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Free Online ConsultationThe Differences Between Minpaku, Ryokan, Simple Lodging, and Hotel Operations—and the Versatility Owners Should Demand from a Management Company
When choosing a management company for your minpaku property, whether that company handles minpaku exclusively or is also well-versed in ryokan and hotel operations can dramatically shape how far your business can grow down the road. Many owners who launched under the Private Lodging Business Act (the “minpaku law”) eventually run up against the 180-day annual operating cap and start considering switching to a ryokan business license or reapplying as a simple lodging facility. At that point, a management company that only handles one business type simply can’t keep up—and owners are forced to start their search for a new partner from scratch.
This article breaks down the characteristics of the four major accommodation business types—minpaku, ryokan, simple lodging, and hotel—and explains the concrete advantages a management company that can operate across all four brings to owners. We’ll also touch on the real costs and operational differences involved in switching business types, along with key points to help you avoid mistakes when choosing a management partner.
Whether you’re an individual owner running a single unit or an operator managing multiple properties under different licenses, understanding the realities of cross-format operations is the first step toward maximizing your revenue.
The Basic Differences Between the Four Accommodation Business Types
Accommodation businesses in Japan generally fall under one of four licensing categories: “Private Lodging Business” (minpaku under the minpaku law), “Simple Lodging Business,” “Ryokan Business,” and “Hotel Business.” Following the 2018 revision to the Hotel Business Act, Hotel Business and Ryokan Business were formally merged into a single “Ryokan/Hotel Business” category, but in practice, people still distinguish between them based on facility scale and the type of service provided. Since each category has different limits on operating days, equipment requirements, and filing authorities, the business type you choose has a major impact on both your initial investment and your annual revenue.
For example, filing under the minpaku law may only require minimal fire safety measures, but it caps operating days at 180 per year. If the average nightly rate is ¥12,000 and the average occupancy rate is 80%, revenue capped at 180 days would come to roughly ¥1.72 million. If you instead obtain a simple lodging license, you can operate 365 days a year, which under the same conditions would yield roughly ¥3.5 million. That roughly ¥1.78 million difference is a number that directly informs the choice of business type.
Characteristics of the Private Lodging Business (Minpaku Law)
This is a notification-based system under the Private Lodging Business Act, allowing you to begin operations simply by filing notice with your prefectural governor. Its biggest advantage is relatively relaxed zoning restrictions—operation is possible even in residential-only zones. However, the number of days you can offer lodging per year is capped at 180, and some municipalities impose even stricter limits through local ordinances. In some areas, for instance, weekday operation is restricted, effectively limiting annual operating days to around 100.
In terms of facilities, you need a kitchen, bathroom, toilet, and washing area, but there’s no requirement for a front desk. The filing process itself is relatively simple, with administrative scrivener fees typically running ¥50,000 to ¥150,000. One important point to weigh when considering a management partner is that you’re obligated to outsource management operations to a registered private lodging management business.
Characteristics of Simple Lodging Business
This is a license-based system under the Hotel Business Act, requiring application to and inspection by the local health center. There are standards to meet, such as a minimum total guest room floor area of 33 square meters (or 3.3 square meters per person if fewer than 10 guests), and you must also obtain a fire code compliance certificate. Licensing typically takes two to three months, with initial costs—including administrative scrivener fees and fire safety equipment installation—running ¥300,000 to ¥1,000,000.
The biggest advantage is the ability to operate 365 days a year. Unbound by the 180-day cap of the minpaku law, you can potentially double your annual revenue depending on occupancy. On the other hand, zoning restrictions are somewhat stricter, and operation is generally not permitted in residential-only zones. If you’re converting an existing minpaku property into a simple lodging facility, you may also need to go through a change-of-use procedure for the building and make additional equipment investments.
Characteristics of Ryokan Business
These are facilities built primarily with Japanese-style fixtures, offering traditional ryokan-style lodging services. While legally merged into “Ryokan/Hotel Business” following the law revision, in practice this category refers to mid-size or larger facilities meeting standards such as a minimum of five guest rooms, each at least 7 square meters. A front desk is generally required, and while ICT-based alternatives are permitted in some cases, how this is applied varies by municipality.
Operating costs are higher than for minpaku or simple lodging, and a higher standard of service is expected—linen changes, cleaning, meal service, and so on. Monthly operating costs typically run ¥30,000 to ¥80,000 per room, and if you provide meals, you’ll need a separate business license under the Food Sanitation Act. When using a management company, whether they can provide integrated support for all of these licensing procedures is a key factor in choosing a partner.
Characteristics of Hotel Business
These are facilities built primarily with Western-style fixtures, generally offering full-service amenities including front desk service, room cleaning, and guest amenities. Before the law revision, standards required a minimum of 10 guest rooms, each at least 9 square meters. While now merged with Ryokan Business under the law, in practice this term usually refers to larger-scale facilities such as business hotels and resort hotels.
Among the four business types, this one demands the highest level of operational sophistication—OTA (online travel agency) customer acquisition strategy, revenue management, multilingual support, and more. Monthly operating costs per room can run ¥50,000 to ¥150,000, and profitability tends to deteriorate quickly if occupancy falls below 60%. This is precisely why a management company with data-driven pricing and channel management expertise is indispensable.
Why Versatility Across Business Types Matters
An accommodation business rarely begins and ends with a single business type. It’s actually quite common for owners who started under the minpaku law to hit a revenue ceiling due to the 180-day cap and begin considering conversion to simple lodging status. Alternatively, some owners follow a growth pattern where they expand a thriving portfolio of simple lodging properties and eventually move into hotel-scale operations.
