The Buddhist approach to doing business is yielding results in Japan again.

Tomoaki Horiguchi runs a small real estate company in Tokyo whose stock has jumped more than 11-fold in the past five years, extending gains in 2016 even as the broader market tumbles. He studies at the management school of Kazuo Inamori, the Buddhist priest and billionaire founder of Kyocera Corp. Around his office hang pictures inscribed with words of wisdom from his 84-year-old mentor, such as the need to make staff happy and for altruism.

When Horiguchi — and Inamori for that matter — talk of doing good, they mean developing a business that contributes to society but also makes a profit. While strolling in Tokyo’s upscale Ginza shopping district last year, which was throbbing with Chinese tourists, Horiguchi had an idea that ticked both boxes: he was going to build hotels for them.

“Asia is becoming wealthier and people want to travel,” Horiguchi said in an interview. “I want to make them happy. Tokyo is an economic hub at the moment, but it’s changing to a tourist destination. It needs more hotels.”

Horiguchi, the founder and president of Sun Frontier Fudousan Co., is planning to spend ¥60 billion to develop 4,000 hotel rooms, half of them with a partner, he said. The 58-year-old opened the first in Nagoya earlier this year, is building another in Narita, and has five more in the pipeline.

Sun Frontier’s shares jumped 34 percent from October, when it announced its hotel tie-up with the parent of Spring Airlines Co., China’s largest budget carrier, through a peak in May. The Topix index fell 13 percent in the period. Sun Frontier, whose shares are up 16 percent in 2016, is the best performer of 56 companies in the Topix Real Estate Index over the past five years.

The strong performance is partly due to the timing of the hotel-business expansion. Japan is seeing record numbers of foreign visitors. Almost 20 million came last year, compared with 8.4 million in 2012, with 5 million of them from China.

That is creating a shortage of rooms in the capital and around the country. Occupancy rates at hotels climbed to as high as 86 percent in Tokyo and 91 percent in Osaka last year, according to the tourism agency. They exceeded 80 percent even in far-flung spots like Fukuoka and Okinawa.

Not only that, the 2020 Tokyo Olympics is just around the corner. The number of tourists will hit 35 million by then, Goldman Sachs Group Inc. estimates.

The occupancy rate at the Spring Sunny hotel in Nagoya that opened in April soared to 98 percent last month, up from about 60 percent last year before Sun Frontier bought and renovated it. Horiguchi added bigger elevators for tour groups, doubled the size of the restaurant, built a special parking area for buses and added five or six Chinese staff to helm the front desk, he said. Its partner, Spring Group, is helping to bring in guests.

Horiguchi said he is considering holding the new hotels for about four years and then selling them as real estate investment trusts to maintain cash flow.

Chinese partnership

Sun Frontier already owned two hotels aimed at local tourists in regional areas of Japan when Horiguchi was approached by Spring Airlines last year, which was interested in buying one of them located near Mount Fuji. Horiguchi sat down with the founder of the company and persuaded him to start a joint hotel-management business in Japan instead.

“We were very much alike,” said Horiguchi. “He wanted to give people happiness.”

Happiness has a slightly different meaning in the world of Horiguchi and his mentor Inamori, especially when it comes to work. It often comes from devoting yourself to a task, no matter what it is. Horiguchi, for example, has his staff clean the company’s toilets, and has done so himself, to get this point across. He also organizes a summer sports camp to encourage bonding, and was featured in a recent issue of a magazine published by Inamori’s business school on the topic of helping workers be the best they can.

Horiguchi joined Inamori’s Seiwa Juku school 21 years ago, a few years before he started Sun Frontier, and took part in its Hawaii get-together this year. He says it is important to get staff to work together, and that 14 percent of his employees’ time is spent on training, company trips and morning gatherings.

Profits surge

Sun Frontier has seen increasing profits over the past six years, posting net income of ¥8.2 billion in the fiscal year that ended March 31, after two years of losses during the financial crisis.

“The company got its fingers burnt in the past with the Lehman shock and so has sharpened its focus on the turnaround of properties,” said Kouki Ozawa, an analyst at Mitsubishi UFJ Morgan Stanley Co. in Tokyo. Lehman shock is Japanese shorthand for the global financial crisis.

“The whole industry suffered at that time. They’ve done a good job of steadily building profit. If it pushed harder it could get higher returns, but that would run the risk of repeating past mistakes. ”

The focus on staff and doing something worthwhile for society is working out for shareholders too. Sun Frontier’s return on equity was 31 percent at the end of June, the highest in at least nine years and four times the average for the Topix. Still, like Inamori, Horiguchi says investors are not his priority.

“My number one aim for the company is to make the employees happy,” said Horiguchi. “Next is to make our business suppliers happy, then customers, after that society, and finally shareholders. And I say that at our annual general meeting.”

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