Space Design Embracing Culture and Nature at KAI Hakone

After COVID, the competitive environment in Hakone changed, with a succession of foreign-owned and upper-middle-scale hotels opening. Our aging guestroom specifications and facilities became an issue. In order to remain popular as a hotel, it is essential not only to renovate the guest areas, but also to improve the working environment for staff because this leads to high-quality hospitality and stable employment. There was a lot of room for improvement in the back of house areas, especially since the dining area and kitchen were on different floors, which was leading to a lot of inefficiency due to the complicated routes for staff movement. In light of these challenges, we launched the renovation plan with the aims of achieving sustainable competitiveness and improving asset value.

Newly Renovated “Hakone Gokochi Suites” for Adult Families to Relax

Kaneko: In order to ensure stable operation of the facility over the long term, major changes were made to the back of house flow plan for the dining areas. Previously, the kitchen was on the first floor and the dining area was on the third floor, which placed a heavy burden on staff serving meals. As part of the renovation, the dining area was moved to the same floor as the kitchen on the first floor. This eliminated the burden on staff from having to move floors, leading to improved work efficiency and service quality. Furthermore, the relocation created space on the third floor, which led to the development of the “Hakone Gokochi Suites,” further enhancing the value of the facility.

Huang: By adding new suite rooms that were not previously available at the hotel, we can expect to increase sales and attract new clientele. The Hakone area has seen a noticeable increase in inbound guests since the end of the COVID pandemic. Compared to domestic guests, inbound tourists have a different sense of space, for reasons such as the amount of luggage they bring due to their long stays, their physique, the need for distance between family members, and the size of their homes. For this reason, ryokans that have previously been designed to domestic standards have inevitably felt cramped. There is also a certain number of domestic guests who want to relax in a spacious room, so we planned guest rooms of over 110㎡ to accommodate this. We sought to create a stay that would not only be luxurious, but would also make guests feel like they were in their own home, with features such as wardrobes large enough to store the suitcases of the whole family and a bathroom area the same size as the living room.

Kaneko: We analyzed travel needs in the Hakone area and the services offered by competing facilities, and gauged demand for stays by “families of adults.” The Hakone Gokochi Suite is a space where adult families, including adult children, can fully enjoy the charm of Hakone and relax. In fact, we have had guests in their 40s who accompanied their parents in their 70s, and they have given us very positive feedback.

Huang: Generally, suite rooms tend to have low occupancy rates. However, we carefully considered the value we could provide and worked to achieve both high unit prices and high occupancy rates. While competing facilities cater primarily to small groups of two or three, the renovated guest rooms, including the Hakone Gokochi Suites, have separate living and sleeping areas, allowing adult families to spend time together at a comfortable distance.

Sawa-chaya Tea House: Inspired by Culture and Location

Kaneko: KAI Hakone's greatest asset is its spectacular location facing Mt. Yusaka and the Sukumo River. The views from the guest rooms and bathhouse are iconic, creating scenes that allow guests to feel the changing seasons. As part of this renovation the Sawa-chaya Tea House was newly built in the Courtyard facing the Sukumo River, where guests can reflect on the history and culture of Hakone. During the Edo period, travelers along the Tokaido road would stop at teahouses to soothe their fatigue on the treacherous Hakone road. This ”tea house culture” has been reinterpreted in modern form. This is part of the new appeal of KAI Hakone, where cultural stories woven from the past are fused with modern customer experience value. At Sawa-chaya Tea House, you can enjoy tea and dango prepared by the master of the tea house, while immersing yourself in the ever-changing sounds of nature, such as the rustling of trees and the murmuring of the river. Calling by the tea house multiple times during their stay naturally creates points of contact between guests and staff, making this a place to enjoy conversation. From a marketing perspective, these efforts will lead to improved customer loyalty, an increase in repeat customers, and stable long-term profits. The tea house can also be seen as a mechanism for increasing the value of the stay and making guests feel that the price is reasonable.

Creating an Integrated Space that Weaves and Spreads Local Culture

Kaneko: We have also launched the “Yosegi Zaiku Experience” as a fun activity for guests to enjoy local Hakone culture. Previously, the experience only gave people the opportunity to learn about marquetry. However, since the renovation, the program has been updated to include hands-on experience of marquetry-making. Working in collaboration with the craftsman, guests hear about the process of how wood is made into marquetry, and then use a plane to shave thin sheets of wood called ”zuku” from a ”tanegi” block, which is made of several parts. Not only do they learn how wood is transformed into beautifully patterned marquetry, but guests also experience the rare opportunity to witness the moment when a work of art is created. We have created a new room dedicated to local experiences, and we opened a shop in the same space so that customers can naturally pick up products after experiencing the local culture. Experiencing marquetry-making in addition to learning about it heightens their interest. Average prices at the store have risen from the previous average of approximately 600 yen to over 900 yen, and marquetry-related products now account for approximately 45% of store sales.

