Hoshino Says REIT Tokyo Debut to Help Overseas Expansion

Hoshino Resort Co., a 109-year-old Japanese luxury hotel operator, wants to be as well known as Toyota Motor Corp. internationally. President Yoshiharu Hoshino says today’s real estate investment trust debut is a start.

“When I walk on the streets of New York or London, I see Toyota, Nissan and Honda cars driving around, but I don’t spot any Japanese hotels,” Hoshino, 53, said in an interview in Tokyo. “It’s my dream to become one of the choices in the international tourism business.”

Hoshino Resorts REIT Inc. will invest in Hoshino’s three hotel brands, which are currently located only in Japan, after raising 10.2 billion yen ($103 million) in an initial public offering. The REIT will buy six hotels for 15 billion yen from the company, Hoshino said.

The REIT jumped 15 percent to 589,000 yen at the close of trading in Tokyo from the 510,000 yen IPO price.

Hoshino said that shifting ownership of the hotels to the REIT will allow him to focus on managing the properties as the company expands, including opening hotels overseas. Hoshino Resort will use the IPO proceeds to upgrade its computer system, strengthen its brand and hiring, the president said.

Expanding Overseas

Hoshino Resort manages 30 hotels across Japan under its Hoshinoya, Kai and Resonare brands. The company is based in Karuizawa in Nagano prefecture, west of Tokyo, known as a summer retreat for Tokyoites similar to the Hamptons on Long Island in the U.S.

Hoshino said he wants to work with hotel owners and investors to open hotels abroad. The company plans to open its first resort outside of Japan, in Bali next year, and is also scheduled to open its first hotel in a city in 2016, in Tokyo’s Otemachi business district, said Hoshino, who inherited the business from his father in 1991. Both will be under the Hoshinoya brand.

The REIT will eventually own assets including the Hoshinoya, the high-end brand that charges as much as 120,000 yen per person a night, the Kai brand that operates Japanese style hot-spring inns known as ryokans, and Resonare resorts that target families, Hoshino said.

The trust is targeting investors seeking to profit from the growth of Japan’s tourism market, Hoshino said.

Growing Tourism

The government has set a target to attract 18 million visitors to Japan a year by 2016 from 8.37 million in 2012, according to Japan National Tourism Organization. The yen’s 12 percent decline this year versus the dollar has helped boost the number of visitors to Japan by 31 percent in May, it said.

“The tourism industry is one of the few industries that is growing in Japan,” Hoshino said. “It’s very important to create such opportunity, so more and more people will have interest in this industry.”

The hotel market accounted for about 70 percent of the 22.4 trillion yen in total spending on tourism in 2011, according to the Japan Tourism Agency.

The average daily rate for hotels in Tokyo rose 7.6 percent to 15,751 yen ($159) in May from a year earlier, according to data compiled by STR Global, a London-based hotel industry researcher. That compared with $275.97 in New York, $214.80 in London and $210.06 in Hong Kong for the same month, it said.

Buying Ryokans

Hoshino group, which has 3,070 employees, plans to expand its Kai brand by acquiring ryokans struggling to survive, Hoshino said. The company plans to increase the number of Kai ryokans to 12 next year from nine and has a goal of boosting the total to 30 “as soon as possible,” he said.

In 2001, Hoshino acquired a hotel in Yatsugatake in Yamanashi prefecture, west of Tokyo, from a unit of Mycal Corp., a retailer that went bankrupt, through the Development Bank of Japan.

Hoshino Resort increased the occupancy rate for that hotel to 80 percent by November 2012 from 44 percent 10 years earlier, the president said.

Hotels managed by Hoshino group generated about 32 billion yen in revenue last year, he said.

“My goal is to provide a Japanese-culture oriented hospitality company,” said Hoshino. “Japanese culture is well known for its friendliness and hospitality. Wouldn’t it be great to utilize our strength?”

Before it's here, it's on the Bloomberg Terminal.