Earnings Call: Q2 2026

Jun 15, 2026

Summary

26th-period DPU beat forecast at ¥6,832, with lease revisions supporting further growth. The ¥7,000 DPU target is delayed one year amid Osaka market softness, while tourism demand and regional expansion remain long-term opportunities.

Hello, everyone. My name is Kenji Akimoto from the Hoshino Resort Asset Management. Thank you very much for taking the time to watch the results presentation for the 26th fiscal period of Hoshino Resorts REIT. Before moving to the main agenda, I would like to begin with an overview of Japan's tourism market. In March of this year, the Japanese government approved the 5th Basic Plan for the Promotion of a Tourism-Oriented Nation. Not every element of the plan will necessarily be implemented exactly as envisioned. However, it provides a clear indication of the overall direction of tourism policy in Japan. I would like to highlight three key points. First, tourism has been designated as a strategic industry. Inbound visitor spending reached JPY 9.5 trillion in 2025. In comparison with export industries, this places tourism second only to the automotive industry. The new plan sets targets of 60 million inbound visitors and JPY 15 trillion in visitor spending by 2030, compared with 42.68 million visitors in 2025. Achieving these goals will require a more geographically diversified tourism model. Demand will need to extend beyond metropolitan areas and into regional destinations across Japan. This objective is clearly reflected in the plan. Second, domestic travel spending by Japanese travelers reached a record JPY 26.8 trillion in 2025. In response, the government raised its 2030 target significantly from JPY 22 trillion to JPY 30 trillion. Even if spending were to remain at the current level of JPY 26.8 trillion, the domestic market would remain sizable, and domestic travel continues to be the most important segment of Japan's tourism industry. Third, the plan identifies the tourism industry's low labor productivity as a key challenge and anticipates initiatives to improve productivity. One measure included in the plan is the leveling of domestic travel demand throughout the year, a topic advocated by Hoshino Resorts representative, Yoshiharu Hoshino, for many years. As Japan's population declines, maintaining the vast scale of the domestic tourism market will require addressing challenges arising from the concentration of demand on a few dates in the year. Taken together, these three points suggest that the expanding demand in regional destinations, which have limited international recognition, will be essential to the continued growth of Japan's tourism industry and the achievement of its long-term goals. Many initiatives will be implemented to stimulate both inbound and domestic demand in these regions. The majority of the properties owned by the REIT are located outside the major metropolitan areas, and by aligning with regional and national tourism policies, we hope to contribute to the continued development of Japan's tourism industry. In today's presentation, we will cover four topics in sequence: the financial summary, operational highlights, the future operations strategy, and our sustainability initiatives. To begin, Kenji Akimoto will present chapter 1, the financial summary. Page 6 presents the financial summary for fiscal April 2026, our 26th fiscal period. Our initial forecast for distribution per unit was JPY 6,500, a significant increase from the previous period. This reflected inclusion of demand from the Osaka Expo in the variable rent calculation period. In addition, performance at the b hotels and our roadside hotels exceeded expectations. As a result, the DPU came in at JPY 6,832, significantly above our forecast. Winter demand has traditionally been a challenge for the roadside hotels. However, our strategy of capturing corporate demand has taken effect. As a result, our DPU exceeded the pre-COVID peak one period earlier than anticipated at the time of our previous earnings announcement. Other key metrics are shown on the slide. Page 7 shows trends and forecasts for DPU. We have already discussed the 26th fiscal period results. For the 27th fiscal period, we forecast a DPU of ¥6,700, ¥40 above our previous forecast. The primary growth driver is the new leasing agreement for three Comfort Hotel properties. The revised agreements change the rent structure to a combination of fixed and variable rent. This should contribute by ¥205 per unit, even with only four months' rent contribution this fiscal period. On the cost side, we expect drags of around ¥46 from a higher interest expense, reflecting assumed interest rate hikes in June and December 2026, and around ¥105 from higher fixed asset disposals and repair costs. For the 28th fiscal period, we forecast a DPU of ¥6,850, up ¥150 from the 27th fiscal period. The growth assumes that downward pressure from the seasonal nature of rental income will be outweighed by the sale of Sol Vita Hotel Naha. On the other hand, both demand and prices in the Osaka market have recently softened. This owes to a reactionary decline in lodging demand after the end of the 2025 expo, as well as the decline in visitors from China. We expect this to affect properties such as OMO7 Osaka and the Grand Prince Hotel Osaka Bay. Page 9 presents the operating results summary by brand. The slide shows results for the past three years, as well as our outlook for the coming year. For properties operated by Hoshino Resorts, RevPAR increased by 2.2% year-on-year. While growth appears to have slowed, we believe this reflects temporary factors such as earthquake rumors that originated in Hong Kong last summer, the effects of natural disasters, and the