Costs and the Big Picture Before Opening a Simple Lodging Business in Hokkaido
Opening a simple lodging business (kan’i shukusho) involves a wide range of costs, from acquiring a property to obtaining permits, completing interior renovations, and purchasing furnishings. In Hokkaido, inbound demand remains strong in popular tourist areas such as Niseko, Furano, and Sapporo, and more people are considering opening simple lodging facilities there. However, few people have an accurate grasp of how much capital is actually required or what steps need to be taken.
This article walks through the concrete steps for opening a simple lodging business in Hokkaido in chronological order, with numerical cost estimates for each stage. It’s designed to give anyone planning to open a facility a realistic picture of both the financial and operational planning involved.
Note that a simple lodging facility is a type of accommodation that requires an operating license under the Hotel Business Act. This is a different system from registered housing under the Private Lodging Business Act (the “minpaku law”), and it comes with the major advantage of having no cap on annual operating days. That said, the hurdles to opening are correspondingly higher, so let’s go through each step carefully.
Step 1: Developing a Business Plan and Choosing a Location
The first task is to develop a business plan that defines which area you’ll operate in and what type of guests you’ll target. Because Hokkaido is so vast, peak seasons and guest demographics vary greatly by area. Central Sapporo can expect both business travelers and tourists year-round, but property acquisition costs are higher there. Niseko, on the other hand, can command high rates thanks to winter skiers, but securing decent occupancy during the summer becomes a challenge.
At the business planning stage, you should pin down five specific items: target guest demographic, projected occupancy rate, average nightly rate per room, the ceiling on initial investment, and the payback period. For example, if you’re planning a 10-room simple lodging facility in a downtown Sapporo entertainment district, assuming an average room rate of ¥6,000 and a 70% occupancy rate, monthly revenue would come to roughly ¥1.26 million. From there, you weigh the profit after deducting operating costs against your initial investment to judge whether the business is viable. If this stage isn’t examined carefully enough, you’ll end up having to redo work later on, incurring unnecessary costs.
Step 2: Acquiring a Property and Checking the Zoning District
Choosing a Property and Estimated Acquisition Costs
Properties used for simple lodging facilities can be acquired through new construction, purchase of an existing building, or leasing. In Hokkaido, a used whole-building property in central Sapporo typically runs ¥20 million–¥50 million, while a used single-family house in the suburbs runs about ¥5 million–¥15 million. If you lease a property, deposits, key money, and guarantee deposits typically add up to 6–12 months’ worth of rent as an initial cost. For a property with monthly rent of ¥200,000, that means initial costs alone could run ¥1.2 million–¥2.4 million.
Checking Zoning Districts and the Building Standards Act
Before deciding on a property, you must always check zoning restrictions. Under the City Planning Act, simple lodging facilities licensed under the Hotel Business Act cannot operate in certain zoning districts. Specifically, operating a lodging business is generally prohibited in Category 1 Low-Rise Exclusive Residential Districts, Category 2 Low-Rise Exclusive Residential Districts, Category 1 Medium-to-High-Rise Exclusive Residential Districts, Industrial Districts, and Exclusive Industrial Districts. There have been actual cases of people purchasing a property only to discover afterward that operation isn’t allowed, so be sure to confirm the zoning district before signing any property contract. In Sapporo, you can check zoning information at the City Planning Division of City Hall or on the City of Sapporo’s website.
Step 3: Design, Interior Renovation, and Fire Safety Equipment
Estimated Interior Renovation Costs
To operate as a simple lodging facility, the property must meet the structural and equipment standards set by the Hotel Business Act and local ordinances. In Hokkaido, guest room floor space must total at least 33 square meters (or at least 3.3 square meters per person if there are fewer than 10 guests). Whether a front desk is required varies by municipality, but in Hokkaido a front desk or an equivalent facility is generally mandatory.
Interior renovation costs vary widely depending on the property’s condition and scale, but renovating a used single-family house into a roughly 5-room simple lodging facility typically costs ¥3 million–¥8 million. Renovating an entire building can cost ¥10 million or more, sometimes exceeding ¥30 million. Specific line items include partition work for guest rooms, adding toilets/sinks/bathrooms, plumbing work, electrical wiring, insulation work (especially important in Hokkaido), and interior finishing. Because Hokkaido is a cold-climate region, insulation and heating equipment costs tend to run higher than in mainland Japan.
