[Part 2] Business Succession in Family-Run Regional Ryokan: Conditions for Successful Family and Third-Party (M&A) Succession

*This is Part 2 of a two-part article. Read Part 1 →

6. What Do Prospective Acquirers Value in a Ryokan?

Companies considering the acquisition of a ryokan do not evaluate only the current market value of the land and buildings. Even if the facilities are aging and the property's appraised value is low, they may identify future business value in factors such as the destination's reputation as a tourist spot, transportation access, the hot springs and rights to use them, nearby dining, transportation, and experiential activities, as well as the trust and business relationships built up in the local community.

However, simply possessing these resources does not guarantee that high business value will be recognized. What matters are the post-succession business plan and implementation structure—specifically, whether the property can be revitalized into an attractive lodging facility through reconstruction or renovation, whether new customer segments can be developed, whether its rooms can be sold at appropriate prices, and whether a general manager and staff can be secured. Prospective acquirers evaluate not only the scarcity of local resources but also whether those resources can be translated into future cash flow.

To illustrate this point concretely, we will examine Atona and Kyoritsu Maintenance below. These two companies are not presented here as examples of completed third-party succession (M&A) deals involving individual family-run ryokan. Atona represents an "investment and development-oriented" model that combines capital, brand power, and development capabilities with local resources, while Kyoritsu Maintenance represents an "operational infrastructure-oriented" model that standardizes functions such as sales, human resources, and digital transformation (DX). By comparing these two companies, we will examine what capabilities are required of the acquiring party to convert a ryokan's potential value into actual revenue.

6-1. Atona: Commercializing Local Resources Through Capital and Development Capabilities

Atona Co., Ltd. is a joint venture established in 2022 by affiliates of Kiraku and Hyatt. In September 2025, Hyatt, Kiraku, and Takenaka Corporation announced that the "Atona Impact Fund"—a real estate fund dedicated to the Atona brand—had reached its final close with a total of 22 billion yen. The fund invests in the development and renovation of ryokan operated under the Atona brand, aiming to enhance the long-term value of local communities while leveraging rare tourism resources in regional areas [1].

This case is relevant to the discussion in this article because it does not evaluate the value of regional ryokan based solely on the condition of existing buildings or current revenue. By combining hot springs, local cuisine, nature, and culture with international hotel management expertise, brand power, architectural and development capabilities, and investment capital, the initiative seeks to establish a new type of lodging business.

Applied to the succession of family-run ryokan, this demonstrates that even if a building's market value is low, it may still be a viable acquisition target if the location and regional resources—such as hot springs—are rare and the post-renovation business plan is deemed sufficiently profitable.

6-2. Kyoritsu Maintenance: Enhancing Business Value Through Its Operational Infrastructure

Kyoritsu Maintenance operates the "Dormy Inn" business hotel chain and the "Kyoritsu Resort" resort hotel chain nationwide. In its Mid-Term Management Plan, the company has set a goal of expanding its resort business to 5,500 rooms by 2028 and plans to open an average of 3 to 4 new locations annually. Furthermore, the company has identified the following as key growth strategies: setting sales prices in response to demand; attracting international visitors to Japan; optimizing customer acquisition costs and improving labor productivity through DX; and recruiting and developing talent [2].

The lesson to be drawn from the Kyoritsu Maintenance case is that, in order to enhance the business value of a ryokan after succession, an operational infrastructure is necessary to continuously support sales, reservation management, pricing, recruitment, staff development, and facility management. In small ryokan in particular, operational responsibilities tend to be concentrated on the owner or general manager. In third-party succession, it is crucial to combine the acquiring company's sales network, personnel, systems, and financial management mechanisms while respecting the experience of existing employees and their relationships with the local community.

6-3. How Should Prospective Acquirers Be Selected?

The cases of Atona and Kyoritsu Maintenance demonstrate that the business value of a regional ryokan is not determined solely by local resources. What matters is whether the ryokan can generate stable profits by combining resources such as hot springs and location with capital, development capabilities, brand, sales capabilities, human resources, and operational know-how.

Therefore, in third-party succession, the successor should not be selected based solely on the transfer price or the financial strength of the prospective acquirer. It is necessary to make a comprehensive assessment of whether the acquirer understands the value of local resources, can execute the necessary capital investments, can appoint an operations manager after the succession, can drive reforms while maintaining the motivation of existing employees, and can build long-term relationships with the local community. Only when the acquirer has these capabilities can the latent value of a ryokan—which was not fully appreciated prior to the succession—be realized as sustainable business value.

However, realizing a ryokan's potential value does not simply mean improving the profitability of a single ryokan. Whether the value generated from the region's tourism resources can be returned to the community—through employment, procurement, and referring customers to local businesses—is also a crucial perspective when evaluating a successor. In the next chapter, we will examine this point in relation to the "Yado" (accommodation) challenge identified by the Japan Tourism Agency.

