Beppu City, on the eastern coast of Kyushu Island, is famous as the site of Japan’s most abundant collection of hot springs, or onsen – it boasts more than 2,000 of them. But its popularity as a destination for domestic tour group’s peaked in the 1970s and declined sharply after Japan’s economic bubble burst in the 1990s.
By 2001, the Beppu SUGINOI HOTEL, in common with many others, was in financial crisis. A year later, ORIX Group picked it up as a distressed asset and began a large-scale, multi-year renovation that culminated in January 2025 with the opening of a new guest room building, the “Hoshi kan”.
Now 80 years old, the SUGINOI HOTEL has been restored to its past glory and can face the future with confidence due to the bold operational overhaul by an owner that applied all of the skills it learned from its management of financial and real estate assets.
In fact, the SUGINOI HOTEL was ORIX’s first proper foray into hotel management, remembers Naoki Mori, Executive Officer and Managing Director of Sales, Marketing ＆Operations at ORIX Hotel Management Corporation. Mr. Mori, who worked at a real estate development company liquidating assets such as golf courses, hotels and resorts before joining ORIX, knew the previous operator of the SUGINOI HOTEL – who therefore reached out in 2002 when he decided to sell.
Though hotel management was unfamiliar territory, it decided to take on the challenge. “ORIX has a record of expanding into adjacent fields of existing businesses. We are constantly seeking new opportunities -- what more we can do for customers,” Mr. Mori says. The group had already started managing residential-style training facilities and believed this expertise could be applied to hotels. As a financial services company, ORIX also knew how to analyze businesses from a cash flow perspective. And Mr Mori’s personal experience in closing down bankrupt businesses gave him a strong motivation to focus on revitalization.
ORIX Hotel Management Corporation
Rebuilding trust comes first
However, he and his team knew that reviving the hotel would not be easy, otherwise someone else would already have done so. That proved to be the case, and having initially outsourced management to an external operator, ORIX brought the property under direct management in 2008, consolidating marketing strategies and fully committing to turning the business around.
The first priority was rebuilding the organization and, specifically, motivating the staff – stopping people from leaving and persuading them that the new owner was not going to just cut costs and try to sell the hotel on for a quick profit. “We needed to gain their trust,” says Mr. Mori. “That’s why I spent the first year living in Beppu myself -- to show our commitment.”
Only after that was accomplished, did the team focus on improving the guest experience. In a onsen resort, the two most important elements are the baths and the meals. If those two are strong, people will come, Mr. Mori argues. But in a town crowded with onsen, they needed a signature attraction.
As it happens, the SUGINOI HOTEL had one – but had not taken advantage of it. The hotel sits on a hill with sweeping views of Beppu Bay, but its main bath was enclosed, so guests could not see the nature surrounding them.
The first major investment by ORIX, therefore, was in redesigning the outdoor baths – making them resemble the terraced rice paddies typical of Oita prefecture where Beppu is located, and offering panoramic view from each of the five levels. Mr Mori recalls that he got the idea from an infinity pool he saw on a private trip. Renamed Tanayu and re-opened in 2003, the renovated bath became a huge hit and customer numbers improved dramatically.
Family values in kitchen and guest room
Turning to dining, ORIX introduced a full-scale buffet format, which was still relatively rare at the time. With 500 rooms to fill and group travel on the wane, the management team realized it needed to appeal to families. And a buffet allows each generation, from grandparents to children, to choose their own preferences.
At the time, buffets had a bad reputation, associated with reheated processed foods and some chefs thought, “That’s not real cooking.” But the team persuaded them to use high-quality local ingredients and have them cook these on-site.
They also adopted an open-kitchen format so guests could see the food being prepared. That gave a sense of authenticity and created excitement with steam and fire. Initially, chefs were hesitant to be on display, but once they started receiving compliments directly from guests, their attitude changed. In retrospect, that shift in mindset was probably the most important factor in SUGINOI HOTEL’s revival, according to Mr. Mori.
Starting in 2019, ORIX then began a large-scale renovation of the buildings on the property. The older buildings were spread out north-south and guests had to ride shuttle buses to access the facilities. Consolidating the guest room buildings near SUGINOI Palace, where the baths and restaurants are located, improved convenience.
With fewer bookings from large tour groups, management reduced multi- guest rooms and designed spaces that cater to families and friends, including loft-style rooms. It also added scenic terraces and comfortable seating near entrances to enhance the experience beyond the guest room.
The hotel has also modernized in other ways to attract multi-generational families, says Tatsuya Kurama, General Manager of the SUGINOI HOTEL: “People often imagine ‘onsen resorts’ as quiet or traditional, but we also have pools, fountain shows, bowling, and other entertainment that younger guests can enjoy.”
Many of these features were developed through staff discussions. One example was making the buffet completely ‘all-you-can-drink’ -- including not only beer but sake and whiskey -- at no extra charge. “Some questioned whether it was sustainable, but we were confident guests would love it. We got approval – and it has turned into a big hit,” Mr Kurama says proudly.
Facing the future with confidence
With the “Hoshi kan” having opened at the start of the year and three new buildings now open, Mr. Kurama reports that staff are showing a clear commitment to improving service quality. The SUGINOI HOTEL plans to keep adding new features so that all kinds of guests will come to enjoy a comfortable, memorable stay at this large-scale resort.
More generally, Mr. Mori says that the insights gained from this large-scale renovation will be used across ORIX’s portfolio of hotels and onsen resorts in Japan. The group sees tourism as a business that generates long-term value by creating local jobs, contributing to a region’s branding and engaging local communities. ORIX sees revitalizing properties like the SUGINOI HOTEL in Beppu not just as a business initiative, but as an opportunity to make a positive economic and social impact.
