Yoshiharu Hoshino, fifth generation owner and CEO of Hoshino Resort Group

Interview by: Helen Homan Wu

The CEO of Hoshino Resorts, Yoshiharu Hoshino shares his insider story about the background of Japan’s most successful homegrown luxury hotel groups, his vision for preserving Japanese culture in modern hospitality, surviving the global pandemic through team empowerment and his passion for skiing.

Yoshiharu Hoshino has a vision for Japan’s environment, society and culture. After inheriting his family’s Hoshino Onsen Ryokan in 1991, Yoshiharu used it as a stepping stone to create one of the best-known hotel groups in Japan, drawing domestic and overseas guests before going on to oversee 40+ hotels in Japan and abroad. HOSHINOYA Tokyo won the CN Traveler’s Reader’s Choice Award for 4 consecutive years, and HOSHINOYA Kyoto was selected for their Gold List. One of the hotel group’s most anticipated openings of the year is the KAI Beppu, designed by architect Kengo Kuma in one of Japan’s most up-and-coming cities (Beppu), located in Kyushu. Like HOSHINOYA, KAI is a brand under the Hoshino Resorts umbrella, together with sub-brands and other lodging projects.

I caught up with Yoshiharu in the midst of the pandemic, while he was in Tokyo and I in semi-lockdown in New York. We agreed that this challenging period afforded each of us a deeper connection to our respective community in addition to inspiring creative leadership which, for Hoshino, is based on team empowerment: “In the United States, I learned about Ken Blanchard’s empowerment theory,” Hoshino told me. “Everybody can participate in the decision-making process.” This, he explained, prevented the company from falling into the trap of bureaucratic red tape.

This interview was conducted via Zoom in May 2021.

HHW: When did you become a hotelier?

YH: I’m the fourth generation to lead the family business. When I graduated from university, I knew that I would be running the Hoshino family hotel which my father managed in my hometown of Karuizawa. So I joined one of the large hotels in Tokyo right after college graduation here in Japan. Actually, I was 23 when I began working in the hotel/hospitality business in Tokyo. I suppose you could say that is when I became a hotelier. Then I went to graduate school in hotel management and worked for another company developing new hotels in the United States.

The first HOSHINOYA Onsen Ryokan in Karuizawa

Tell us about the concept behind the HOSHINOYA brand?

HOSHINOYA is known as a luxury resort in Japan, but we really didn't intend that when we were planning the first property. And even now, we don't consider it as a luxury resort, as defined by the hotel industry. The room rates are relatively high, I agree, but that is a result of creating something unique in each area. It is more like a themed resort. We have a theme for each property. In my hometown of Karuizawa, we wanted to create a modern Japanese village. We were thinking that we lost so many great cultural elements as Japan grew as a country. If we had kept those important elements in our society, what would have been our lifestyle? That was an idea we wished to explore in Karuizawa. After completing that project, every time we have had a chance to create a new HOSHINOYA, we have generated a different theme, one which is very local. We want to emphasize the benefits of each area’s culture and surrounding nature. The developed environment is also very important. Take Taketomi island, for example. This is a very traditional cultural area in Okinawa with a population of only 400 and considerable protected architecture. We therefore hoped to recreate a modern Okinawa village. As that required so much time, energy and investment, the room rates became relatively high, but we prefer to describe our properties as themed resorts in each part of Japan rather than luxury resorts. There are currently two HOSHINOYA properties outside of Japan: one in Bali and another in Taiwan.

“We lost so many great cultural elements as Japan grew as a country. If we had kept those important elements in our society, what would have been our lifestyle?”

I also experienced what you just described and it's really special. And I love that we can just get into the whole experience from the theme of each property, with every little detail provided including yukata, flashlights and a little carrier tote.

Creating a new kind of space or environment sometimes requires us to sacrifice convenience. That's the difference between luxury resorts and HOSHINOYA. We try to eliminate parking spaces from our resorts. Parking immediately adjacent to resort facilities might be convenient for customers, but that sort of idea comes from living in cities and the civilized world. We can eliminate parking lots if we need to. We also excluded TVs in most of our rooms. It is common sense to have a large TV set in expensive hotel rooms these days, but I think having a TV is problematic when we are creating a very different environment and hope customers will pay attention to the culture of the locality. That is why we usually prefer not to have TV sets in HOSHINOYA hotel rooms. Those are sacrifices that we are asking the guests to accept. Our guests are actually very, very happy. They gain many positive elements by sacrificing some of the conveniences they usually have in city life.