concentration of leisure demand in Osaka during the expo period. We conservatively forecast RevPAR growth of 2.8% over the next year. The right side shows our externally operated properties. RevPAR increased by 10.8% year-on-year on strong inbound demand, as well as demand generated by the Osaka Expo. Over the coming year, while expo-related demand will fade, we believe this will be offset by strong performance at properties such as the Grand Hyatt Fukuoka. For consistency in historical comparisons, properties acquired after May 2023, including OMO7 Osaka and the b Asakusa, are excluded from these figures. Please turn to page 11. This slide provides an overview of our management strategy in response to changes in the operating environment. Starting with the external environment, unit prices across the J-REIT market remain under pressure, and some expect additional policy rate hikes in Japan. On the cost side, rising energy prices and labor costs continue to weigh on profitability. While inbound demand could be volatile in the near term, medium to long-term growth potential remains significant. In addition, AI is creating new opportunities to enhance the booking experience and improve operational efficiency. Against this backdrop, we believe the market is looking for a clear path towards sustainable distribution growth, supported by tangible results. To meet these expectations, we will leverage both Hoshino Resorts' operational expertise and our asset management capabilities to the fullest extent. We will thereby continue to enhance the earnings power of our assets while also pursuing future external growth from both a short-term and a medium to long-term perspective. In the short term, we will focus on underperforming properties, strengthen inbound demand capture, increase rental income through lease revisions, and promote CapEx with short investment payback periods. Over the medium to long term, we will pursue sustainable distribution growth through both internal growth, leveraging our operational expertise, and external growth, backed by our extensive property pipeline. I will discuss these initiatives in more detail later. Page 12 outlines recent factors affecting distributions and the initiatives that will support future growth. The chart at the top illustrates our roadmap for DPU growth and lays out the path from the current level above pre-COVID peak toward our target of JPY 7,000, and over the medium term, JPY 8,000. I will now walk through the forecasts. The factors behind the changes in the 27th and 28th fiscal periods are shown on the slide. If we exclude one-offs, such as gains on the sale of Sol Vita Hotel Naha, the DPU in the 29th fiscal period would be around JPY 6,000. From there, we target growth to DPU of JPY 7,000 by the 31st fiscal period. The attainment of our JPY 7,000 DPU target has been pushed back by one year compared with our previous plan, mainly because of the Osaka market. During the 2025 Expo, we captured demand to drive revenue growth. However, the post-Expo fallback, coupled with a decline in visitors from China, has intensified price competition in Osaka. That said, we believe many of these factors are temporary. We are already seeing progress attracting demand from other countries. We will continue with turnaround measures on OMO7 Osaka and the Grand Prince Hotel Osaka Bay. At the same time, we expect continued growth from strong-performing properties such as KAI Enshu and Grand Hyatt Fukuoka. We therefore remain committed to achieving our target DPU of JPY 7,000, although the timing has been delayed by one year. Next, I, Takahashi, will explain the initiatives to increase rental income. Please turn to page 13. The upper section covers rent increases achieved through lease revisions. We have signed new lease agreements for three Comfort Hotel properties aimed at increasing rental income. The existing agreements comprised only fixed rents. Under the new structure, rent will be linked to GOP. Following discussions with the tenant, GREENS, we were able to bring implementation of the new agreements forward before the expiration of the current leases. We therefore expect rental income to increase from the 27th fiscal period onward, boosting DPU by around JPY 205 in the 27th fiscal period, and around JPY 130 in the 28th fiscal period. Once fully implemented, we anticipate an annual boost of around JPY 420. On the lower section of the slide, we continue with conversions into multi-occupancy rooms to capture investment opportunities. We have combined two guest rooms into one large room and introduced loft beds and sofa beds to increase room capacity. Following the renovations, RevPAR increased by 29.7% at the b Akasaka and by 49.5% at the b Asakusa. Over the past two fiscal periods, we have deployed CapEx of around JPY 100 million in these projects. We will continue to capture investment opportunities that contribute to higher profitability and earnings growth. Page 14 illustrates the virtuous cycle of operations centered on customer satisfaction. At Hoshino Resorts, we have developed a unique growth cycle in which CapEx deployment, the creation of attractive experiences, and public relations activities reinforce one another, helping drive sustainable earnings growth. A specific example is shown on the lower left side. This is OMO7 Osaka. The OMO brand offers the Local Rhythm Night, designed to provide guests with an exciting nighttime experience while enjoying the unique rhythm of each destination. At OMO7 Osaka, this program underwent a major renewal last November. The concept was to create a space that captures the energy and vibrancy of Osaka. The revamp raised media exposure, attracting more guests specifically interested in the