Opportunity in ‘micro tourism’

Amid fears coronavirus crisis will continue for a few years, hotelier eyes ways to thrive

Yoshiharu Hoshino is the chief executive officer of Hoshino Resorts Inc., an operator of Japanese-style hotels known for the revitalization of failed hotels and ryokan inns. With the new coronavirus having dealt a serious blow to the travel industry, he discussed measures for dealing with that situation in an interview with Yomiuri Shimbun senior writer Sachio Nikaido. The following is excerpted from the interview.

Based on calculations using figures from financial institutions and variables such as the number of room reservations, I announced the company’s “probability of default” on my in-house company blog. I have been blogging for some time, but started to post information more frequently since April, when the novel coronavirus began having a serious impact. Amid the crisis, it is very important to share details of the company’s financial situation and performance in an honest manner. Among my blog posts, those about default probability were viewed by numerous visitors.

When I dealt with the topic on my blog for the first time in mid-May, one employee said: “The post was exciting and typical of Hoshino Resorts. It’s the first time I’ve seen this kind of post in a long while.”

Of course, it is possible to reduce the bankruptcy probability rate if we take appropriate measures. I made the announcement because I hope that employees will come to understand our company’s measures, carefully think about what they should do, and take action.

While I cannot reveal concrete figures, the bankruptcy probability rate was up in June and decreased in July and August, when the number of room reservations started to increase.

Hoshino took over his family business of running a hot spring ryokan inn in Karuizawa, Nagano Prefecture, in 1991, just after the bubble economy collapsed. After that, his company weathered the 2008 bankruptcy of Lehman Brothers and the 2011 Great East Japan Earthquake, among other events.

In the latest case, travel demand weakened across the country and all over the

world at the same time, which is unprecedented. Even so, the situation will be resolved if a vaccine is developed. The current crisis is unusual in the sense that its exit is in sight. I believe the crisis will last for one or two more years, or three years at the longest.

At the time of the bursting of the bubble economy and the collapse of Lehman Brothers, I did not know how long the economic crisis would continue.

Furthermore, Japan is still suffering from reputational damage resulting from the nuclear accident following the 2011 earthquake.

If we could overcome the coronavirus crisis, it would give our young employees, and others, great confidence and valuable experience. For that, it is necessary to have them accurately understand the moves of the company, including the bankruptcy probability rate. I also expect employees to overcome the crisis while enjoying it, just like playing a game.

In 2019, the Japanese tourism market was worth about ¥27.9 trillion. Of that, foreign tourists spent a total of ¥ 4.8 trillion, while Japanese tourists spent a total of ¥ 22 trillion, accounting for nearly 80% of the total.

In recent years, the number of international tourists has surged. However, the domestic tourism market heavily relies on Japanese tourists. If we can have Japanese people who usually travel overseas spend their money on domestic trips, it will help make up for the loss caused by the decline in the number of international tourists.

In the field of domestic travel, I am proposing to put more effort into micro tourism, which refers to short-distance trips. The concept is trips within two hours from home, and the point here is that this creates trading areas between prefectures. For example, people living in Nagano Prefecture could become guests for hot spring resorts in Gunma Prefecture.

It is difficult to have people come from overseas many times a year. However, people living in neighboring areas might become repeat guests. If we work hard on micro tourism, we will be able to expect stable demand.

Traditionally, most Japanese trips in the past fell into the category of micro tourism, so I am not saying that we should suddenly start a new thing. Sightseeing areas and travel agencies need to review the market again and

Hoshino Resorts Aomoriya in Misawa, Aomori Prefecture, made a nebuta float together with local craftsmen and shows it to guests. Likewise, facilities in various parts of the country are working to create their own attractiveness.

Local employees living there and offering service to guests every day have a lot of ideas. I increased the discretion given to on- site workers so that they are able to take their own measures to enhance the value of their facilities.

To make this happen, they need an environment where anyone can freely express opinions regardless of position. In our organization, relations between employees are fair and equal. They do not address others by their position titles, but they simply use “- san.” No one, not even me, has their own private office in the company.

I took over a small, old wooden ryokan inn in Karuizawa. If I wanted to hire young people, I had to create a company where employees could enjoy working. My efforts to create a flat organizational culture are based on that way of thinking. I was greatly influenced by U.S. economist Kenneth Blanchard’s remark: “Effective managers manage themselves and the people they work with so that both the organization and the people profit from their presence.”

When I became the president, largescale resort facilities were constructed one after another across the nation. This was because of the law to promote resort development, which took effect several years before. Since I thought it would be risky to develop and own new facilities amid the oversupply, I decided to make my company concentrate on operations.

Our first project was the Risonare Yatsugatake in Hokuto, Yamanashi Prefecture. In 2001, we took over a members-only hotel that was suffering huge deficits and brought its business back on track. We also successfully revitalized the Tomamu in Shimukappu, Hokkaido, and other facilities. The number of our projects has gradually increased. I believe it is good to have concentrated on operations and focused on speed.

If we had failed in any one of these projects, the company might not exist now. However, we could not find our next opportunity without taking risks, and we had no choice but to keep going forward. We could not afford to hesitate or be scared when we received an offer, to be honest.

We have developed a lot of talented individuals, so the company functions well without much involvement from me. Even so, I will be deeply involved in efforts to attract guests, which is my area of specialty. Now, the internet is the main battlefield in this area. Travel websites allowing customers to compare various products are becoming powerful. Under such circumstances, enhancing our company website and differentiating it from others would be crucial.

We are also putting effort into overseas businesses. We started to operate a facility in Hawaii in January, in addition to those in Bali, Indonesia, and in Taiwan. We will make use of our own know-how that we developed in Japan and aim to become a globally successful hotel operator.

Since the new coronavirus makes it difficult for people to travel abroad, the market is now stagnant. However, given that Japan’s domestic market is expected to shrink due to the declining birthrate and aging population, globalization is unavoidable. Of course, it is important to deal with the imminent crisis, but it also is important to consider the post-crisis scenario and make preparation for that.

Yomiuri Shimbun photos