Totally. And you could really feel that in the Kyoto HOSHINOYA, because you have to take a boat to get there, and suddenly it feels like you’ve left civilization.

That's right.

By the way, I love the Karuizawa property. It's really lovely and I'm fascinated by the beauty of Karuizawa and its history. I drove around to look at all the architecture and soak up the local culture. It's definitely a very special area, but I don't know a whole lot about its history. It would be wonderful to hear your perspective because you're from there. Why is it a special place and how did the town’s cultural history affect you as a professional?

Right. That's also a very difficult question. Karuizawa is my hometown. I was born and reared there. It really started in 1888 as a resort town when English ministers started to visit Karuizawa during the summertime. Tokyo was so hot, so they escaped the heat by coming up to high altitude areas in Karuizawa. So Western culture was really the attraction for Japanese visitors in those first years from 1888 to the early 1900s. When Japan’s economy was growing, everybody wanted to change their lifestyle from Japanese to Western, and Karuizawa was really a symbol of the modern Western style of living in Japan.

The kind of culture we created at HOSHINOYA Karuizawa is a little different from the real historical elements of the town. Since I grew up there, I was confident that the positive elements of Karuizawa were the natural environment and our lifestyle within it, and that was something important that we want to emphasize. But the Western culture aspect was something I wanted to lessen from the theme of HOSHINOYA Karuizawa.

I think we lost many positive elements from our Japanese lifestyle and culture by trying to Westernize everything too much, especially when the economy was growing so rapidly. Both Japanese and overseas visitors appreciate the concept of HOSHINOYA Karuizawa because they can feel the elements of Japan in the local culture.

“sustainability is more important than short-term profit”

Yes, I think it's really amazing because it's not a completely traditional ryokan, but maintains those qualities while offering more comforts for the Westerner.

Yes, that's right. We have to offer a comfortable stay for sure. But at the same time, in keeping the Japanese elements, we ask the customers to sacrifice some conveniences which they usually enjoy in city life. It’s very important to us that the customers feel a difference as they enjoy our resort.

I think it's a really great balance between the two. The resorts are not overly traditional. They have Westernized comforts for our needs. I didn’t even notice the lack of TV because there's so much nature around to explore. A TV would be a distraction from the beauty that’s outside. I feel like looking out the window is – well, that's the TV!

When the Japanese take their holidays, how is that different from what overseas visitors experience? And how do you balance that in the Hoshino resorts when you are shaping the concept for each property?

The average Japanese traveler has more than 100 days off per year. So they have a lot of vacation time. When they have one or two weeks of vacation time, they tend to travel outside of Japan. And when they only have one or two days over the weekend to travel, they choose to visit domestic destinations. That was the habit that we didn't like when we were creating HOSHINOYA because we wanted them to stay longer. We've been trying to avoid the weekend resort reputation by promote longer stays for Japanese, even as a domestic destination.

And that's a very important point for the tourism industry in Japan, because we have a very high occupancy during the weekends, but low occupancy on weekdays. That causes a high level of temporary workers, and that's not very good for the local community and economy. So it's very important to have a stable demand throughout the year. In order to achieve that, we really needed to become good enough for Japanese travelers to visit even on weekdays, or hopefully stay longer like three or four nights. We structure prices so that it's motivating to stay longer. That's also something we've been doing to have a more stable demand throughout the year. And of course, visitors coming to Japan from China, the United States and Europe stay much longer. So that’s helping us stabilize the demand throughout the year.

“They now realize that a pandemic occasionally happens and that we will have economic slowdown … Our performance has always been consistently better than that of our competitors even during such difficult times.”

“We really needed to create a demand for our resort in that destination. When you don't have that constant flow of guests, you must create your own attractions...”

How did you start expanding the resort business outside of your hometown?

When I started, it was more than a decade before I took over the one ryokan from my father in 1991. And the first property we managed outside my hometown was in 2001, so it took us 10 years to become a hotel management company outside my hometown. That first project was very difficult. Well, for me, it was my first experience. At the hotel that we operated in my hometown, we had a history and a leg up, since many people helped us. Going on to Yatsugatake we didn’t know anybody.

