The President of Candeo Hotels, Teruaki Hozumi, on The Most Highly Rated “Third Place” Hotel
Candeo Hotels is neither an ordinary business hotel nor a downtown hotel. It has established itself as a brand new type of hotel and has created a new “third place” category in the hotel world. In an interview held on April 16th, 2018, we asked the president of the Candeo Hotels chain, Teruaki Hozumi, what exactly did his hotels do that has awarded them first place in “Nikkei Business” hotel rankings.
— What Kind of Hotel is Candeo Hotels?
It is not a “cheap business hotel to spend a night in”, nor is it a “luxurious hotel with good service that is too expensive to stay in”, it is somewhere in between that. One year, when I was searching for a new location to open a hotel, I was away for business for around 200 nights of the year. During that time, I noticed that there were few hotels that were easy to use and provided amenities that truly soothed me.
At first, I was unable to figure out whether there was simply no demand for such a hotel, or that a potential market existed but was not being supplied with the service. After personally examining the hotel markets of many cities, I was half convinced that a potential market existed, so I thought about creating a hotel to satisfy it. The other half was a gamble (laugh).
— How did Customers React?
When we first became established, we did not have any brand power, recognition or experience, and that truly made it a continuous struggle. A lot of people believed it was “too expensive for a business hotel” or that it was “inadequate as a downtown hotel”.
However, through all of it, the passion we had for creating a hotel that we ourselves wanted to stay in never faded, and after receiving opinions, we continued to listen and improve at a fast pace. About three years later, we started to hear things from customers like “I’ve always wanted this kind of hotel”, and our rate of repeat customers soared. With that I was eventually fully convinced that there is truly a demand for our kind of hotel.
On coming in 1st place in the “Nikkei Business” October 23rd, 2017 article: “The Opinions of 5000 business personnel: Airports & Hotels You Won’t Regret Staying At- A Customer Satisfaction Ranking”.
Since we operate based on our customer’s views, we have proceeded based on the premise of “what kind of hotel do we out really want to stay in?” For example, at Candeo Hotels, we have an observatory style outdoor bath on the top floor. In fact, the hurdles in terms of the technology and the costs of this were very high. This is why large public baths at most business hotels are on lower floors.
But from a customer prospective, they would like to enjoy an open-air bath with a better view from the top floor. It would be nice to be able to use a high-quality bath just like those at a hot spring, even on business trips. We are always pursuing this type of value.
Furthermore, some business hotels only provide frozen foods that have been thawed for breakfast. Our company offers cooked meals that take a considerable amount of time and effort. It’s buffet style with more than 60 items that are healthy and gentle on the body, which is why our breakfast is a bit expensive. Despite this, we always pursue services that people feel are worth paying for. I believe we have strived to add value to the 3 B’s- baths, breakfasts and beds, and that in the end, this is what led us to become number one in Japan.
–What are your thoughts for the future?
In recent years, there has been a trend among talented, hardworking business people for work-life integration. While working hard they also want to enjoy the pleasures in life. It is for these people that we want to provide this so-called “third places” where they can really feel relaxed, and experience a change of pace that allows them to be more efficient in their work. We want to progress as a hotel by offering our own unique rooms and experiences.
Rather than using the top floors to offer suites with good views to only a few customers, we have created a space more like a common area with outdoor baths and a lounge. We would like to continue to provide new value to a larger number of customers.
Our hotels are created in such a way that all the areas in the hotel can be enjoyed while our customers are dressed in their best. After a nice bath, you can enjoy original beer at the lounge and work on your PC on the sofa in clothes provided by the hotel in the relaxing comfort of our well-designed spaces.
— The entrance areas are also stylish. Were there any considerations you made regarding the interior design?
All our furniture is custom made. We do not use premade items. It is just a small thing but, the furniture in our hotels is the type of furniture that I would choose to put in my own 355 square foot living room if I have one.
Our beds which soothes away the fatigue of our customers are Simmons mattresses are said to have the best balance. When I opened the first branch, I arranged about 10 mattresses with their brand names hidden, gathered everyone together and we tried them out ourselves by jumping on them, hopping on them and lying down on them.
So, when I asked them “which one was the best?” everyone chose the same one, and it was the Simmons. Maybe it’s just very suitable for the Japanese body. Since our establishment, we have always used Simmons mattresses.
— Baths, breakfasts and beds have special characteristics, right?
In the hotel industry, baths, breakfasts and beds, or, the “3B’s” are said to be the three major factors for how customers intuitively judge hotels. We have been operating with these three major elements in mind and have thought thoroughly about how we can make them stand out.
