#2: Revitalization of a Loss-making Ryokan by Yoshiharu Hoshino, President of Hoshino Resorts

December 2nd, 2022 [No. 103 – 2022]

Norihiko Takeuchi
Professor,
Graduate School of Business and Finance, 
Waseda University, Japan

#2: Revitalization of a Loss-making Ryokan by Yoshiharu Hoshino, President of Hoshino Resorts

The ryokan example introduced in the previous article is a real case, an act before the revitalization of the former “Izumisou” (established in 1912, now part of the Hoshino Resort “Kai” brand), a long-established onsen ryokan in Shizuoka Prefecture that was revitalized by Yoshiharu Hoshino, current President of Hoshino Resorts. The roots of Hoshino Resorts go back to 1914, when the first owner, Kunitsugu Hoshino, opened the Hoshino Onsen Ryokan in Karuizawa, Nagano Prefecture. Yoshimichi Hoshino is the fourth generation of this Karuizawa onsen ryokan, and through his remarkable management skills, he has revitalized numerous large resort facilities and traditional inns that had fallen into financial difficulties. By bringing them under the umbrella of his own resort management company, Hoshino Resorts has grown into a nationwide luxury resort and ryokan management company. 

Now, let us return to the revitalization by Mr. Hoshino of the former Izumisou ryokan. When Mr. Hoshino embarked on the revitalization of this ryokan in 2005, it was in financial difficulties with debts amounting to 4 billion Japanese yen. The approximately 60 employees were eager to revitalize the ryokan to please their customers, but they did not know what to do. The following is a detailed report on the revitalization of the former Izumisou ryokan as broadcast by NHK.

Mr. Hoshino's first task in revitalizing the ryokan was to create a concept for the ryokan. He gathered all the employees and promised to create a concept for the ryokan within a two-week time frame. While Mr. Hoshino used his own customer survey data to identify the target clientele, he asked his employees to come up with their own concept.

The survey results showed that although the number of customers itself was declining, Mr. Hoshino noted that there were strong repeat customers. Repeat customers were characterized as “couples in their 60s or older,” “groups of women in their 50s or older,” and “three-generation families with grandchildren.”

Mr. Hoshino gathered the ryokan’s key front-line staff and created opportunities for discussion. Mr. Hoshino asked questions such as, “What kind of customers does Izumisou overwhelmingly satisfy?” and “Is there anything you can think of in the field?” to encourage the staff to reflect on and become aware of their daily operational activities. Although eliciting opinions from staff members was a patient process, Mr. Hoshino did not give easy answers, but rather gradually elicited information from the field. Then, his staff’s comments, which were based on their field experiences, began to capture the characteristics of the repeaters as indicated by the results of the customer survey. When the staff members began to realize that the three customer segments that emerged from the customer survey – “couples in their 60s or older,” “groups of women in their 50s or older,” and “three-generation families with grandchildren” – had “mature women” in common, the expressions of all the staff members brightened at once. In this way, they were able to find that older female customers serve as key and loyal customers who make the decision to stay at Izumiso. In conclusion, the concept of a “Multi-occasion Hot Spring Ryokan for Mature Women” was derived.

Furthermore, Mr. Hoshino devised a way to communicate the concept decided with the core members to all employees. Later, he gathered all the staff together for a quiz-style meeting called “Izumisou Quiz.” Through this quiz, everyone shared the fact that the repeaters and particularly satisfied customers were elderly female guests. Through this process, the final concept of the ryokan, “A Multi-occasion Hot Spring Ryokan for Mature Women,” was presented to all employees.

Thereafter, the employees came up with services (food, hospitality, etc.) that would overwhelmingly satisfy the older female guests at each site, and put them into practice. The following year, the guest room occupancy rate increased by 10% over the previous year, paving the way for the revival of the ryokan.

This case illustrates the key points of effective employee motivation management. In the next article in this series, I will explain how Mr. Hoshino's intervention enabled the employees, who had been disappointed, to take action on their own initiative, based on theories of management and psychology.