In Yamanashi?

Yamanashi yes. It was a new property for us and it had so many problems.

The first three or four projects were very difficult. I visited those properties almost every day - Yatsugatake in 2001, and Alts Bandai and the Tomamu ski resort in 2004. We experienced so many difficulties with these three projects, but we learned a lot. We had a very difficult time, but that was a very good experience for us as it helped us grow.

How would you describe some of those difficulties?

In Karuizawa, there was a strong visitor demand every year. We thought that was natural. However, in Yatsugatake, there was no demand! We really needed to create a demand to visit that destination. I realized that Karuizawa was one of those lucky locations for tourism. We usually don't have the luxury of just sitting back and awaiting visitors like at famous destinations. When you don't have that constant flow of guests, you must create your own attractions. It took us a long time to accomplish that, and when we started managing those sites, we were losing money. The finance department asked me to accelerate the process and start making money as soon as possible, but it took us something like two to three years for each property to break even and then start making money.

So you have a good business sense.

Not really, but we wanted to be a hotel management company. We needed to expand the business and locations by taking whatever was available to us at that time. We didn't have any experience and we didn't have any confidence. However, we also didn't have any choice. We needed to take those projects and turn around operations to show that we had the ability to manage the resort hotels.

Hoshino Resorts KAI Kirishima, Guest Room View

It sounds like you created a market.

It took us a long time, but we are now known as a resort operator creating a demand to visit a location. That's why many towns, developers, and hotel owners are contacting us to manage properties for them. We are expanding quite rapidly, but we are still very careful about the properties we accept, as too much speed or too many properties simultaneously could cause problems. So we are very careful.

HOSHINOYA started as a family business and now you're the fourth generation. Carrying on the family legacy is something I really admire in Japanese culture. How do you feel about this tradition and do you envision your children taking over someday?

I think this family business is not only for family members. There are some great benefits to sustaining family businesses, and one is that we can always look at a business as a long-term endeavor. We are not trying to maximize our profit on a short-term basis, but most importantly the management objective is to stay alive. We're not really taking unnecessary risks. We want to make sure that the business continues. The company has a history of a hundred and seven years. We are trying to preserve that for the next 100 years, and that's the environment we can enjoy, because we are a family business. So staying in the family business does have some great benefits for management. The strategy we can take is a bit different from a non-family business.

As long as we can stay as a family business, the challenge becomes the size of the company. When I took over from my father, the company had only one hotel in my hometown and 150 employees. Now, that has expanded to nearly 50 properties here and overseas, with about 4,000 employees. As an organization, it has become much more difficult for one person to take over. That is a challenge we are facing right now. The stage of the company business has changed and it is a different game. My son cannot start operating this company right off the bat.

The Hoshino family's function or role might be different now. When a family business grows, the management style must change along with it. We do have a very strong management team, and they probably will have to be more active and assume more responsibilities in the future. It is still a family-owned company, but the decision-making process should be more professional to secure business continuity. We must ensure that we are sustainable in the future, as that will be an important keyword for the family business. We think that sustainability is more important than short-term profit.

Hoshino Resorts KAI Beppu, Reception area

Hoshino Resorts KAI Beppu, Guest Room View

I’m very excited about the brand new KAI Beppu designed by Kengo Kuma. Beppu is one of my favorite cities in Japan because I love onsen! It is also a good base for exploring Kyushu. Beppu seems to be generating a buzz these days. Can you tell us the idea behind this new resort?

First, Kyushu has great potential in terms of tourism resources, thanks to the abundant hot spring sources, variety in hot spring (onsen) quality, plentiful local produce, and rich natural environment. Until recently, we only had one property in Kyushu but we are planning to make full use of Kyushu’s charms and to share these findings with our guests through the opening of KAI Kirishima and Beppu, as well as future KAI openings in Yufuin and Unzen. The addition of KAI to these locations will allow us to expand the breadth of modern toji (hot spring healing) and the rediscovery of Japan through the allure of hot spring travels.