In recent years, there has been an increase in hotels that are following in the same direction as our company. Hardware can be easily imitated, and I think that being imitated is good for the development of the industry. We believe that we need to continue progressing forward, so others can’t catch up to our software.
— Do you have any management index goals?
Currently we have about 4,500 rooms in Japan, including venues scheduled to open. If we calculate backwards from the market size, domestic projects are considered to increase to up to 10,000 rooms. For the overseas market, we are developing 4,000 rooms, mainly in ASEAN, with the goal of developing 14,000 rooms by the year 2025 for the 20th anniversary of our foundation.
In terms of sales, it’s around 50 billion JPY. The goal we have set for ourselves comes from the famous book “Visionary Company” and is referred to as BHAG (“Big Hairy Audacious Goal” – a tremendously difficult and bold goal but exciting if you can achieve it). The goal of ‘BHAG 500’ is to have sales of 50 billion JPY in our 20th year with 30 billion JPY from Japan and 20 billion JPY from foreign countries.
We do not consider stock listings. Because we are aware of the governance of standards of listed companies in relation to what we were aiming for at the time of our foundation, the transparency of the numbers among other things was extremely high. We daringly thought that more flexibility will be given to unlisted companies and our top priorities are based on that. After achieving sales of 50 billion JPY, we would like to focus on social contribution projects with synergies with our core business.
— Does that mean you don’t go beyond the scope of necessity?
In terms of sales, we are not much different from the operators of big senior global hotel chains. However, in terms of profitability, we are aiming to be the world’s best in the future. We also aim to provide higher customer satisfaction, become hotel operators for developers and investors seeking higher yields, and secure high profits as resources to make our company happy. We are trying to realize the three-way satisfaction concept, which has very high obstacles.
It’s common for business hotels to have higher profit margins than luxury hotels. Luxury hotel operation is advanced and complex. In general, one or more employees are required to operate one room, meaning 100 people are needed for 100 rooms, and so on. However, I think that it is also the role of the luxury hotel to provide many staff members and to develop profound service. We are trying to place ourselves in an original position by making efforts to achieve the contrary goal of enhancing customer satisfaction while streamlining operations.
I myself had the experience of doing volunteer work in my school days. As a student, I had enough time so it wasn’t a problem. A fellow volunteer suffered through the combination of working and volunteering. I saw that the more he worked, the more he suffered to make his daily earnings. I always felt that it was strange, “even though you do something for the betterment of the world, there is this contradiction where the more you work the more you suffer.”
To solve the contradiction, not by volunteering, but through a private commercial company, I had the desire to start a business that would contribute to a sustainable society. For that reason, our main business needs to be stronger than anything else. At our main business, which is the hotel business, we aim to have the world’s best profit margins, and by utilizing the power that comes with a business with 50 billion JPY in sales, we hope to develop social contribution projects that synergize with the hotel business in areas such as food, clothing and shelter, energy, agriculture, education and so on.
For example, in terms of the mission to further develop Cambodian farmers, we will work with partners in agricultural technology to increase local agricultural skills and create a system in which farmers are able to create their method of selling their products directly to the local market. When prices are good, farmers will sell more goods to the market and become rich. When prices collapse, we support them by buying goods a price that was originally decided upon from the beginning. In this way, farmers can sell their crops with peace of mind and we can offer our hotel guests a product with high traceability.
I think this will become a win-win business model because the hotel industry encompasses a wide variety of businesses and through them we can develop a wide variety of fascinating enterprises.
— You could say that Candeo Hotels is in a “third position” that hasn’t existed until now.
In that sense, while we operate in a highly efficient manner, one could say that our type of hotel is neither “cheap nor bad”. It is a type of hotel that has never existed before.
According to our findings, the current domestic hotel market contains about 900,000 rooms. Hotel companies conscious of the mid-range area, like our company, make up about 5% of the total. Compared to the 5 star hotel and 3 star hotel markets, our market size is overwhelmingly small in the first place and is clearly a niche. However, I’d like to push through to the top of that niche. We are thankful that loyal customers are steadily rising recently.
— Lastly could you please give a message to the ZUU online readers.
Our big city hotels cost around 15,000 JPY to 25,000 JPY per night. It’s true that we are little bit more expensive than the average business hotels that offer rooms for around 10,000 JPY. However, we offer value that you will not believe is true and we would love for you to come and enjoy our services. We believe in surpassing your expectations every time.
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