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For hotelier, budget prices at resorts are an easy sell

by Takahiro Fukada

Naoki Yamanaka, president of hotel operator Shiki Resorts Co., wants more Japanese to appreciate the seasonal changes that bless this country.

In fact, the name of his firm, “Shiki,” means four seasons.

“Japan has four seasons. Despite that, are Japanese enjoying (traveling) in four seasons?” Yamanaka asked.

“With our accommodations, you can enjoy traveling four times a year,” he said.

Since 2001, Yamanaka has been offering affordable but quality lodging utilizing corporate resort hotels — a legacy of the bubble era that has become a burden for many of the companies that own them.

A room that includes breakfast runs only ¥5,000. Dinner costs ¥3,000 extra. And the prices are fixed year-round.

Today, Shiki Resorts manages 24 hotels and accommodates some 200,000 guests annually. The firm’s sales in fiscal 2007 amounted to ¥1.3 billion.

Although he is now a successful entrepreneur with 160 employees, business wasn’t always good for the 44-year-old.

Yamanaka joined Mitsubishi Estate Co. in 1989 with the ambition of one day being involved in a municipal development project.

For his first 10 years at the firm, however, he mainly worked in the administrative section and in accounting.

But those experiences were helpful in his later career, Yamanaka said.

“Without having done accounting and administrative jobs, success in its current form would never have been possible,” he said in an interview with The Japan Times.

His career took a turn in 1999 when he was accepted into a new intracorporate venture set up by Mitsubishi.

He said that as a company employee he felt obliged to make at least one proposal for the project.

He came up with a plan to operate hotels with reasonably priced accommodations by making the so-called corporate resort hotels available to the general public.

Built in the bubble era, many companies ran their own resort hotels for their employees.

But after the collapse of the bubble, running these facilities on their own became a financial burden for many firms.

Yamanaka said the idea of operating cheap hotels with quality service came from his own experience trying to find such a place to take his mother on a trip.

Because Japanese tend to take holidays on weekends, at yearend or during the summer, many hotels and “ryokan” inns charge higher prices at those peak times.

Restricted by a limited budget, he looked high and low for a place to stay, eventually finding moderately priced lodgings.

Contrary to his expectations, the facility, albeit simple, was extremely clean and served good meals. He was amazed that it was possible to satisfy customers for such a low price.

Consequently, Yamanaka wondered why Mitsubishi only operated pricey hotels.

“With the funds needed to manage a deluxe hotel, we could operate 10″ reasonably priced properties, he thought.

Aware that many companies considered their resort hotels a financial burden, Yamanaka hit upon the idea of using them.

One of 37 applicants for the intracorporate venture competition, when Yamanaka’s turn came to make his presentation he convinced the examiners to give him a chance.

But the road ahead was still tough.

During the feasibility study, Yamanaka had a hard time finding a suitable hotel to start the new business. More than 100 owners turned him away, afraid because there was no precedent for his proposal.

Finally, he stirred up some interest with the health insurance cooperative of an automaker’s union that owned a hotel in Hakone, Kanagawa Prefecture.

By visiting nearly every week, Yamanaka eventually won over the hotel’s owner to his plan.

Although grateful, Yamanaka said he felt a strong sense of responsibility and was nearly overwhelmed by pressure. “When the owner put me in charge, I wondered how I could manage such a large facility.”

Yamanaka set up Shiki Resorts in 2001 and started operating Forest Hakone and Hakone Shunka, which was a corporate resort hotel owned by Mitsubishi for its employees.

In no time, the low-priced hotels were attracting plenty of guests.

But even though the business seemingly got off to a successful start, there were still problems.

Within a month of starting, Yamanaka saw his employees dwindle from 12 to four due to the difficult working conditions.

Because the hotels were nearly fully occupied on weekends, the four employees weren’t able to handle all the work. Until he was able to hire more help, Yamanaka had to rely on his mother and wife for help. Some employees also brought in their girlfriends. No one could take a day off.

But soon other facility owners, impressed by his success, started approaching Yamanaka.

Today, Shiki Resorts operates hotels in Hakone; Izu, Shizuoka Prefecture; Nasu, Tochigi Prefecture; Shinshu and Karuizawa, both in Nagano Prefecture; Kusatsu, Gunma Prefecture; Ise-shima, Mie Prefecture; and Hokkaido and Kyushu.

To keep revenue stable, half the facilities are located in the popular Izu-Hakone area. “Even in a recession, at least (the facilities in) Izu-Hakone will definitely be fully occupied,” he explained.

This fall, Yamanaka’s company broke away from Mitsubishi. He acquired the venture business from the parent company to protect his own business model and maintain the trust of people inside and outside his firm.

If Shiki Resorts had continued as an in-house project, Yamanaka and his staff would eventually have been replaced by others, and the reasonable charge of ¥5,000 may have been revised, he said.

Dedicated to offering reasonably priced accommodations, it would have been irresponsible for him to leave his venture firm for Mitsubishi, he said, as each owner of the 24 facilities and their employees had placed their trust in him.

In the face of rising fuel costs, maintaining the room charge hasn’t been easy. Even so, Yamanaka has no intention of hiking prices while wages remain frozen.

He said he would rather cut back on services than raise prices, believing that is what is most beneficial to the guests.

And rather than increasing the number of hotels, Yamanaka hopes to attract more guests. The number has increased tenfold since the business was launched, but he’s aiming for even more.

“(I hope) Japanese will come to know Shiki Club as well as they know Seven-Eleven,” Yamanaka said.

In this occasional series, we interview entrepreneurs whose spirit may hold the key to a more competitive Japan.

Highlights of Yamanaka’s career

1989 — Joins in Mitsubishi Estate Co. Works for the following 11 years in administrative and accounting sections.

1999 — Submits a proposal to Mitsubishi’s new in-house venture competition to turn corporate resort hotels into reasonably priced accommodations for the general public.

2001 — Sets up Shiki Resorts and starts his business with two hotels in Hakone, Kanagawa Prefecture.

October 2008 — Acquires Shiki Resorts and becomes independent from Mitsubishi.