Hotel business shows profit recovery, but repeatability of bookings and ADR is the next focus

Hotel business revenue in FY2027-Q1 was ¥630 million, down 1.4% year on year. Segment profit, however, rose 67.9% to ¥106 million, indicating an improvement in profitability even though revenue remained broadly flat. Hotel business profit exceeded consolidated operating profit of ¥90 million, making it the main business driving the company's overall profit recovery.

However, in FY2026, hotel business revenue rose 12.0% year on year to ¥2,224 million, while segment profit fell 54.8% to ¥209 million. Factors behind the failure of revenue growth to translate into profit growth included costs associated with refurbishing existing facilities and opening new ones, as well as delays in demand forecasting and sales controls. It is therefore difficult to conclude that the increase in FY2027-Q1 profit represents the completion of a structural earnings improvement.

In particular, THE FARM Slow Mountain Narita, which opened in March 2025, achieved high occupancy mainly on weekends and during holiday periods immediately after opening, and bookings also increased following media exposure. However, both guest numbers and ADR fell below the original plan. The company also said that, despite expanding initiatives in FY2026, including events, social media, sales channels, food and beverage menus, options and digital marketing, revenue and profit fell significantly short of plan.

In FY2027-H1, it will be necessary to determine whether the first-quarter levels of ¥630 million in hotel business revenue and ¥106 million in segment profit can be replicated during the six-month period, including the summer vacation and event seasons. Occupancy rates, ADR, guest numbers, booking lead times, and the breakdown between new facilities and existing hotels have not been sufficiently disaggregated in the results disclosed to date. Whether the company discloses performance against plan for the new facility, the room mix following refurbishment of the existing hotel's 108 rooms, and the contribution from group and family demand will be key to assessing the quality of the profit recovery.