Hilton Hotels bag white elephant, turn it around

January 25th, 2011 by Philip Brasor & Masako Tsubuku

Getting consumers to part with disposable income has become a national mission, and one success story in this regard is the increasing popularity of higaeri, or one-day excursions where travelers go someplace, enjoy that place, and return home without staying the night. Morning news and information programs are filled with suggestions for higaeri, and one of the most talked about destinations is the Hilton Odawara Resort and Spa, located on the Izu Peninsula in Shizuoka Prefecture. Until Feb. 28, the Hilton is offering a special higaeri deal on weekdays. For ¥4,000, a person can partake of the resort’s lavish all-you-can-eat lunch buffet and use all of their spa facilities, which includes onsen (hot spring), sauna, Jacuzzi, an Olympic pool and more. Normally, the buffet itself is ¥3,850 and access to the spa facilities is as much as ¥3,000 for the day. In addition there’s free shuttle-bus service to the hotel from the JR Odawara or Nebukawa stations on the Tokaido line, about an hour from Tokyo Station.

Rooms with a view

A lot of resort hotels have higaeri deals, but what makes the Odawara one appealing is the Hilton name. In fact, it appears that many young women are taking advantage of the deal simply because they think it’s the only chance they’ll ever get to patronize a Hilton Hotel; and that, of course, prompts another question: What is Hilton, one of the grandest luxury hotel brands in the world, doing with a hot spring resort in the mountains of Shizuoka?

Hilton, in fact, doesn’t own the resort. It’s owned by Odawara city, which purchased the property from the Koyo Noryoku Kaihatsu Kiko (Employment and Human Resources Development Organization), one of those national bureaucratic organs whose main purpose is to justify its own existence. Nominally, the EHDO is charged with managing the funds collected through the workman’s compensation insurance program. In the not-so-distant past these funds were used to construct concert halls (Nakano Sun Plaza is one of the more famous EHDO projects) and other white elephants, the vast majority of which never made money. In fact, almost all of them lost money, a lot of money, including the elaborate hot spring resort they built in Odawara.

In the 1980s, Japan was on top of the world, and its trade deficit with the United States was so alarming that it had to make concessions, so Japan agreed to import more American beef and oranges, which effectively put a lot of mandarin orange farmers in Shizuoka out of business. The municipal government of Odawara asked the EHDO (which was then called Koyo Sokushin Jigyodan) to buy the land that used to be used for mandarin orchards, and the EHDO built a leisure facility on it in 1988, ostensibly for workers who paid into the koyo hoken system, though, practically speaking, anyone could go there and enjoy the hot springs and stay overnight. EHDO spent ¥44.5 billion on the sprawling resort, which it dubbed Spauza Odawara. Local hot-spring resort operators were up in arms since Spauza was cheaper and drained off some of their potential business, but this was nevertheless a semi-public enterprise, and as with all businesses that are propped up by amakudari (“descent from heaven,” i.e., public corporations set up to give work to retired bureaucrats) there were concerns it was wasteful and mismanaged, and thus bled red ink. When the Junichiro Koizumi administration came to power at the start of the millennium and reduced the size of government, most of these white elephants were put on the block, and Odawara City bought Spauza for a mere ¥850 million.

The city took bids on managing the facility and chose Hilton, and in February of 2004 renamed it the Hilton Odawara Resort and Spa. The gamble paid off. In 2010 it won a World Travel Award for a Japanese resort for the fifth time, and is seems to be very profitable, despite the fact that it charges more for a room (on average, about ¥15,000 per person per night) than it did when it was being run by EHDO. To put this matter in its proper perspective, the government still hasn’t unloaded the Kampo no Yado network of 70 inns built by another amakudari concern that invested postal insurance funds. These inns are still under public management despite an offer several years ago from Orix. Some people in the government, mainly the pugnacious former postal-services minister Shizuka Kamei, thought the price Orix offered was too low. In the meantime, the network is costing taxpayers ¥4 billion a year.

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