Foreign-affiliated hotels growing through marketing and strategy

The 2023 edition of the "White Paper on Tourism" (Japan Tourism Agency) clearly states that the earning power of tourist destinations and the tourism industry is the key to creating sustainable tourism regions. Amid this backdrop, the accommodation business is seen as the player with the biggest earning potential. “According to the ‘Consumption Trend Survey for Foreigners Visiting Japan,’ foreign visitors spend the most money on accommodation, accounting for about 30% of their total spending. In other words, improving the earning power of the accommodation business should lead to a more profitable tourism industry.” These are the words of Ishizaki, who explains why he focuses on the accommodation business in his research on tourism marketing. In his recent research, he has been analyzing the hotel business through the lens of marketing.

“Since the 2010s, the hotel industry has become globalized and grown in scale, and foreign-affiliated luxury hotels have been opening in quick succession in various locations in Japan. The major difference between these hotels and Japanese hotels is in their marketing and strategy,” explains Ishizaki.

Touching on the basic theories of marketing known as the Four Ps (Product, Price, Place, and Promotion), Ishizaki first points out the importance of location and hotel design in terms of the first P, or Product. “A global hotel chain that recently opened a hotel near famous tourist attractions in Kyoto has attracted attention and received high praise for its thoroughly refined design. The hotel's designers stated that they paid attention not only to the exterior and interior design, but also, for example, to the design of the display tags that are hung on the door knobs of the guest rooms. This attention to detail is what differentiates these hotels and makes them stand out from the crowd of luxury hotels in Kyoto,” says Ishizaki.

Next, looking at the second P, or Price, Ishizaki mentions the prevalence of revenue management, in which prices fluctuate depending on the time of year, and the importance of personalization, which is gaining momentum, especially among foreign-affiliated hotels. If all hotels are the same, then price competition will ensue. If a hotel has a distinct personality and people want to stay there, it can maintain high unit prices.

According to Ishizaki, the most significant change in the situation surrounding Japan's accommodation industry relates to the third P, or Place. “During Japan’s economic boom, as group travel booked through travel agencies became the mainstream, a structure dependent on customers sent by major travel agencies took shape, leading to the homogenization and commoditization of hotels and ryokans. Since the collapse of the bubble economy, however, the trend has shifted from group travel to individual travel, resulting in the decline of hotels and ryokans that could not respond to this change.”

In terms of the fourth P, or Promotion, Ishizaki says that, in line with the recent development of the internet, the dissemination of information using social media and influencers is the key to attracting tourists. As he sees it, Japanese hotels are lagging far behind their foreign-affiliated counterparts, which excel in all of the Four Ps above.

According to Ishizaki, the Imperial Hotel, Hotel Okura, and Hotel New Otani, known as the "Big Three," have long existed as the face of luxury hotels in Japan. After the 1964 Tokyo Olympics, the shift to hotels with mass appeal progressed, and several large hotel chains were developed. However, the format of the business differed significantly from that in the West. Ishizaki explains: “While Western hotel chains specialize in management and operations, the mainstream in Japan was for hotel chains to acquire land, build hotels, and operate them on their own.” In other words, rather than generating profits from the hotel business, it was more like a business that anticipated unrealized profits as a real estate enterprise. This management style came to a standstill when the price of land plummeted in the wake of the collapse of the bubble economy, and many of Japanese hotels and ryokans were replaced by foreign-affiliated hotels.

What is ryokan marketing in an era of diversification and personalization?

In recent years, some Japanese hotels have had success adopting the marketing strategies of foreign-affiliated hotels. There is a major resort chain known for revitalizing multiple local ryokans that have run into management troubles. Specializing in management and operations without owning the land or buildings, the company has succeeded in differentiating itself by promoting rational management as typified by multitasking and by maximizing the individuality of its ryokans as well as the characteristics of the regions where they are located, thereby achieving nationwide expansion. On the other hand, business hotels that excel in terms of price competitiveness are also diversifying and expanding.

“While the number of hotels is on the rise, the number of ryokans is on a continuous decline,” says Ishizaki, stressing that “it is ryokans that need to use marketing to differentiate themselves.” He cites an example: “There is one ryokan that moved away from large-scale hotel operation, which relied on tour group customers, and reduced the number of its guest rooms from nearly 50 to about 10, effectively shifting to a luxury model. This ryokan has succeeded in maintaining high prices by differentiating itself with locally sourced cuisine and meticulous service.”

He continues by explaining that in today's age of increasingly diversifying and individualized travel, collaboration with the local community is essential to realizing a sustainable ryokan. “A successful ryokan can increase the number of guests by making use of local resources to customize itself, but systems that links this to the revitalization of the local economy need to be put in place,” says Ishizaki.

According to Ishizaki, the cultivation of human resources capable of developing marketing strategies in line with the times is also an urgent issue. In April 2024, Ritsumeikan University established a Major in Tourism Management in its Graduate School of Management. Ishizaki believes that it is an important responsibility to provide education in this new major, and going forward, he will continue striving to promote the ryokan business in Japan through his research and teaching.