program. By delivering experiences that met those guests' expectations, customer satisfaction also improved, resulting in a positive cycle. The percentage of guests selecting the highest satisfaction rating, very satisfied, increased significantly from 47% to 62%. The right-hand side shows the example of HOSHINOYA Okinawa. I will not go into the details here, but this property demonstrates a similar cycle driven by enhanced public relations activities, driving steady growth in occupancy. Page 15 highlights a replicable CapEx model that supports revenue growth. By making consistent investments that express each property's core concept, we have achieved sustained growth in ADR. We will continue to roll out successful initiatives across the portfolio, aiming thereby to increase the probability of ADR growth across the entire portfolio. As examples of this approach, KAI Hakone carried out guest room renovations designed to offer guests an experience of being immersed in the history of the Tokaido route. We have also consistently carried out renovations at KAI Enshu that leverage the appeal of Japanese tea since 2022. Both investments have contributed to higher ADR and improved guest satisfaction. We are currently renovating KAI Matsumoto in preparation for its reopening in the summer of 2026. In addition to supporting ADR growth, the investment aims to optimize operational efficiency. We will provide a further update in future earnings presentations. On this page, we will discuss the inbound tourism ratio. Among properties operated by Hoshino Resorts, the inbound guest ratio is rising at HOSHINOYA Okinawa, and among our externally operated properties, it is rising at ANA Crowne Plaza Hiroshima and ANA Crowne Plaza Kanazawa. Of course, part of this reflects broader market trends. However, in the case of HOSHINOYA Okinawa, we believe the increase also reflects the success of Hoshino Resorts' marketing initiatives, as discussed on page 14. In contrast, both external and Hoshino-operated properties in Osaka have experienced a decline in their inbound guest ratio, driven mainly by the decrease in visitors from China. That said, we believe this is largely an Osaka-specific phenomenon, with inbound demand for Japan as a whole largely resilient. As dependence on China declines, we expect the inbound guest ratio in Osaka to recover naturally over time. At this point, we have a message for you from Yoshiharu Hoshino, representative of Hoshino Resorts. Please watch the video. Hello, this is Yoshiharu Hoshino of Hoshino Resorts. We had 42.7 million international guests 2025. It was a sharp increase from the corona pandemic period, but if you look at the last 15 years, the growth rate is decreasing. It is very important to think which way we are going, and Hoshino Resorts believes that the international guest figure for Japan 2026 would be totally flattened out and no growth. This is what happened between January and March of this year compared to 2025. The number of guests from China decreased a little bit more than we expected, but as we expected, the international markets from other countries increased significantly. The total figure would be about the same as 2025. This trend will probably continue throughout 2026. This is why we believe that the number will be flattened out and will be the same as 2025 for this year. It is not only bad news. After the rapid growth of international guests, we do have some problems in different areas, so it would be a good time for us to think and improve our operations and improve our industry during this flat period to get ready for the next growth. There are two things we need to do for the next two growth. One is we need to solve the problems of this airport capacity. Those major airports are very close to the capacity limit, but there are so many airports in local areas, we should be using those areas to accept more international guests. At the same time, five major prefectures are accepting 70% of the total guests. 42 prefectures with the lesser-known destinations, we should be promoting those areas so that we could accept. This is a very important policy, and also the government understands it and working with us to accomplish this goal. Most of our facilities are located in local areas of Japan, lesser-known destinations. The last 10 years, we have been having the press conferences in major cities in Asia, and I was in Paris and London to promote the new facilities and also existing facilities. One of the new facilities in Yamaguchi Prefecture, which is one of the always bottom five in terms of the accepting international guests, is selected as the world's greatest places for 2026, and this will be published in July. If you look at those facilities, KAI Hakone has been very famous internationally, but other KAI facilities are also increasing international guests little by little. The same in city hotels. OMO7 Osaka is one of the most famous cities in Japan, but OMO7 Kochi is always one of the bottom five, but our facility is gradually increasing international guests. At the same time, domestic market is important. Our total industry volume is now second largest in Japan. We have to target domestic market, international market, at the same time. This is why we are putting a lot of emphasis on the reservation system. Services and facilities are important. However, there is so much room for the improvements in the reservation system, in Japanese tourism industries. This is our vision, a more easy access and easy reservations and easy modifications of the reservations on the smartphones. We introduced four services last year, change of the number of guests, room type, and schedule, now available for many facilities with the flexible