7. The Japan Tourism Agency's "Yado" (Accommodation) Challenge and Regional Economic Circulation

IIn its "Action Plan for Creating High-Value-Added Inbound Tourism Destinations in Regional Areas," formulated in 2022, the Japan Tourism Agency organized the challenges involved in attracting high-value-added travelers to regional areas from five perspectives: "Uri" (attractions), "Yado" (accommodation), "Hito" (personnel), and "Kone" (connections), with "Ashi" (transportation) added as a fifth. Among these, "Yado" refers to lodging facilities that offer high quality not only in terms of physical infrastructure—such as buildings and amenities—but also in terms of service, and that allow guests to experience the region's unique culture and stories through their stay. The plan points out that such lodging facilities are particularly scarce in regional areas [3].

The Japan Tourism Agency also states that in order to promote the development of high-quality lodging facilities, local governments, regional financial institutions, local businesses, and tourism operators must play central roles. On the other hand, in many regions, tourism strategies have not been formulated or are not sufficiently shared among stakeholders, so it remains unclear what kind of lodging facilities the region actually needs. Furthermore, the plan identifies as challenges a lack of information on potential sites for lodging facilities and surrounding infrastructure, target customer segments, and facility concepts and scale, as well as a lack of the knowledge and networks needed to select development operators.

Although the plan primarily targets the development of lodging facilities aimed at attracting high-value-added travelers, these points also apply to the business succession of existing ryokan. If the succession of a ryokan is viewed solely as a matter for a single company, and the successor is determined based solely on the transfer price or the financial strength of prospective acquirers, there is a risk that the ryokan will no longer align with the region's tourism strategy after the succession. When proceeding with business succession, it is necessary to clarify what role the ryokan has played within the community and what role it should play after the succession.

The key here is neither to uniformly prioritize succession to local companies nor to exclude outside capital. Rather, it is to determine whether the successor can improve the ryokan's profitability while maintaining and developing relationships with local tourism resources and businesses. Decisions should not be based solely on the location of prospective acquirers or the nature of their capital; instead, it is necessary to specifically verify the post-succession business plan, operational structure, employment policies, and policies for collaboration with the local community.

In addition, the property owner and the ryokan operator do not necessarily have to be the same entity. For example, one possible model involves an external investor owning the land and buildings, while a company jointly established by a local business and a specialized management firm operates the ryokan. By separating the roles of real estate ownership, ryokan management, day-to-day operations, and regional marketing—and clarifying the respective responsibilities—it is possible to maintain ties with the local community while leveraging external capital and operational expertise.

Ryokan are linked to many local industries, including food ingredients, sake, crafts, transportation, food and beverage, experiential activities, and finance. Therefore, when evaluating the business succession of a ryokan, it is necessary to assess not only the ryokan's individual sales and profits but also the extent of the economic impact generated within the region—through the maintenance of local employment, procurement from local sources, and the referral of guests to nearby restaurants and experience providers. What matters is not whether the successor is a local or external company, but rather the extent to which the value created after the succession is returned to the local community.

Policies regarding this division of roles with the community and regional economic circulation cannot be realized simply by stating them as the principles of the stakeholders. They must be incorporated into the post-succession business plan and operational structure, with clear implementation steps, responsible parties, and goals. Particularly in third-party succession, it is crucial to incorporate these elements into the post-merger integration (PMI) (*1) process following the succession.

(*1) PMI (Post-Merger Integration): The process of advancing management integration, building trust with stakeholders, and integrating operations following the completion of an M&A transaction.

8. Post-Succession Management Structures and PMI: The Key to Success or Failure

Business succession is not complete merely when management control is transferred. It marks the starting point for efforts to concretely implement the management policies and division of roles with the local community—as outlined in the previous chapter—in post-succession management and daily operations, thereby establishing a new management structure. In intra-family succession, the key challenge is whether the successor can make decisions without being constrained by traditional management methods, while preserving existing relationships of trust. It is not enough to simply introduce AI and DX; it is also necessary to integrate the property management system (PMS), accounting, and customer data to monitor metrics such as average room rate, occupancy rate, RevPAR (*2), food cost, labor productivity, and direct sales ratio on a monthly basis, and to use this data to drive improvements. In particular, by combining a multilingual company website, customer relationship management, social media, and local experiences to directly appeal to international customers, ryokan can build customer relationships as their own assets while reducing excessive reliance on OTAs (Online Travel Agencies).

(*2) RevPAR (Revenue Per Available Room): Room revenue per available room. It is calculated by dividing total room revenue by the number of available rooms.