When it comes to converting between business types or operating multiple types simultaneously, a management company that only handles one business type forces you to switch partners every time you convert. Given the information loss during handover, the gap in operations, and the cost of educating a new management company, the resulting losses are far from trivial. In one case, a change in management company led to roughly two months of reduced occupancy, resulting in an opportunity loss of ¥400,000 to ¥600,000 per property.
Smooth Transitions During Business Type Conversion
When switching from minpaku to simple lodging, you need to withdraw your existing filing while simultaneously pursuing a new license application. This involves multiple administrative procedures running in parallel—installing additional fire safety equipment, confirming the change of use under the Building Standards Act, and pre-consultation with the health center. A management company with proven cross-format experience can accurately map out the timeline for these procedures and arrange things to minimize the period during which the property can’t operate.
In practice, some owners have kept the gap before obtaining a new license to within two weeks, while others who worked with inexperienced management companies ended up unable to operate for more than three months. The ability to sequence procedures efficiently is directly tied to a management company’s cross-format experience.
Deep Familiarity with the Operating Rules of Each License Type
Changing business types also means the laws and operating rules you must comply with change. Under the minpaku law, you’re required to maintain a guest registry and submit periodic reports; under the Hotel Business Act, you need face-to-face confirmation at the front desk or an approved ICT-based alternative. Fire code use classifications also differ, meaning that even within the same building, converting business types may require adding or modifying fire safety equipment.
Fully understanding all of these differences and building the optimal operating workflow for each property is a strength unique to management companies with track records across multiple business types. For example, one management company simultaneously manages 10 minpaku properties, 15 simple lodging facilities, and 5 ryokan businesses, centralizing report preparation for each license type, scheduling of periodic inspections, and interactions with government authorities.
Managing a Portfolio Across Multiple Business Types
From an investment risk diversification standpoint too, operating across multiple business types is effective. Minpaku-law properties have low initial costs but a revenue ceiling due to the 180-day cap. Simple lodging allows year-round operation but has a higher bar for obtaining a license. Hotels can be highly profitable but carry heavy fixed costs. Combining these business types allows you to spread out seasonal fluctuations and regulatory risk.
Concretely, an owner running three minpaku properties and two simple lodging facilities could adopt a pricing strategy that boosts occupancy at the simple lodging facilities during the minpaku properties’ off-season (the period after their 180 days have been used up). Realizing this kind of cross-format coordination requires a management company capable of integrated management and cross-cutting data analysis across all your properties.
Checklist for Choosing a Management Company That Handles Multiple Business Types
So what criteria should you actually use to choose a management company capable of operating across multiple business types? Rather than comparing on fee structure alone, it’s important to evaluate on multiple axes—the range of business types they handle, their track record with licensing procedures, and how well-integrated their management systems are. Here, we outline concrete checkpoints.
Range of Supported Business Types and Licensing Support
The first thing to check is how many business types the management company actually has a track record operating. It’s not uncommon for a company to claim it “can handle” multiple types while its actual track record is limited to minpaku alone. Ask specifically about the number of times they’ve supported simple lodging or ryokan license applications, and how many business type conversions they’ve assisted with. As a benchmark, a company with a track record of managing at least five properties in each business type can be considered to have accumulated real practical know-how.
Regarding licensing support, another key point is their working relationship with administrative scriveners and fire safety equipment specialists. Whether they have specialized in-house staff or an ongoing partnership with outside professionals affects both the speed and accuracy of procedures.
Fee Transparency and Cost Structures by Business Type
Management fees generally run 10% to 30% of revenue (varying by company and scope of work), but since service content differs by business type, a flat fee doesn’t allow for a proper comparison. Minpaku management centers mainly on cleaning arrangements and guest support, while ryokan and hotel operations involve a wider scope of work—linen management, amenity restocking, revenue management, and more.
A quality management company will clearly present a service menu and fee structure for each business type. Whether they can offer a tiered fee structure—say, 20% of revenue for minpaku, 18% for simple lodging, and 15% for hotels—or a hybrid model combining fixed and variable costs, is a useful benchmark for judgment. If line items like “cleaning fees billed separately” or “supply costs reimbursed at actual expense” remain vague at the quoting stage, that’s a red flag.
Centralized Data Management and Reporting Structure
When operating multiple business types, managing OTA dashboards, sales reports, occupancy data, and guest reviews separately for each type makes it impossible to see the big picture. A good management company will use its own management system or a PMS (property management system) to consolidate data from all properties into a single visual dashboard.
The frequency and content of monthly reports also matter. Before signing a contract, confirm whether they can provide reports comparing occupancy rate, ADR (average daily rate), RevPAR (revenue per available room), and guest satisfaction scores by business type and by property. A management company willing to go further and offer data-driven improvement proposals is one you can trust as a long-term partner.
Contact Stay Buddy Inc.
Stay Buddy Inc. provides management services covering all four accommodation business types—minpaku, simple lodging, ryokan, and hotel. From support with obtaining licenses to day-to-day operations to consulting during business type conversions, we offer one-stop support for every phase of your accommodation business.
Whether you’re “currently operating under minpaku but considering a switch to simple lodging,” “running multiple properties under different business types and want to consolidate management,” or “starting an accommodation business and unsure which type is right for you”—we’ll respond to your inquiry with concrete revenue simulations.
Our proposal capability, grounded in a proven track record across multiple business types, is Stay Buddy Inc.’s core strength. We’ll present the optimal operating plan tailored to your property’s location, revenue goals, and future expansion plans.
Please feel free to reach out to us. We’ll begin by listening to your current operating situation, and we offer a free initial consultation. Stay Buddy Inc. is here to walk alongside you toward maximizing the profitability of your accommodation business.
