Wealth Planning and ManagementThe world’s oldest independent family owned and managed firm is the Hoshi Ryokan, in
the Awazu Onsen area of Komatsu in Japan. According to legend, in AD 717 the
Buddhist monk and teacher Taicho Daishi had a dream in which he was instructed by the
deity who guarded the Mount Hakusan to find an underground hot spring with curative
powers in the village of Awazu. Taicho and his discipline, Garyo Hoshi, went to the
village and, with the help of the villagers, managed to locate the spring.
Taicho told the sick to bathe in the waters and soon their health improved. He ordered
his discipline to build an ‘undefined’ spa on the site and to manage it.
Since Garyo Hoshi, the first manager of the ryokan, the family has been in charge for 46
generations. The pattern of succession follows strict rules. In each generation, ownership
and management responsibility is conferred on one person alone; other siblings leave
the family through arranged marriages.
Today the Hoshi Ryokan is a modern inn with facilities to host up to 450 guests, but
there is still a strong focus on tradition. The personal service that each guest receives
starts with a traditional Japanese welcome: a tea ceremony. The hot spring feeds both
indoor and outdoor bathing facilities.
Over the centuries many important visitors have stayed in the ryokan including
emperors, artists and prestigious families. Few foreigners find their way to the inn, even
though it has featured in a number of international travel magazine.
The first Hoshi was already doing business 700 years before Christopher Columbus
embarked on his first voyage to the New World, and indeed even before the Vikings
started to make trouble in Northern Europe. The name of the family and the inn are
closely intertwined, and there is a sense of history in every corner of the property, from
the beautiful garden to the famous tea room.
Visitors come to appreciate that the family is the guardian of that history, and Zengoro
Hoshi and his wife are very visible in the hotel, taking an active part in the day-to-day
management. The family and its history are clearly central to the unique visitor
experience it offers.
To what extent is this family asset transferable to future generations
The Hoshi family has developed a unique succession model whereby ownership and
management of the inn are inherited by a single heir, typically the eldest son, although it
can also be a younger son, a son-in-law or even an adopted son. While more radical
than most succession models, it has allowed the family assets to be handed down from
one generation to the next a record of 46 times.
To what extent are those family assets transferable to an outside owner Let’s image
that an international hotel chain bought the Hoshi Ryokan. Not only would it lose its
status as the oldest founder family owned and managed hotel in the world, but even if it
retained the facilities, something would be lost – the magic of an unbroken line of
Zengoro Hoshi across 46 generations and the status of this old family in society.
The hotel so embodies the history of the Hoshi family that the brand and reputation
would inevitably be undermined if sold to an outsider. This exclusiveness emphasizes
that family assets are relation-specific – a unique contribution by a particular family to a
It’s clear the family does not seek to optimise the short term market value of their unique
assets, perhaps because the yardstick by which they measure success is not size but
endurance, or they feel that the Hoshi style would be impossible to emulate in a different
location. In any event, they must have found the secret of harmony long ago for their
family business to have survived for 1,300 years.
What the Hoshi Ryokan key success factors
Firstly, the history and the legacy of 1,300 years of family involvement are a unique
contribution to the inn.
Second, they are what make the hotel unique and they are the foundation of the
Third, the magic of the Hoshi Ryokan would be seriously harmed if the new owners or
managers were not part of the family.
Fourth, the family has cultivated a very unique governance strategy focused on
transferring family assets intact across every generation which is tailor-made to mitigate
Ownership and management responsibility is given to one individual in each generation
according to the following criteria:
a) The first-born son is considered the natural successor to the ryokan.
b) When there were no sons, the husband of the eldest daughter has been adopted into
the Hoshi family and became the next Zengoro Hoshi.
c) Most marriages are arranged (they are not love matches).
d) If there were no children in one generation, the Hoshi will adopt a successor who will
carry the family heritage and the ryokan forward.
How does the Hoshi family deal with the increasing number of offspring who mostly live
locally The following steps in the succession model deal with this aspect:
a) When the old Zengoro Hoshi retires from business, the chosen successor (who
carries the Hoshi name either from birth or by adoption) will change his first name to
Zengoro. So for 46 generations, the owner-managers of the ryokan all have the same
name: Zengoro Hoshi.
b) Daughters become part of other old Japanese families through arranged marriages,
thereby giving up the Hoshi name.
c) Younger sons likewise marry into other old Japanese families. They are adopted by
the wife’s family and take her family name.
d) As a majority of the family fortune is tied up in the ryokan, the successor is the
exclusive heir; other offspring receive no share of the inheritance.
Accordingly to Zengoro Hoshi, the name is an integral part of the heritage. Essentially it
secures the stability of the succession. Beyond its symbolic value, in our view, the inn
possess the most powerful family asset: 46 generations of history and heritage.
The selection process and name offer the most efficient transfer of this asset across the
generations. Image if the Hoshi Ryokan were managed by the husband of a Hoshi
daughter with another surname; not only would the magic disappear, but it would do so
for good, since future generations would no longer bear the Hoshi name.
These rules may seen blatantly unfair, but the current Zengoro Hoshi is candid about
their necessity. They are a cornerstone of the business model and simply cannot be
challenged. When asked how he catered for his other children, he said he focused on
investing in them so they could achieve the best possible education to prepare them for
life outside the ryokan. He acknowledged the dilemma between wanting to support them
and having to preserve the family’s wealth exclusively in the ryokan to ensure the optimal
future for the inn.
Question 1 :Identify 2 key challenges, that Hoshi Ryokan’s Family faced, in each of the Life Cycle
Forces namely Individual, Organisation, Ownership and Industry with detailed
justification as well as recommendation to resolve these challenges. (850 words)
Question 2: What lessons can be learned from Hoshi Ryokan’s method of business and wealth
succession planning (300 words)
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