Beppu Onsen always ranks among the top three hot spring areas of Japan and it is a fascinating place with eight different types of hot springs. We decided to open a property in Beppu in the hopes that our guests would experience Beppu Onsen as well as the lively atmosphere of hot spring towns, which were once prominent in this area. We hoped to capture that atmosphere and bring it inside our facility. We also chose the location so that guests can enjoy the view of Beppu Bay (which is why every room has an ocean view).

You function differently from other hotel management companies because you have more say in the concept of the properties, visualizing the themes.

Each property has its own theme and style of hospitality. And new elements must be introduced every year to sustain onsite demand. We delegate authority to each property and its team and encourage all the employees to participate in the decision-making process. That is one important difference between Hoshino resorts and other hotel management companies.

Right. There are many creative and cultural elements within the brand. Where does that come from?

Yes. In the United States, I learned about Ken Blanchard's empowerment theory. Everybody can participate in the decision-making process. We try to ensure that frontline employees who meet our customers every day know as much as possible about the company, so they will actually care, and will make good decisions for the company. That's very important especially in the hospitality business, because they are the ones meeting the customers. The customers give us valuable information. So instead of delivering that information to top management, we should ask the frontline teams to use it to make decisions. Our management style is very different from that of Western hotel management companies. The elements that you just described really come from organizational culture. And the concept of that organizational culture comes from the empowerment theory created by Professor Ken Blanchard. We might be the only ones applying that theory to a hotel management organization in Japan or even in the U.S.

Interesting.

There are so many rules and regulations. The budget can really be an obstacle for the front line management teams. They lose their freedom of judgment if there are too many restrictions on budgetary decisions. That's something we are always very careful about. We do have a business plan. We do have a budget, but it is flexible. Each team is constantly making and changing the budget every month.

That must be a very challenging job, for the person doing the budget.
Yes. The important thing is that the budget doesn't really come from corporate headquarters. In our case, corporate headquarters is involved in the budget process, but each team at the property participates in the budget making and they have the freedom to make changes as we go along during the year. And we're constantly talking to the owners and the investors about it.

What are some of the challenges of running a large resort group? I think you mentioned some of them earlier, but do you have anything else to add?

As we grow our number of employees, and as we have more properties to manage, it becomes very difficult to maintain the same culture in all properties. Again, that organizational culture is of great importance to Hoshino Resorts, so we must nurture it in all properties. That's a challenge, but there's also a huge benefit to being a large hotel company. For example, we do have an economy of scale in all aspects of our business, in purchasing and hiring, marketing... The economy of scale works in all of these areas of our business.

I started as one hotel operator in my hometown of Karuizawa, but the situation is much more powerful and easier for me to manage right now, because the economy of scale is helping us. For example, talking to the travel agents and including us in promotional activities with Japan Airlines and JTB. And because of the number of rooms we have, all these very powerful companies are willing to work with us, which is a benefit of being a large hotel company.

Have you always collaborated and partnered with the airlines, JTB, and others?

We've been doing that for a long, long time. . As we grew, we gained each other’s trust to work on collaborations and partnerships with flexibility and now we can work with different companies. When we exceeded 10 properties, we had some level of negotiating power and then it became 20 and then 30, and now more than 40 properties within and outside of Japan. We can now work directly with different companies, so that's definitely a benefit. There are some difficulties in running a large operation, but there are also many benefits to offset them.

Right. My first impression of HOSHINOYA, when I was booking a property for my New York clients, was that it didn't feel like a big corporation at that time. The brand felt very Japanese, but definitely high-end and very refined. And then later on, two properties became Virtuoso partner hotels. I don't think a lot of international agents even realize that HOSHINOYA is such a big corporation in Japan. And I just recently learned that there are so many sub-brands.

The entire tourism industry in Japan and worldwide now is pivoted to change because of the pandemic. Government policies are changing. It's hard to keep track of what's going on. Borders are still closed. There’s still so much uncertainty. As a leader in your company and an influencer in the hospitality industry, what has been your strategy to bring positivity and motivation to your team?

We are a hotel management company and we are working with the owners and investors who own the properties, and we have a management contract with them. So we are not really taking a real estate risk. During this pandemic period, the huge difference between average and good hotel management companies has become evident. The performance difference is enormous, so actually this is the time for us to show our hotel managing capability. Even during this pandemic period, 85% of Japan’s tourism revenue is generated by Japanese people traveling to domestic destinations. So income loss from inbound visitors is only 15%. We've been targeting Japanese customers even during the pandemic.

