We aspire to the ideal of an independent company able to maintain long-term competitiveness. Indeed, the Hoshino Resorts of today only exists thanks to the ability of our first hot spring ryokan, established in Karuizawa, Nagano Prefecture, in 1914, to survive despite difficult circumstances by welcoming challenges represented by growth opportunities. Now, it is up to those of us in charge to create systems that will remain competitive 100 years from today, which I believe can be achieved by utilizing the methodology of “Management by the Book”. The hospitality market environment is continuously in flux, and in order to be able to make the right decision at any time, I believe that we must find the answer in current business theories rather than rely on intuition or succumb to the trappings of past successes. Then, we must use these answers to initiate bold change.
Our basic strategy is founded on Michael Porter’s theories on business competition. We strive to reach the frontier of productivity by first carefully selecting endeavors with a range of varying trade-offs, and then cultivating a plan that offers the best fit between these different activities. By adhering to Porter’s theories, we can secure difficult-to-imitate market position that allows us to grow while maintaining high profit margins, even in an environment in which many hotel management companies are already pushing international expansion.
One of the productivity choices we have made is that of cultivating a flat management structure, influenced by the theories of Ken Blanchard. This has proved to be the wellspring of our current competitiveness--as we aim to create a team organization drawing out the potential of each and every employee, we are consistently able to come up with innovative ways to make our facilities appealing that further improve our ability to attract customers as well as maintain high customer satisfaction each year. In addition, we have also evolved a unique multitasking service team over time which continues to be an indispensable element of our operations, as it further raises productivity at our lodging facilities at a time where labor hours are becoming an increasingly valuable management resource.
Multitasking relies on a flat organization, and a flat organization is maintained by multitasking. Similar to this, we have also incorporated three other initiatives that share a symbiotic relationship, and none of these activities will ever be imitated by major international hotel companies. This is not because other companies do not believe in the effectiveness of these systems, but because at this late stage the high costs of nurturing a flat organizational culture in a long-established international management structure and the change to a multitasking workflow would far outweigh the benefits.
Going forward, we will accelerate the pace at which we increase the number of our facilities both in Japan and overseas while holding fast to our unique strategy. We are currently doing this through the development of four sub-brands individually tailored to each category of travel.
For our KAI hot spring ryokans, the pattern of operations is already well established, and we are rapidly increasing the number of locations in Japan’s hot spring regions. The deeply rooted popularity of hot spring ryokans in Japan has also grown popular with the inbound market in recent years, and we will work further to reinforce KAI’s position as the only chain of full-scale high-end hot spring ryokans. By expanding the number of locations nationwide to 30 facilities which each have a relatively small number of rooms (from 40 to around 100), we gain the benefit of maintaining high occupancy rates and high unit prices at the same time that we mitigate the risks of temporary reductions in demand caused by phenomena like volcanic activity. Some have argued that the small scale of each facility leads to operational inefficiencies, but this obstacle is completely overcome using a multitasking service team.
Rather than simply position RISONARE as a Western-style resort hotel brand, we strive to develop it into the premier brand for families with children, a demographic that has always taken a large part of the travel market. Those with children under 12 years old have special travel requirements that tend to result in a change in travel patterns. We are currently exploring ways to develop destination areas important to the family market in Japan, whether it be tourist locations easily accessible from the Tokyo Metropolitan region, holding a large share of the family market, or popular regions further away like Okinawa, Hokkaido, and even the overseas destinations of Guam and Hawaii.
Our push to develop the newly introduced OMO urban tourism hotel brand in Japanese cities aims to capitalize on the already substantial urban tourism market that is expected to continue growing in future years. The positioning for OMO properties is clearly distinct from that of competing city hotels and is carefully tailored to suit this urban tourism market. By selecting locations considered disadvantageous for targeting business customers, adopting innovating guest room layouts, and discontinuing several services in favor of new ones like the OMO Rangers, we have been able to realize and reinforce our niche position in the market. Furthermore, instead of segmenting OMO brand price points by level of luxury, we designate each location by the breadth of facilities differentiated with a numeral suffix and offer facilities with a wide range of price points. This system has already given birth to OMO7 Asahikawa and OMO5 Tokyo Otsuka. For the hotel industry, where the majority of brands are defined according to a stratified consumption model, this is an entirely new concept. We believe that this approach allows our brand to be firmly established and achieve economies of scale rapidly even in the saturated hotel industry.
We plan for the HOSHINOYA brand to be developed not just in Japan but overseas as well. Our goal as Hoshino Resorts is to build unique systems that transform us into a hotel management company able to compete anywhere in the world. To compete at this global level, it is imperative that we build systems that can compete successfully in Japan against global hotel chains and then help us take on the challenges of going global. As soon as we take a single step outside Japan, whether we like it or not we will be responsible for the destiny of the image of Japanese management companies. In the 1980’s, the Japanese hotel industry forgot the importance of this destiny in its rush to expand overseas, and ultimately failed. Learning from those lessons and aiming to try again, we created HOSHINOYA Tokyo, a Japanese ryokan that thrives in the city. Creating the global hotel category of “Japanese ryokan”, we believe that we can secure a route to a global market in which Japanese management companies are accepted as a natural part of the scene. HOSHINOYA Tokyo is not a goal in itself, but a base camp from which we can explore opportunities for attacking the ultimate summit.