Message from the President

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To our shareholders:

We would like to thank you for your support and patronage. I have been newly appointed as Representative Director and President, Executive Officer on March 27th, 2024. I will do my utmost to fulfill your expectations as I perform my duties.

Regarding 2023:

In 2023, in addition to the improvement in product appeal in each of our business segments, the switch of the status of the novel coronavirus to category 5 under the Infectious Disease Control Law allowed recovery of domestic demand and enhancement of inbound demand, and our unit consumption and occupancy rate (number) in the accommodation department increased significantly in comparison with the previous year.

In our WHG business, propelled by the enhancement of additional value such as breakfast inclusion and the rise in inbound demand, the average per-room rate and occupancy rate rose noticeably, improving our financial results.

In the Luxury and Banquet business, for Hotel Chinzanso Tokyo, the new exposure gained by the hotel garden, such as it being designated among the “Twelve New Scenic Views of the Reiwa Era” upon the 145th anniversary of its creation by Prince Yamagata Aritomo, supported stay plans adding value to the hotel’s assets and facilities, leading to the increase in average per-room rate.

In the Resort business, the Hakone Kowakien Hotel was opened on July 12th. Hakone Kowakien Yunessun underwent a major renovation in which a flowing pool and other facilities were added, and the entire Hakone Kowakien area including previously existing facilities was made more appealing, getting off to a promising start in becoming more accessible to the target audience of families.

As a result, net sales for the Group overall increased 20.7 billion yen from the previous fiscal year to a total of 64.5 billion yen, while operating income increased 10.6 billion yen to 6.6 billion yen, and ordinary income increased 11.5 billion yen to 7.0 billion yen. Net income belonging to our parent company’s shareholders was 8.1 billion yen, primarily due to extraordinary income from the sale of the Hotel Toba Kowakien site.
Additionally, due in part to the structural reforms promoted during the pandemic, net income belonging to our parent company’s shareholders reached a record high since 2021, the year in which sales of fixed assets (extraordinary income) contributed to the amount of 33.3 billion yen.
Among the 150 shares of Class-A preferred stock issued on September 28th, 2021, 50 shares were redeemed (repurchased and cancelled) on December 22nd, 2023.

For 2024, we forecast net sales of 68.7 billion yen, operating income of 6.0 billion yen, and ordinary income of 5.8 billion yen. While we expect an increase in average per-room rates, primarily in the WHG Business, we have also factored in higher personnel costs and a reinstatement of investments that had been limited during the pandemic, leading to increased income and decreased profits in comparison to the previous year, but we are committed to achieving our Midterm Plan 2028 and connecting it to future results.

About Medium-term Plan 2028: “Shine for Tomorrow, to THE FUTURE”:

Although profitability has increased, due in part to the structural reforms promoted during the pandemic, as mid to long-term goals, we are deeply aware of necessity of building a foundation that is resilient to external factors, and acquiring and training the human resources who will support our business. In consideration of these circumstances, we have constructed a five-year medium-term management plan spanning from 2024 to 2028 in order to realize our long-term vision.

Under the slogan of “Shine for Tomorrow, to THE FUTURE,” we are addressing the important issues of establishing a foundation for sustainable grown unaffected by external factors, acquiring and developing human resources, and building a sound financial base. In addition, we are furthering five strategies: the business strategy, human resource strategy, financial strategy, sustainability strategy, and growth strategy.

○ Establishing a foundation for sustainable grown unaffected by external factors
By efforts such as strengthening the profitability of existing facilities in the Luxury & Banquet and Resort businesses, the company will correct the profit balance that is currently heavily weighted toward the WHG business, and create new businesses. In regard to new openings of WHG business locations, we will not limit ourselves to rented locations, but rather will diversify opening formats including asset acquisition, franchises, and management contracts, working to lower the ratio of fixed rent locations.

○ Acquiring and developing human resources
We consider response to the labor shortage caused by the decline in the working population and the rapid recovery in demand for lodging to be an urgent issue, and will work to acquire and develop human resources by focusing on strengthening both recruitment and education. While readying a method to stably hire management and specialized personnel and develop the work environment, we will establish a new personnel policy, and use the system to appropriately place and train personnel, retaining them in order strengthen the capabilities of our organization.

○ Building a sound financial base
In order to maintain the majorly improved earning capacity, we will make aggressive investments contributing to earnings growth, and will work to achieve both capital reinforcement and early redemption of preferred stock.

The first three years of the five-year plan are set as the “foundation-building phase,” in which we will invest in human resources and improve added value and productivity while addressing challenges in each business. At the same time, we will seek to build a financial foundation while maintaining an equity ratio of 25%. We have set the last two years of the plan as the “revenue growth phase,” and in 2028, the final year of the plan, we seek to expand the number of locations in the WHG and Resort businesses, improve the performance of Hotel Chinzanso Tokyo, and launch new businesses while also improving the capital adequacy ratio.

As indicators for profitability, we have set net sales, operating income, operating margin, and ROE, and intend to maintain these at 80 billion yen, 8 billion yen, 10% profit margin, and 10% ROE, respectively. As for capital investment, our investment in fiscal year 2023 was 5.2 billion yen, but we plan to invest a total of 35 billion yen over the five-year period through 2028, while keeping investment within the scope of operating cash flow. In order to redeem preferred stock and reduce interest-bearing debt while increasing retained earnings, maintaining an equity ratio of 25% or higher during the period the plan, we will appropriately manage financial stability. (For details on the Medium-term Plan 2028, please see pages 5 and 6.)

By using the experience of overcoming the pandemic as a valuable asset, we will steadily carry out our medium-term management plan, endeavoring to meet expectations. We thank our shareholders for their support and patronage, and ask for their continued support in the future.

Shinsuke Yamashita
Representative Director and President,
Executive Officer
Fujita Kanko Inc.

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