And we are successful in doing that. Even now our occupancies are much higher than those of our competitors. I think this difficult period is a chance for us to show how good we are in terms of attracting and pleasing customers and producing some level of profit for owners and investors. And I would like to add that investors are quite happy and that their satisfaction is communicated to the investment world of Japan. And that's why we are getting more inquiries from others to manage hotels for them. That’s why we are increasing the number of properties that we are managing. We just opened two city hotels in Kyoto recently, which wasn’t planned, but they were in trouble during the pandemic.

Our management fee is higher than that of most management companies in Japan. That's why owners choose other companies, but they now realize that a pandemic occasionally happens and that we will have economic slowdowns, such as the one caused by the “Lehman shock” in 2008 and 2009. Our performance has always been consistently better than that of our competitors, even during such difficult times. I'm communicating that to our staff, letting them know that this is the time for us to reassure others and prove ourselves. We've been actively doing that since the pandemic started.

Okay. But what’s the secret?

There's no secret. You see, we've made a lot of changes in operations, so that guests don't feel the need to worry about getting infected when they are staying with us. We are asking our guests to accept some inconvenience under the current situation. In addition to that, we targeted local people. I call it micro tourism...a one-hour or two-hour driving distance from each property. It's not a big population, but even during this pandemic period, many of them are actually repeat customers. So the shorter-distance travel market is identified and targeted.

We changed the food menu very rapidly because ours was designed to attract people from Tokyo, Osaka, New York, Shanghai, and so on. We had a lot of local food ingredients for our guests. But these local cuisines are familiar to our local visitors, and therefore boring. We made a lot of significant changes in the food menu, knowing that many of them traveled to Tokyo and outside of Japan before the pandemic, but they cannot do that right now. We introduced this micro-tourism in June 2020. Very early on, we made a lot of changes in our operations. Very swift and successful innovations.

Also, we had very good demand from July through November in 2020. I was very worried, of course, during April and May when the pandemic started, but we were lucky to have that strong demand during the fall.

The resort was really full in Karuizawa when I stayed there (HOSHINOYA Karuizawa) last July, even during the rainy season. The guests were all Japanese. And even in the rain, the onsen (hot spring) was pretty full. I love onsen. Maybe that's a big reason, the quality of the onsen. All your properties have great hot springs!.

Yes! Onsen, and also because most of our facilities are in rural areas. That is also very good. Many from nearby cities continue to make repeat visits to our sites.

Oh, I wish I could go right now. Are you a wellness person?

Not really. I ski a lot. That's the only thing I have outside of my work. I ski 60 days per year, and to do so, I need to be in the mountains for about 80 or 90 days, which is really difficult to arrange. There's always bad weather and so on. Skiing is the only hobby I have now. It's becoming more than a hobby.

Sounds like it’s becoming serious. Last question: if you were not CEO of HOSHINOYA, what would you be doing?

Of course I wanted to become a professional skier! In fact, I'm trying to decrease the number of roles I have and my overall workload so that I might be able to become a professional skier.

So you're doing both!

I'm trying! I'm actually trying to create more ski days in the next 10 years or so. That's my goal. So I’m delegating more things and only attending the meetings I have to be in. I try to have more time in Hokkaido, Tohoku and other ski areas. Usually I travel to the Southern hemisphere during July and August. I have been doing that for the last 10 years, and I was not able to do that last year, of course (because of the pandemic). But as you are calling the Japanese embassy to see if they will give you a visa, I'm calling Australia and New Zealand to see if they have started accepting visitors from Japan.

All images courtesy Hoshino Resorts

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Influencer Spotlight: Yoshiharu Hoshino on HOSHINOYA’s Japanese Legacy

“We lost so many great cultural elements as Japan grew as a country. If we had kept those important elements in our society, what would have been our lifestyle?”

“sustainability is more important than short-term profit”

“They now realize that a pandemic occasionally happens and that we will have economic slowdown … Our performance has always been consistently better than that of our competitors even during such difficult times.”

“We really needed to create a demand for our resort in that destination. When you don't have that constant flow of guests, you must create your own attractions...”