Fire Safety Equipment Installation and Costs
Simple lodging facilities are classified as “inns, hotels, and lodging houses” under the Fire Service Act, which requires the installation of automatic fire alarm systems, guide lights, and fire extinguishers. Depending on floor area and number of stories, sprinkler systems may also be required. Installation costs run roughly ¥300,000–¥800,000 for an automatic fire alarm system, ¥100,000–¥300,000 for guide lights, and ¥5,000–¥10,000 per fire extinguisher. If a sprinkler system is required, expect an additional ¥1 million–¥3 million or more.
Before starting construction, it’s important to submit a “Notification of Commencement of Use of Fire Prevention Object” to the local fire department and consult with them in advance about the required equipment. If the fire department’s inspection turns up deficiencies, additional construction work will be needed, delaying your opening schedule. Coordinating with a fire safety equipment contractor from the design stage and consulting with the fire department while blueprints are still in progress can minimize the need for rework.
Step 4: Applying for a Hotel Business Operating License
Where to Apply and Required Documents
Applications for a simple lodging operating license are submitted to the public health center that has jurisdiction over the property’s location. In Hokkaido, this means the Sapporo City Public Health Center for properties in Sapporo, the Asahikawa City Public Health Center for properties in Asahikawa, and the Health and Welfare Department of the relevant regional promotion bureau for other areas. Key required documents include the operating license application form, drawings showing the facility’s structure and equipment (floor plans and elevation drawings), a location map of the surrounding area, a copy of the building’s completion inspection certificate, a fire code compliance notice, and water quality test results (if using well water).
It’s standard practice to consult with the public health center before submitting your application. During this consultation, you bring your drawings and have them checked against the structural and equipment standards. These preliminary consultations are free and can be held multiple times. Filing an application without a preliminary consultation significantly raises the risk of it being sent back due to missing documents or non-compliance with standards, so be sure to take advantage of this step.
Application Fees and Review Period
The application fee for a hotel business operating license is ¥22,000 in Hokkaido (amounts may vary by municipality). After you submit your application, a public health center official will conduct an on-site inspection, and once compliance is confirmed, a license will be issued. The review period is typically 2–4 weeks, but it can take longer during busy periods or if documents need correction.
Separately from the application itself, if you hire a licensed administrative scrivener (gyoseishoshi) to handle the application process on your behalf, fees typically run ¥100,000–¥250,000. Because Hotel Business Act applications involve numerous documents, drawing preparation, and coordination with various authorities, first-timers may find it worthwhile to consider hiring a professional.
Step 5: Purchasing Furnishings and OTA Registration
Furniture, Appliance, and Supply Costs
Once you’re on track to obtain your license, it’s time to furnish the guest rooms with furniture, appliances, and amenities. Estimated per-room costs include ¥30,000–¥80,000 for beds and bedding, ¥10,000–¥30,000 for a table and chairs, ¥20,000–¥40,000 for a television, ¥50,000–¥100,000 for an air conditioner (if not already installed), and ¥10,000–¥20,000 for curtains and lighting. Add amenities like towels and shampoo, plus cleaning supplies, and you’re looking at roughly ¥150,000–¥300,000 per room. For a 5-room facility, that’s ¥750,000–¥1.5 million, and for a 10-room facility, ¥1.5 million–¥3 million.
In Hokkaido, heating equipment is a critical consideration. Many properties use kerosene-fired central heating, but if the equipment is old, the boiler may need to be replaced, which would add another ¥500,000–¥1 million. In areas with a high concentration of international guests, reliable Wi-Fi is essential — budget roughly ¥50,000–¥150,000 for a commercial-grade Wi-Fi router and line installation.
OTA Registration and Marketing Preparation
Listing your property on OTAs (online travel agencies) such as Booking.com, Airbnb, Rakuten Travel, and Jalan.net is a lifeline for attracting guests. Registering with these platforms is free, but a commission is charged whenever a booking is completed. Commission rates vary by platform: Booking.com charges 12–15%, Airbnb charges 3% to the host (plus a guest-side fee), and Rakuten Travel charges roughly 8–10%.
