Portfolio Formation Policy

HRR’s basic policy is to form a portfolio with a stable revenue base centering on hotels, ryokans and ancillary facilities that can respond to the travel needs of tourists.

1. Investment properties

HRR believes its facilities that are differentiated from others with a superior business model, operating skills, location and such will be able to generate stable earnings and secure steady cash flow over a long-term period.

From this perspective, HRR selects investment properties from the stance of “superior know-how and experience” (whether the business model, brand power, etc. can be differentiated from competitors and whether it is operated by an operator with extensive expertise) and “superior location and facilities” (whether the facility itself is superior as to its location, rarity of the building, etc.)

HRR seeks to flexibly form an optimum portfolio to secure long-term and stable cash flow. After proactively obtaining sales information on for-sale properties operated by both the Hoshino Resorts Group and outside operators and on overseas properties in which the Hoshino Resorts Group is engaged, HRR will examine individual properties upon their selection for investment.

  1. (1) Properties operated by the Hoshino Resorts Group

    HRR considers investments in the three brands “HOSHINOYA,” “Hoshino Resorts KAI,” and “Hoshino Resorts RISONARE” operated by the Hoshino Resorts Group as most desirable. “HOSHINOYA” is a flagship brand of the Hoshino Resorts Group that seeks to provide overwhelming, extraordinary experiences and global standard services; and HRR believes it is the brand which has strongly rooted the small luxury concept in the domestic resort market. “Hoshino Resorts KAI” is a premier hot spring ryokan located in renowned hot spring tourist destinations and is small in scale but high in quality. It aims to provide a special and comfortable stay with abundant charms of the region. HRR expects this brand to attract more foreign tourists, along with “HOSHINOYA,” as a “hot spring ryokan,” which is a type of resort unique to Japan. Furthermore, the Hoshino Resorts Group incorporates succession of management/operation from currently existing ryokans which face difficulty in sustaining their businesses due to financial problems, lack of successors or other reasons as one of the business models under this brand, and looks to further expand its pipeline in the future. “Hoshino Resorts RISONARE” works under the concept of creating resort hotels that can be enjoyed by both adults and children. With its goal of offering an array of activities suitable for each season and attractive soothing time that can be only experienced at resorts, it aims to become a brand favored by families. HRR believes the securement of stable earnings will be possible by continuously investing in the three brands as well as in other brands developed by the Hoshino Resorts Group. HRR intends to obtain information on facilities under the three brands and other brands developed by the Hoshino Resorts Group by actively utilizing the sponsor support agreement with Hoshino Resorts Inc. As a result, if HRR decides that a facility is able to generate long-term and stable cash flow, proactive investments will be made.

  2. (2) Properties operated by outside operators

    As HRR aims to create a system that enables the unitholders of HRR to benefit from the outcome of the growth of Japan’s tourism industry through holding of HRR’s investment units, HRR believes that “tourism” can be broadly classified into three types: “resort tourism,” “hot spring tourism” and “urban tourism.” Referring to the idea of a “tourism-oriented country,” HRR and Hoshino Resorts Group believe that needs of urban tourism exist in cities with abundant regional features considering the attention on practices conducted to utilize touristic resources provided by the diversity found in each region in Japan. Securing long-term and stable cash flow against the backdrop of urban tourism demand in accommodation facilities is possible as these facilities will become the base of urban tourism. HRR believes that demand for facilities arising from urban tourism exists and that investment in these facilities will lead to a continuous increase of unitholder value.
    Furthermore, similar to investing in properties operated by the Hoshino Resorts Group, HRR believes it will be able to secure long-term and stable cash flow by making appropriate investments that consider “superior know-how and experience” and “superior location and facilities” based on sufficient information collected by the Asset Management Company.
    Accordingly, HRR will leverage the sponsor support agreement with Hoshino Resorts Inc. as well as the unique network of the Asset Management Company to obtain information on hotels, ryokans and ancillary facilities operated by operators other than the Hoshino Resorts Group serving as urban tourism bases where tourism needs complementing urban tourism are believed to exist (“urban tourism properties”). If it is judged that long-term and stable cash flow can be secured from the viewpoint of “superior know-how and experience” or “superior location and facilities” facing urban tourism demand in cities where properties are located, HRR will make proactive investments. Furthermore, HRR will obtain information on hotels, ryokans and ancillary facilities other than urban tourism properties (“other properties operated by outside operators”) in which non-urban tourism needs are recognized. In line with this, HRR will make proactive investments if it is judged that long-term and stable cash flow can be secured from the viewpoint of “superior know-how and experience” or “superior location and facilities.”

  3. (3) Overseas properties in which the Hoshino Resorts Group is engaged

    Regarding overseas properties with which the Hoshino Resorts Group is engaged, HRR intends to carefully conduct investments by first obtaining adequate information on the country/region of the investment target from macro perspectives such as political trends, demographics and economic growth. With the obtained information, HRR will comprehensively analyze the market where the subject real estate is located, which includes real estate market trends/systems and rules present in the respective country. HRR will also take into account risks that may be derived from investing in properties located in foreign regions including legal, accounting and tax systems; foreign exchange risk pertaining to investments and profit returns, etc. Considering the above, decisions on foreign investments will be made if HRR can expect stable use of the facilities along with long-term and stable cash flow.

2. Investment Period

HRR, in principle, will acquire hotels, ryokans and ancillary facilities for ownership over the medium to long term.

3. Expansion of asset size and promotion of portfolio diversification

HRR aims to reduce the risk of a significant drop in its cash flow resulting from changes in tourist needs, trends, natural disasters, domestic and overseas economic trends, etc. by diversifying its portfolio while also aiming to simultaneously strengthen stability in earnings through the expansion of asset size.

Hoshino Resorts Group operates each facility after classifying investment target hotels, ryokans and ancillary facilities into each brand from various perspectives. HRR aims to obtain portfolio diversification efficacy and stabilize earnings through investments not only in the singular brands of the Hoshino Resorts Group but also in “HOSHINOYA,” “Hoshino Resorts KAI,” “Hoshino Resorts RISONARE” and other properties of Hoshino Resorts Group whose size, price settings and target customer base vary, in addition to urban tourism properties which are operated by operators other than Hoshino Resorts Group, other properties operated by outside operators and overseas properties in which the Hoshino Resorts Group is engaged.

In addition, HRR will continue consideration of investment in properties operated by Hoshino Resorts Group which includes the main brand properties and properties with other brands as urban tourism properties operated by operators other than Hoshino Resorts Group and other properties operated by outside operators going forward.