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Wealth Planning and Management

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

particular firm.

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

family roadblocks.

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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