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The Japanese hotel industry is expecting to emerge from a long period of oversupply toward increased demand and has entered into a cycle of new hotel development. This, in turn, will precipitate another round of oversupply, a cycle which has played out repeatedly in our industry’s history. Increased supply accelerates hotel commoditization. What, then, are the elements which enable a facility to continue attracting a stable stream of customers, even in the face of rising supply? This question should be of paramount interest in the minds of those presently planning new properties. Since a hotel must maintain its competitiveness over decades, and through ups and downs in the market, it is risky to build one merely to respond to a short-term scarcity of supply.

One of the reasons guests choose a hotel will always be “it’s new and beautiful.” During the decades-long lifecycle of your property, there will always be fresh-faced newcomers entering the fray, and you must have a strategy to avoid competing head to head with these younger counterparts. Business models that rely on “hardware,” that is, buildings and facilities, favor the latecomer. You need to leverage your “soft” power to build platforms with a first-mover advantage. Hoshino Resorts answers this challenge with three types of “soft” power, cultivated through our 105 years of operation in the Japanese countryside.

The first is to have mechanisms for the continuous creation and messaging of attractive offerings. One of the longtime challenges at Hoshino Resort was the need to invent reasons for people to come and stay at places where tourists weren’t flocking to at the moment. For instance, Karuizawa, the birthplace of Hoshino Resorts, is a renowned tourist destination; yet it is offseason year-round except in July and August. No hotel can recoup its investment in two months out of the year, so our job was to come up with reasons for people to stay in spring, fall, and winter. This perspective was instrumental when we later went about revitalizing resorts; we improved room sales by creating the demand ourselves. For us, the buildings and facilities are a “stage” on which to give “performances,” and the “performances” are what the customers come for. At Hoshino Resorts, each hotel’s management team is responsible for conceptualizing new delightful offerings, while the head office support team evaluates them. This is the polar opposite of conventional processes where the head office takes the lead and the individual facilities execute within their budgets. Mechanisms for maintaining our “soft” power in a fresh, exposure-ready state are built into our roles and responsibilities.

The second is the flat organizational culture which boosts the management team’s creativity. We consider each staff member, attentively serving our customers on a daily basis, to be a creator of new and exciting concepts to make our property more appealing. Ideas which arise out of direct dealings with guests can provide hints for next season’s attractions or for new services, and it is crucial to have systems in place to leverage these ideas. We share our business information to encourage people to think and imagine. Our customer satisfaction surveys are particularly useful: we not only share the results, but offer unique tools for analysis, so that the teams at each facility have the autonomy to run the cycle of identifying issues, formulating and executing solutions, creating new attractions, and checking feedback. To ensure the free expression of ideas, and to enable the team to properly discuss, examine, and make decisions on those ideas, the culture needs to keep everyday relationships equal and non-hierarchical. The “Moss Program” at Oirase Keiryuu Hotel, the ranch at Tomamu, and the “Gotochi-raku (Local Luxuries)” at Kai – all of these arose out of the flat organizational culture.

The third is to form deep bonds with the community to generate sustainable customer-drawing synergies. In our 105 years in Karuizawa, we were always aware of the fact that the hotel and the community are one and the same. When the local area becomes more attractive, this translates directly to hotel room sales, while the hotel’s messaging of local attractions can help enhance the regional brand. Activities rooted in this kind of trust relationship with the community are advantageous to the first mover and are sustainable. In Karuizawa, the Picchio Wildlife Research Center’s ecotourism focuses on local wildlife, protecting bears and conserving the natural environment. Risonare Yatsugatake, Japan’s first wine resort, collaborates with local winery Domaine Mie Ikeno to support full-fledged winemaking in our nation’s largest wine producing region. Hoshinoya Taketomi Island worked with the local community to resurrect the local traditional soybean, Kumomami, helping to conserve a valuable food resource as well as creating enjoyable plans featuring Kumomami tofu-making. OMO5 Tokyo Otsuka and OMO7 Asahikawa are strengthening cooperative relationships with local restaurants, cafes, bars, shops, museums, and other businesses. Although only the most ultra-famous establishments make it into the major guidebooks, other stores are just as attractive in terms of unique local charm.

These can join forces to play up the local charms, which boosts the value of sojourning where OMO is located. Instead of building a hotel in an already popular place, the idea is to go into areas with desirable traits that only the locals know about. We then leverage hotel marketing to raise the value of the area and generate demand for overnighting. Preparations are underway to open the hot spring hotel Kai in Yamaguchi Prefecture’s Nagato Yumoto Onsen area. Here, Hoshino Resorts designed the master plan for the entire hot spring district. We will work together with the government, other hot spring hotels, and local businesses to execute the plan. We believe our efforts will result in new local attractions, revitalize the entire hot spring area, and give the first-mover advantage to Kai Nagato, around which the system revolves.

Hoshino Resorts makes a point of building long-term competitive advantages into the hotels we operate. As hotel supply increases going forward, it will become more important than ever to develop customer-drawing power that is sustainable and unaffected by market fluctuations.

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