system. We are introducing meals this year. This is a very large step for us because most of the onsen ryokans and resort hotels, the room comes with the two meals and a fixed price. If you are booking three nights, you are also booking the three meals in the same restaurant, in the same location. This is one of the problems of our industries, and that could also be one of the barriers for the longer stay. In our system, you can choose different locations in each day, and also you can modify the reservation after the booking. We are trying to increase the number of hotels under our management, carrying this flexible system. You can look it up which facilities flexibles are available. This fall, we are introducing the system in most of the OMO facilities. I hope that this will continue improving and should be able to approach our repeaters, and to create more loyalty to our brands. Thank you very much. Thank you for watching. Page 19 outlines our risk management and financing strategies in a rising interest rate environment. We are enhancing our financial management through three key initiatives. The first is the optimization of our funding structure. While long-term fixed-rate financing remains our core approach, we are also utilizing floating-rate borrowings for financing with maturities of three years or under, reflecting the recent increase in funding costs. We also actively manage cash on hand through instruments such as time deposits to achieve efficient funds management. The second initiative is the use of sustainable finance. We have been reducing interest costs through measures such as climate-related financing programs supported by the Bank of Japan and have also taken out sustainability-linked loans. The third initiative is the diversification of debt maturities. By avoiding concentration of repayment dates, we reduce the risk of sharp increases in financing costs and minimize refinancing risk. Through these initiatives, we maintain a stable financial foundation, even in a rising interest rate environment. Page 20 summarizes the measures we have taken to mitigate the impact of rising interest rates. We have been intentionally enhancing our financial foundation since before concerns over higher interest rates emerged. Our initiatives can be grouped into three key objectives. The first is reducing funding costs. We have lowered financing costs through initiatives such as commencing bilateral transactions with Mizuho Bank, utilizing sustainable finance, and issuing investment corporation bonds. This has enabled us to secure funding on more favorable terms than conventional syndicated loans. Investment corporation bonds currently account for 4.9% of our total borrowings, which indicates additional capacity compared to the J-REIT average of around 7%. The second objective is to mitigate the impact of rising interest rates. We have limited interest rate risk during refinancing through a fixed rate debt ratio of over 90%, a diversified debt maturity profile, and by extending the average remaining maturity. At the same time, we believe there is still substantial room to use floating-rate financing, which currently offers a lower funding cost. The third objective is to strengthen our funding platform. We have entered transactions with new lenders and continue to build a stable bank formation. Page 21 highlights our strong financial foundation and the stability of our financing platform. More than 80% of our borrowings are provided by Japan's major banks and the Development Bank of Japan. We have therefore established a stable lender formation. Our LTV is 40.8% on a total asset basis. This is below the J-REIT average of around 46%, allowing us to maintain both financial soundness and flexibility for future acquisitions. For now, we intend to bring LTV to between 42% and 43%. Each additional percentage point represents roughly JPY 4.4 billion of acquisition capacity. In February this year, we also issued our fifth investment corporation bond. We continue to diversify our funding sources and investment corporation bonds now account for 4.9% of our total financing. Next, I would like to discuss our future operating strategy. Page 23 illustrates our long-term vision for the REIT. We continue to hold a medium to long-term target of JPY 300 billion in assets under management. However, our approach is not scale driven. In principle, we plan to conduct public offerings at a price to NAV ratio of one or higher. As mentioned earlier on page 11, when we presented an outline of our overall management strategy in a changing environment, our first priority is to support a recovery in our unit price by steadily increasing distributions and build an environment conducive to future equity offerings. Please turn to page 24. We have been steadily expanding our asset base, and as of 30th of April 2026, our portfolio consisted of 71 properties worth a total of JPY 233.9 billion. Please turn to page 25. Following the acquisition of AQUAIGNIS, the proportion of properties operated by Hoshino Resorts stands at 46.8%. We believe Hoshino Resorts' operational expertise is one of the key drivers of the REIT's growth and intend to continue managing the portfolio with a ratio of over 50%. Please look at the diagram on the left side of page 26. The hotel business is built on three key functions, ownership, operation, and development. In our case, the REIT is responsible for ownership. Hoshino Resorts oversees operations, and the joint fund between Hoshino Resorts and the Development Bank of Japan is responsible for development. This structure allows each party to leverage its respective strengths and creates a distinctive platform for growth. Page 27 presents our pipeline. A preliminary