Hiring a professional photographer for your OTA listing photos typically costs ¥30,000–¥80,000, but since photo quality directly affects booking rates, it’s an investment worth making. A simple company website can be built for roughly ¥100,000–¥300,000. Right after opening, most bookings will come through OTAs, but once your operation is up and running, increasing direct bookings through your own website can help reduce commission costs.
Step 6: Building an Operating System and Ongoing Costs
Labor and Cleaning Costs
Running a simple lodging facility involves day-to-day tasks such as check-in support, cleaning, linen changes, and guest inquiries. If the owner handles everything alone, labor costs can be kept low, but this becomes impractical as the facility grows. Outsourcing cleaning to an outside vendor typically costs ¥3,000–¥6,000 per room, per visit. For a 5-room facility operating 20 days a month, cleaning costs alone would run ¥300,000–¥600,000 per month.
Linens (sheets, towels, etc.) can either be laundered in-house or outsourced to a linen supply company. Using a linen supply service typically costs ¥300–¥600 per set. In rural areas of Hokkaido, the number of available vendors is limited, so it’s important to check vendor availability and pricing in advance.
Utility and Communication Costs
One thing that’s often overlooked when running a simple lodging facility in Hokkaido is the cost of winter utilities. For a 5-room facility using kerosene heating, kerosene costs during winter months (November–March) can reach ¥50,000–¥120,000 per month. Electricity typically runs ¥30,000–¥80,000 per month, and water ¥10,000–¥30,000 per month. Utility costs drop in summer since heating isn’t needed, but it’s wise to budget an average of ¥60,000–¥150,000 per month year-round. Internet service typically costs ¥5,000–¥10,000 per month.
Costs When Using a Property Management Company
If you outsource all operational tasks to a management company, it’s common for management fees to run 10%–30% of revenue (depending on the company and the scope of services outsourced). For monthly revenue of ¥1 million, that translates to ¥150,000–¥250,000 in management fees. The scope of services typically covers guest support, cleaning coordination, OTA management, price adjustments, and handling issues as they arise — making this an effective option for owners who live far away or are running the business as a side venture. When choosing a management company, be sure to compare service areas, track record, fee structures, and responsiveness in emergencies.
Total Cost Simulation for Opening a Facility
Let’s add up the costs from each step covered above for a case where you open a 5-room facility in a used single-family house in Hokkaido. Property acquisition (purchasing a used house) runs ¥8 million–¥15 million, interior renovation runs ¥3 million–¥8 million, fire safety equipment installation runs ¥500,000–¥1.5 million, license application-related costs (including administrative scrivener fees) run ¥150,000–¥300,000, furnishing costs run ¥750,000–¥1.5 million, and OTA listing/website creation costs run ¥150,000–¥400,000. Adding it all up, total initial investment comes to roughly ¥12.55 million–¥26.7 million.
If you lease a property instead, initial costs can be kept to around ¥1.2 million–¥2.4 million, bringing the total down to roughly ¥5.75 million–¥14.1 million. However, with a leased property, monthly rent becomes a fixed cost, so you’ll need to pay close attention to cash flow during periods of low occupancy. Also, don’t forget to budget for Hokkaido’s winter snow removal costs (roughly ¥50,000–¥150,000 per season) and freeze-prevention measures.
Need Help Opening or Running a Simple Lodging Facility? Contact Stay Buddy Inc.
Opening a simple lodging facility requires specialized knowledge and experience at every stage — from selecting a property to obtaining a license, designing the interior, and building an operating system. Hokkaido in particular has cold-climate-specific equipment requirements and fluctuating tourist demand depending on the area, and costs can easily balloon if you proceed without local knowledge.
Stay Buddy Inc., a minpaku property management company, provides one-stop support from opening assistance all the way through to ongoing property management for simple lodging facilities. We can advise you starting from the business planning stage, coordinate with the various authorities needed for your license application, develop pricing strategies to maximize revenue, and handle day-to-day guest support and cleaning coordination.
We also welcome inquiries at the earliest stages, including cost simulations before opening and assessments of whether a given property is suitable for a simple lodging business. It’s fine to reach out even if you haven’t decided on a specific property yet.
If you’re considering opening a simple lodging facility in Hokkaido, please feel free to contact Stay Buddy Inc. at any time.
