Culture

Ownership and Occupancy: Chinese Take Over Traditional Japanese Hotels, Inns

Published

7 years ago

October 17, 2017

As tourism in Japan increases at an accelerated rate, inns and hotels in the rural areas could face numerous changes in management. It’s difficult to predict the future, as there have been many cases of Japanese owners letting go of their establishments only to be purchased by foreign investors. An increasing amount of large-sum transactions have been made by investors from China, causing more and more changes in management styles.

“I have no other option but to sell, as I have nobody to take my place.” That was a 70-year old inn manager in Okayama Prefecture speaking, as he contemplated selling his establishment.

This particular inn was a secret hideaway that had been around since the good old days, with meals that hold high-acclaim. “Repeaters” accounted for 30% of overall visitors. The turnover rate for guest rooms froze at roughly 60% to 70%, and it remained mostly empty except on Saturdays.

The manager had worked alongside his wife, whose health was deteriorating. “I believe it’s about time to retire,” he said. Profits wouldn’t increase, so it’s impossible to take the plunge to remodel and make drastic changes. His children have all started walking their own paths, too.

Earlier this year, he chose to sell his establishment for 65 million yen.

Risk of Closure

Many traditional inns in rural Japan are at risk of closure due to the owners’ old age, deterioration of establishments, as well as excessive debt.

The Ministry of Health, Labour and Welfare’s “Public Health Administration Report” shows that there are approximately 40,000 inns in Japan as of 2015. Those numbers are at a declining rate, and over 10,000 inns have disappeared between 2006 and 2015.

According to the Teikoku Database census, there were 86 bankruptcies in 2015, an 8.9% increase from the previous year. This is the first increase in four years—the last having been in 2011, resulting from the Great East Japan Earthquake. Over half of these bankruptcies happened to establishments that had been in business for more than 30 years. The majority encountered a decline in management due to deteriorating facilities and money borrowed for repairs.

While all of this takes place, we are experiencing a sudden increase in foreign capital, purchasing Japanese inns and hotels. As rural Japan encounters rapid decline, it could very well be transformed into a hayfield-like state.

Yuji Tsuji, 58, head of the consultancy firm Hotel Management Research Center, says there has been a flood of consultations from foreigners ever since Tokyo was declared the host of the 2020 Olympics and Paralympics.

Of the 30 to 40 inquiries received daily, 90% are from the Chinese. “Contract agreements have risen to 30 to 40 deals every year,” said Tsuji. “By running hotels in regions the Japanese don’t visit as often, the Chinese believe they’re able to earn their income by bringing in a steady number of Chinese tourists.”

Chinese Owners, Chinese Guests

A 54-year-old man who works in real estate was shocked to learn of this business technique after selling an onsen (hot spring) hotel in Osaka to a Chinese.

This hotel was sold because it was experiencing a decline in visitors and inflated debt costs. Upon reconsidering old customs and reducing unnecessary spending, the man decided to sell.

The hotel underwent a complete change after it was sold. A method of theirs is to assemble a large tourist bus with Chinese visitors who are on a tour. They then cram four to five people into each room, despite prices having been lowered to 3,000 yen per night. This “cramming” technique is what makes this hotel stand out.

The man remarks that, according to a person involved in the hotel operations, the guest room occupancy rate has greatly improved. But Japanese guests are keeping their distance.

Aside from lowered accommodation costs and crammed spaces, meals are typically the first to be affected by price cuts. Most onsen hotels serve traditional Japanese kaiseki meals for dinner, whereas this hotel now has an “eat out for dinner” system. What used to be two meals served per day is now simply breakfast-included only.

Scraping off the usual services from onsen hotels “merely makes them feel like staying at a city hotel,” the man said.

Venturing Outside the Golden Route

The Chinese are willing to invest outside the so-called Golden Route of tourist attractions.

Tsuji explained: “The Chinese notice that there are just as many beautiful tourist destinations outside of the Golden Route. They now have an interest in traditional inns and hotels nationwide, with a particular interest in Hakone and Kusatsu as of recently.”

There are a large number of Chinese who seek consultation to begin increasing their investment. “This investment craze will continue even after the Tokyo Olympics and Paralympics end,” Tsuji said.

There have been cases where individuals who visit Japan want to summon acquaintances and buy traditional hotels and let them stay at a place with a “guest room” feel. There are also substantial management styles that are entrusted in the Japanese as before. These situations typically maintain a high-class feel and traditional services, bringing in wealthy clientele domestically and internationally.

Hotel and inn owners whose selling points were Japanese omotenashi, or hospitality, have been replaced by Chinese owners. And it looks like more traditional establishments are going that way.

* The images are not directly related to this story.

(Click here for the original article in Japanese.)