The basic approach is the same in third-party succession, but the process becomes more challenging due to the need to integrate different organizations. It is crucial to determine whether capable general managers and managers can be appointed, whether operations can be transformed while preserving the employment and professional pride of existing employees, and whether good relationships can be established with tourism associations, DMOs, chambers of commerce, financial institutions, and other ryokan operators. In some cases, the previous owner remains involved as an advisor for a certain period. However, if the duration of their involvement, their authority, and the channels of communication are ambiguous, it becomes unclear who the ultimate decision-maker is. It is essential to design a role that allows the previous owner's expertise and connections to the local community to be passed on without hindering the new management's decision-making.

The Small and Medium Enterprise Agency's "SME PMI Guidelines" organize the areas to be addressed after an M&A into three: management integration, building trust, and operational integration [4]. In third-party succession for ryokan, it is too late to begin considering these matters only after the contract is signed. Starting from the basic agreement stage, it is necessary to specify the actions to be taken, the responsible parties, and the required funds across two timeframes: the first 100 days after succession and the subsequent three years.

What should be avoided during PMI is proceeding with the contract without having decided on the personnel who will lead on-site operations after the succession, while spending time deliberating on the transfer price and renovation plans. At small ryokan, the capabilities of a single general manager have a significant impact on revenue, employee retention, and relationships with the local community. It is necessary to select an operations manager in parallel with the search for prospective acquirers and to incorporate the manager's possible start date into the business plan.

8-1. Business Plan and Cash Flow Plan

Highly accurate business and cash flow plans form the basis for decision-making in both intra-family succession and third-party succession (M&A). However, a single, overly optimistic forecast is insufficient. At a minimum, three scenarios—base case, downside, and renovation delay—must be developed to verify not only revenue projections but also whether there will be any periods of cash shortfall. In some cases, the renewal of hot spring facilities, roofs and exterior walls, kitchens, fire safety equipment, air conditioning, and elevators may take priority over guest room renovations. It is essential to reflect loan repayments, taxes, working capital, losses during periods of suspended operations, and even recruitment and training costs in the monthly cash flow plan, and to continuously update it based on actual results.

10 Essential Items to Prepare Before Business Succession:
①  Monthly trial balances for the last three years ② Revenue and cost of goods sold by department ③ Revenue and commissions by booking channel ④ Staffing, wages, and shifts ⑤ Loans, collateral, and personal guarantees ⑥ Real estate, leases, and boundaries ⑦ Hot spring usage rights and spring source facilities ⑧ Permits, licenses, laws, fire safety, and sanitation ⑨ Repair and capital expenditure plans for the next 10 years ⑩ Map of PMI stakeholders, including local stakeholders, business partners, and the previous owner

9. Conclusion

Going forward, family-run ryokan in regional areas are likely to face increasing opportunities to consider both intra-family succession and third-party succession. The expansion of inbound tourism to regional areas is introducing new evaluation criteria even for small ryokan that have traditionally been unlikely acquisition targets. However, a recovery in demand alone will not resolve issues such as aging facilities, debt, labor shortages, and declining profitability. To translate potential business value into actual revenue, it is essential to have personnel capable of managing the business and a financial foundation strong enough to execute necessary investments.

In intra-family succession, the key is not simply to continue managing the business exactly as the previous generation did. Rather, it involves using the inherited business resources as a starting point to test new initiatives within acceptable limits and adapt to an uncertain environment while collaborating with local businesses and external talent. This approach can be described as the practice of "effectuation." On the other hand, in third-party succession, success is not determined solely by the attributes of the prospective acquirer or the transfer price. Post-merger integration (PMI)—which consists of management integration, building trust, and operational integration—as well as local networks and regional economic circulation must be designed before the succession takes place.

Business succession for a ryokan is not completed simply by transferring shares, real estate, or the business name. It is an effort to redesign the very structure of management—determining what to preserve, what to change, and who will operate the business under what organizational framework. The blueprint for this consists of a succession policy that clearly defines the intentions and conditions of the parties involved, as well as business and cash flow plans that are updated based on actual performance. In intra-family succession, a transition plan is necessary to gradually transfer management authority and roles. In third-party succession, a PMI plan covering the first 100 days after the succession and the subsequent three years is also crucial. By preparing these elements before the succession takes place, the inn that the family has safeguarded can be passed on to the next generation as a business that supports the future of the local community.

References and Sources 
[1] Hyatt Hotels Corporation (2025) Atona Impact Fund final close (September 11, 2025) (Last accessed: September 2, 2026)
[2] Kyoritsu Maintenance, "Long-Term Vision and Mid-Term Management Plan" and "CFO Message" (Last accessed: September 2, 2026)
[3] Japan Tourism Agency (2022), "Action Plan for Creating High-Value-Added Inbound Tourism Destinations in Regional Areas" (Last accessed: September 2, 2026)
[4] Small and Medium Enterprise Agency (2022), "SME PMI Guidelines: For Successful SME M&A" and related practical tools (Last accessed: September 2, 2026)