How much can you profit from converting a vacant house or villa in Hokkaido into a licensed inn or simple lodging facility?
If you obtain a hotel business license in Hokkaido and operate a vacant house or villa as an accommodation facility, how much profit could you actually generate? Against the backdrop of recovering inbound demand and a domestic travel boom, attention on Hokkaido’s accommodation facilities has been growing year by year. Especially in popular tourist areas such as Niseko, Furano, Otaru, and Hakodate, there are numerous cases of individual owners converting vacant houses into simple lodging facilities and generating annual revenues in the millions of yen.
This article provides a detailed explanation of the profit simulation, initial costs, running costs, and specific points for maximizing profits when operating a vacant house or villa in Hokkaido as a licensed inn (simple lodging business). For those wondering “I’m interested, but will it actually be profitable?”, we’ll share realistic figures to help you decide.
The background and market environment that make the hotel business profitable in Hokkaido
Strong inbound demand and the power of the Hokkaido brand
Hokkaido is an overwhelmingly popular destination among travelers from both Japan and abroad. It consistently ranks near the top on major global travel review sites, drawing diverse demand throughout the four seasons—skiers seeking powder snow, tourists visiting the summer lavender fields, and food travelers enjoying fresh seafood. According to Hokkaido Prefectural Government statistics, the annual number of foreign visitor-nights in the prefecture reached approximately 9 million at pre-pandemic levels, and it is on a recovery trend.
This depth of demand is the greatest advantage of running a hotel business in Hokkaido. Unlike Tokyo or Kyoto, in Hokkaido the fact that an accommodation facility is located in a natural, scenic area away from tourist attractions can itself become an added value. Even an older detached house can be marketed under a concept like “experience rural life in Hokkaido” and command a premium nightly rate in some cases.
Low acquisition costs for vacant houses and villas
Hokkaido is one of the regions in Japan with the highest vacant-house rate. According to the Ministry of Internal Affairs and Communications’ Housing and Land Survey, the vacant-house rate in Hokkaido hovers around 15%. In rural areas, it’s not uncommon to find detached houses available for between 1 million and 3 million yen, and there are even cases of resort condominium units built during the bubble era being sold for just a few hundred thousand yen. Because property acquisition costs can be kept low, investment payback periods tend to be shorter—a distinct advantage unique to Hokkaido.
In addition, some municipalities offer subsidy programs for utilizing vacant houses. Examples include programs that subsidize a portion of renovation costs, or support funds available under migration and settlement promotion frameworks. Taking advantage of these programs can further reduce your initial investment.
Requirements and costs for obtaining a hotel business (simple lodging) license
Requirements for simple lodging business licensing
To obtain a simple lodging business license under the Hotel Business Act, several requirements must be met. The main requirements are: a total guest room floor area of at least 33 square meters (or at least 3.3 square meters per person if the number of guests is fewer than 10), appropriate ventilation, natural light, lighting, and drainage facilities, and the establishment of front desk functions (either in-person or ICT-based).
In Hokkaido, the public health center under each regional promotion bureau serves as the point of contact. The application fee is approximately 22,000 yen. You will also need to obtain a fire code compliance certificate, which requires the installation of fire safety equipment (automatic fire alarms, emergency exit lights, fire extinguishers, etc.). Depending on the property’s zoning designation, some locations may not permit hotel business operations, so checking urban planning regulations in advance is essential.
Estimated initial costs
The initial cost of converting a vacant house into a simple lodging facility varies greatly depending on the property’s condition and location, but general estimates are as follows: property acquisition cost of 1 million to 5 million yen, renovation costs of 2 million to 8 million yen, fire safety equipment installation of 500,000 to 1.5 million yen, furniture, appliances, and amenities of 500,000 to 1.5 million yen, and license application-related costs of 300,000 to 500,000 yen. In total, this comes to a range of approximately 4.3 million to 16.5 million yen.
Property prices tend to be higher in popular areas like Niseko and Furano, but this is offset by the ability to set higher nightly rates, so it’s not necessarily a disadvantage. Conversely, a strategy of acquiring cheap property in a lesser-known area and differentiating it with a unique concept can also be effective.
Profit simulation: How much can you actually earn?
Setting nightly rates and occupancy rates
Nightly rates for simple lodging facilities in Hokkaido vary depending on the area, property grade, and capacity. For a typical whole-house rental (accommodating 4-6 guests), the going rate is 15,000 to 35,000 yen per night. During Niseko’s ski season, rates of 50,000 to 80,000 yen per night can still attract bookings. Here, we’ll run a simulation using realistic figures: an average of 20,000 yen per night and an annual occupancy rate of 60% (219 nights).
A 60% occupancy rate assumes high occupancy centered on Hokkaido’s tourist seasons (summer: June-September, winter: December-March), with occupancy dipping during the slower spring and autumn seasons. Facilities that actively leverage OTAs (booking sites) and promote themselves on social media have achieved annual occupancy rates of 70% or higher.
Breakdown of annual revenue and expenses
Calculating based on the conditions above, annual revenue would be approximately 4.38 million yen (20,000 yen × 219 nights). The main expenses deducted from this are as follows: OTA commissions (12-15% of revenue) of approximately 550,000 to 660,000 yen, cleaning fees (5,000-8,000 yen per cleaning) of approximately 1.1 million to 1.75 million yen, utilities and communication costs of approximately 360,000 to 480,000 yen, consumables and linen costs of approximately 120,000 to 180,000 yen, property tax and fire insurance of approximately 100,000 to 200,000 yen, and repair reserve funds of approximately 100,000 to 200,000 yen. Total expenses come to roughly 2.33 million to 3.47 million yen.
