourism sector is still nascent.

a guest room in Kai Hakone, part of Hoshino Resortsa guest room in Kai Hakone, part of Hoshino Resorts

a guest room in Kai Hakone, part of Hoshino Resorts

Want to collaborate with a global hotel group?

One of the most intriguing questions for hoteliers outside Japan is whether Hoshino Resorts – which had a gross transaction volume of half a billion dollars (82.2 billion yen) last year – would enter into a licensing partnership with an international hotel group.

Given that over 60% of bookings already come directly through the site, it is not clear whether a partnership would boost direct bookings enough to justify the costs.

What about a ‘soft brand collection’? one where Hoshino retains control over brand standards but benefits from the marketing power of an international hotel group? Hoshino said he was open to “discussions,” but he was skeptical.

“The international hotel groups are trying to sell their name to smaller companies and sometimes call it a soft brand collection,” Hoshino said. “This business model is very close to and Expedia, where we would align our brand with the network of an international hotel group in exchange for paying fees. This business model could be a problem for us.”

Expansion of its brand portfolio

Occupancy rates and average daily rates across all Hoshino Resort brands are above pre-pandemic levels. The Japanese travel boom illustrates that fact.

Since becoming CEO, Hoshino expanded his group’s portfolio to five sub-brands, each targeting a different market.

“We are not interested in increasing the number of sub-brands we have,” he said. “These five sub-brands can likely meet the needs of most investors and hotel owners.”

  • Hoshinoya is a luxury brand that aims to encapsulate omotenashi, the Japanese philosophy of providing exceptional hospitality. The brand, founded in 2006, has won several awards. The ninth location is planned for 2026, 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 is a set of 22 luxury inns next to hot springs, modeled after onsen ryokan, or traditional Japanese inns. The inns offer Kaiseki-style meals and first-class service. The brand was launched in 2011 and was well received. Last year, Travel + Leisure chose a Kai in Yufuin as one of the 100 best new hotels in the world.

  • Risonare is a brand founded in 2011 to offer rural resorts where guests can enjoy up-close experiences with nature and private saunas.

  • Omo is a series of urban lifestyle hotels with different service levels ranging from premium economy to mid-range. It was launched in 2018.

  • Beb is a casual hotel brand offering a premium hostel setup and a premium economy price, launched in 2019.

Expanding its activities

Hoshino Resorts has also invested in more than 35 properties other than those of the Hoshino Resorts brand family, believing these are likely to deliver stable cash flows in the long term. For example, it owns a Grand Hyatt Fukuoka that is managed by Hyatt.

The parent company currently only manages 42% of properties within its branded and third-party managed network, but aims to reach 50% soon.

Hoshino Resorts’ real estate investment trust is seeking to finalize an alliance with Greens, a hotel operator, and MUFG (a megabank), to develop 20 roadside hotels under the name Comfort Inn (in partnership with Choice Hotels International) with Greens as the management company and Hoshino as owner. That would expose the companies to the budget segment in secondary markets across the country as tourism becomes increasingly important.

The Hoshino Resorts real estate investment trust is also in the process of acquiring the 22 Chisun roadside hotels it owns and transferring their branding to the Comfort Inn brand and their operations to Greens.

Overcoming labor shortages

Over the past year, international travel in Japan has recovered to pre-pandemic levels, thanks in part to the weak yen.

But Hoshino, like other hotel companies, is struggling to meet demand. The aging of the working population has created a labor shortage. Japan encourages formal training for many hospitality positions, so there may be a delay in the process of adding employees.

“We will accept 700 new employees from universities and schools across Japan in April,” Hoshino said. “That is the largest group we have ever accepted in one year. We don’t have the ability to train them all at once, so we had to be creative in our process.”

Hoshino prefers to hire staff directly, but at a few mid- and low-cost properties in big cities it has had to turn to housekeeping outsourcing companies.

Finding ways to run hotels with fewer staff is crucial as an aging society will lead to labor shortages for all Japanese companies. The aim is to train staff in multitasking, with one employee taking care of reception duties, cleaning the rooms and serving the staff. Automating as many processes as possible, such as check-in, is crucial.

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