Huang: That’s very interesting from the perspective of asset efficiency. Generally speaking, experience spaces tend to become deserted at certain times of the day, and there are concerns that they may not be fully utilized. Connecting the shop and experience in this way allows the space to be used at all times of the day, transforming it into somewhere that creates value. This allows the shop and experience to create synergistic effects. We have been able to improve the business model so that cultural experiences naturally lead to revenue, while also contributing to the local community.

Creating Value By Transcending Barriers: ”Collaboration Between Operations and Asset Management”

Kaneko: When planning the new public spaces, we considered various angles, such as the concept, existing buildings, location, and competing facilities. However, we were finding it difficult to foresee the extent to which new value could be created. As these discussions were underway, Ms. Huang suddenly sent us a proposal. Rather than simply expressing requests and opinions from his position as an asset manager, I felt that he had transcended the barriers and become actively involved in the planning process.

Huang: Actually, I only came up with the proposal in the hope that it would serve as a starting point for conversation and discussion. We came up with the idea for the Sawa-chaya Tea House from a landscaping perspective, designing the spaces around the facility to allow guests to fully experience KAI Hakone's rare location facing the river and a courtyard where they can enjoy the ever-changing beauty of Hakone's nature and riverside.

Kaneko: When a completed plan is presented, it becomes difficult for on-site staff to voice their opinions, but because Ms. Huang's proposal left room for variation, they were able to offer their opinions freely from an on-site operational perspective. As a result, the asset manager’s perspective on investment recovery and Hoshino Resorts’ ideas on creating a comfortable stay for guests blended naturally, and a shared understanding was born that the Sawa-chaya Tea House would be somewhere that would raise the value of KAI Hakone.

Huang: The way we hold discussions has clearly changed since then. In previous projects, there was a clear division of roles, with the asset manager acting on behalf of the investor to check and make investment decisions on the projects planned by Hoshino Resorts. Hoshino Resorts Group’s corporate culture is one of a horizontal, mature organizational culture that transcends positions and allows people to engage in lively discussions. We succeeded in realizing an attractive renovation through repeated discussions between the two companies, with the aim of enhancing the value of KAI Hakone.

Investing in Hardware to Achieve Strong Operational Capabilities

Huang: For asset management, you need to cooperate with hotel operators and manage investments appropriately. The cost of this renovation project had increased from the initial estimate, and unexpected additional work was also required due to aging facilities. Despite these increased costs, in order to achieve the profits that we had initially envisioned, the staff members worked together to come up with various ideas and aimed to improve our ability to attract customers and establish profitability. As a result of these efforts, we have been operating at close to full occupancy every day. (As of October 2025)
The renovation has already produced short-term results, but whether it can continue in the future will depend on the deepening of our management capabilities. In an environment where construction costs are rising, it will become increasingly important to come up with ways to create high value for existing buildings.

Kaneko: Even if sales increase, if a business is not run efficiently, there will be no profits left over. Each of the investments, including the establishment of the Sawa-chaya Tea House and Hakone Gokochi Suites, and the improvements to locally-themed activities and back-of-house areas, will directly lead to improved profits. We expect the more comfortable back-of-house environment to improve staff performance and make the hotel somewhere guests choose to return repeatedly. Good management is directly reflected in profits, and ultimately in REIT rental incomes. This structure is the reason why we feel this renovation was so significant.

A New Model for Increasing Asset Value Originating at KAI Hakone

Kaneko: Converting experiences so that guests can continue to understand the value of local culture, such as the marquetry-making experience, and connecting this to revenue, is a model that can be applied at other facilities. We have accumulated highly reproducible know-how, including flow design, space efficiency, and integration with shops.

Huang: We aim to use our experience at KAI Hakone to help increase the asset value of the REIT as a whole.

Kaneko: Through this renovation, we gained a solid sense of achievement that will serve as a foundation for the mutual growth of Hoshino Resorts and the REIT.

Hakone Gokochi Suites:The Hakone Gokochi (Hakone-esque) Suites, of which there are only two, are equipped with a desk space in the living room and a sofa space that is one step lower than the floor. Spacing in this way throughout the suite creates room for adult families to relax together. Guests can enjoy seasonal scenery from the private open-air bath in their rooms, and cool down after their bath in the relaxing ”Ishi-no-ma Room.”

Sawa-chaya Tea House: Inspired by Culture and Location All rooms are local-style Hakone Gokochi (Hakone-esque) rooms. There is also a new space for relaxing called the Sawa-chaya Tea House, inspired by teahouse culture, and a workshop-like space where guests can experience authentic Japanese marquetry-making.
The facility has been reborn as an onsen ryokan where guests can enjoy a stay immersed in the culture and history of Hakone.

• Book value (end of the current fiscal period) 2,465 million yen
• Real estate appraisal value 2,950 million yen
• Total number of guest rooms 34

Property Details