estimate of potentially acquirable properties puts our total pipeline at around JPY 130 billion. We believe this provides sufficient acquisition opportunities for future external growth centered on a DBJ joint fund. We will carefully evaluate acquisitions based on the current market environment. Page 28 outlines Hoshino Resorts' upcoming property openings. We continue to expect a well-balanced rollout across the HOSHINOYA, KAI, RISONARE, OMO, and BEB brands, driving steady expansion in both the number of operating properties and total room capacity. Compared with 2019, the portfolio has increased by 38 properties and 5,562 rooms. One recent highlight is that RISONARE Shimonoseki, a pipeline property, was selected by Time magazine as one of the world's greatest places. Opened in December 2025, RISONARE Shimonoseki has been highly praised for its distinctive design inspired by fugu pufferfish, as well as the wide range of activities that take advantage of its location on the Kanmon Strait. Our pipeline includes highly attractive properties such as this. We believe the continued accumulation of high-quality assets with strong medium to long-term earnings growth potential is one of the strengths of the REIT. Next, I will discuss our sustainability initiatives. The REIT has long been committed to sustainability through efforts such as reducing environmental impact and promoting coexistence with local communities. In recent years, however, issues such as climate change, resource constraints, changes in local society, and labor shortages have become more than simply matters of social responsibility or environmental stewardship. Rather, they increasingly affect property operations, the guest experience, and ultimately, longer term asset value. Hotels and ryokans in particular derive their value from more than the physical buildings themselves. Factors such as energy efficiency, resilience to natural disasters, the use of local resources, and the value of experiences unique to the location all contribute to a property's competitiveness and play a role in maintaining long-term appeal. From this perspective, HOSHINOYA Karuizawa and OMO7 Osaka are facilities with spaces and experiences that are designed around an appreciation of the local characteristics, including the area's natural conditions, resources, history, and ecosystem. We view HOSHINOYA Karuizawa as a representative example of our resort-style properties and OMO7 Osaka as the same for our urban properties. As these examples illustrate, responding to social and environmental challenges is becoming an increasingly important part of our operations. From an environmental perspective, addressing climate change is a crucial issue. Our efforts to reduce carbon emissions in day-to-day operations are closely linked to the management of energy and building systems across our portfolio. In addition to measuring and disclosing metrics such as greenhouse gas emissions and energy consumption, it is important to use this information to improve operations and support investment decisions. For example, by utilizing an internal carbon price or ICP, we can incorporate potential future carbon costs into our investment decisions. This allows us to evaluate the economic benefits of investments in high-efficiency equipment and renewable energy solutions more appropriately. In other words, environmental initiatives should not be viewed simply as additional costs. Rather, they are tools for reducing future risks and enhancing the stability of property operations. We are also expanding our supply chain efforts over a wide range of areas, including new property acquisitions, collaboration with operating partners and suppliers, and working with sustainable aviation fuel. From a social perspective, coexistence with local communities is a key priority. The value of travel is greatly enhanced by the natural environment, culture, cuisine, industries, and people of each destination. Hospitality experiences that make use of these local resources not only enrich the guest experience but also help properties become deeply rooted in their communities. This provides a foundation for long-term competitiveness. In this presentation, we have introduced a conceptual diagram to show how stronger relationships with local communities can enhance asset value. We seek, through our unique operations that leverage these strong relationships, to address social risks such as population decline, weakening regional economies, and the loss of traditional culture, and support a cycle within the local community. One practical example is the rebranding of OMO7 Kochi and its contribution to the local economy and cultural development. By creating hospitality experiences that make effective use of local resources, we can deepen our ties with the community, thereby building a more resilient operating platform and supporting long-term growth in asset value. Finally, for more information on our website renewal and our initiatives for employees, please visit the websites of the REIT and the asset management company. As I have discussed today, sustainability is not simply a collection of environmental initiatives or social contribution activities. Rather, it is an important framework that supports operational stability, enhances the guest experience, strengthens relationships with local communities, and underpins long-term asset value. As a REIT, we also recognize social and environmental challenges as important management priorities, and by addressing them, we aim to sustainably enhance the value of our travel-related assets. That concludes the presentation. Thank you very much for your attention. We sincerely appreciate your continued support of Hoshino Resorts REIT.