Therefore, the annual operating profit works out to approximately 910,000 to 2.05 million yen. If initial costs are kept to 5 million yen, the payback period would be approximately 2.5 to 5.5 years. In high-rate areas like Niseko, achieving an average nightly rate of 35,000 yen with a 65% occupancy rate would boost annual revenue to about 8.3 million yen, and even after deducting expenses, an annual profit of over 4 million yen is achievable.
Income and expenses when using a management company
For owners living remotely or with another primary occupation, outsourcing operations to a property management company is a common approach. Management fees typically range from 10% to 30% of revenue (varying by company and scope of services). Assuming a 25% management fee on the annual revenue of 4.38 million yen mentioned earlier, this would result in approximately 1.1 million yen in management costs.
In this case, total expenses including management fees would come to approximately 3.43 million to 4.57 million yen, significantly reducing the owner’s take-home profit to a range of negative 190,000 yen to positive 950,000 yen. When using a management company, it becomes difficult to turn a profit unless you raise the nightly rate, increase the occupancy rate, or achieve both. An average nightly rate of 25,000 yen or more combined with an occupancy rate of 65% or higher can be considered a break-even threshold when outsourcing management.
5 key points for maximizing profits
Setting seasonal rate fluctuations
Since Hokkaido experiences a large gap between peak and off-peak seasons, implementing dynamic pricing directly boosts profitability. An effective strategy is to set rates 1.5 to 2 times higher than normal during the winter ski season and summer peak tourist season, while offering discount plans or long-stay discounts during the off-season to boost occupancy. In fact, simply raising rates appropriately during peak season has led to cases of a 20-30% increase in annual revenue.
Multilingual support for foreign tourists
Most foreign tourists visiting Hokkaido speak English, Chinese (traditional or simplified), or Korean. Simply translating your OTA listing pages, house manuals, and check-in instructions into multiple languages can significantly improve your booking rate. Using translation tools allows you to accomplish this while keeping costs down. Some operators report that offering English support alone increased their booking rate by 15-25%.
Differentiating through concept and experiential value
Since Hokkaido has numerous accommodation facilities, simply positioning your property as “a place to stay” risks getting lost in the crowd. It’s important to establish a clear concept, such as “a mountain lodge with a wood-burning stove,” “an ocean-view retreat where you can enjoy seafood BBQ,” or “a workation-ready cottage with high-speed Wi-Fi.” Facilities that enhance their experiential value tend to receive better reviews, which in turn improves their search ranking on OTAs.
Monthly rentals as an off-season strategy
Rather than relying solely on short-term stays during the winter and the slower spring and autumn seasons, it’s worth considering monthly rentals. By targeting remote workers, seasonal laborers, and long-term foreign visitors with rates of 100,000 to 200,000 yen per month, you can significantly reduce the risk of vacancy. With a hotel business license, you’re not bound by the 180-day annual limit imposed under the Private Lodging Business Act, making this flexible approach possible.
Optimizing your tax strategy
When operating a hotel business as a sole proprietor, you can reduce your taxable income by applying the blue tax return special deduction (up to 650,000 yen) and by recording depreciation expenses. Renovation costs and the purchase costs of furniture and appliances are subject to depreciation. Additionally, acquiring the property under a corporate entity name can, in some cases, allow for more flexible expense recording and profit-and-loss offsetting. Consulting a tax accountant typically costs 100,000 to 200,000 yen per year, but given the tax savings involved, it’s a worthwhile investment.
Risks and precautions when starting a hotel business in Hokkaido
Maintenance costs unique to snowy, cold climates
For properties in Hokkaido, winter snow removal costs and heating expenses can become a significant burden. Annual contracts with snow removal companies typically cost 100,000 to 300,000 yen, and kerosene costs alone can reach 30,000 to 60,000 yen per month during winter. Additionally, maintenance measures not required elsewhere in Japan—such as preventing frozen water pipes and clearing snow from roofs—are necessary. If these costs aren’t factored into your financial plan, you could end up facing unexpected losses.
Preventing disputes with neighboring residents
When operating an accommodation facility on a property located near a residential area, there is a risk of disputes with neighbors over noise or trash disposal. It’s essential to take preventive measures, such as thoroughly explaining house rules at check-in, handling trash collection independently, and posting emergency contact information. Some municipalities have established their own ordinances governing these matters, so it’s important to check local regulations in advance.
For hotel business and simple lodging operations, consult Stay Buddy Co., Ltd.
If you’re considering utilizing a vacant house or villa in Hokkaido as a licensed accommodation business, please feel free to consult Stay Buddy Co., Ltd., a vacation rental management company. We provide one-stop support ranging from license application assistance and property profit simulations to renovation advice and day-to-day operational management.
At Stay Buddy, we propose optimal management plans tailored to each property’s unique characteristics and the owner’s budget. Even if you live far away and find it difficult to manage the property in person, you can leave everything to us—including cleaning arrangements, guest communication, pricing adjustments, and review management.
We’re happy to carefully answer even the most basic questions, such as “Will this actually be profitable?” or “Is my property suited for this type of business?” Please feel free to reach out via our contact form. Let’s take the first step together toward turning your Hokkaido property into a profitable asset with Stay Buddy.
