Gaia Series 76: The Ambition of the East and West "Hot Spring King"!

A high-stakes merger sees Japan’s top onsen hotel chains blend operations and traditions to bring new experiences for locals and tourists alike.

Shirahama Town in Wakayama Prefecture, a famed hot spring destination, witnesses the grand reopening of TAOYA Shirahama Senjo. On November 1, with fresh floral decorations adorning its entrance and staff beaming with anticipation, the onsen resort celebrates its first day of business under new management. This milestone is the result of a strategic merger between Japan’s two major onsen chains—Oedo Onsen Monogatari and Yukai Resorts—a union that promises to reshape the hospitality landscape.

The merger brings together Oedo’s innovative flair and Yukai’s tradition-rich offerings under the umbrella of GENSEN Holdings, now boasting a projected annual revenue of 58 billion yen (S$500 million). Yet, this union - first announced in March 2024 - has not been without its challenges. Employees and chefs alike faced months of uncertainty, confusion, and the daunting task of integrating vastly different styles of management, cuisine, and culture.

"We will have to change our operations to suit Yukai," noted one Oedo team leader during the merger’s early days, reflecting the uneasy adjustments. Chefs from both companies, proud of their culinary traditions, clashed over a unified menu. One commented candidly, "They said, 'The merger has been decided,' and I can't help but wonder, when was it decided?" Despite these heated moments, a grand vision drove the effort forward.

One shining example of the merger’s ambition is the revitalised TAOYA Shirahama. As a symbol of the new partnership, this flagship property underwent significant enhancements. Its main attraction remains the onsen itself, steeped in history and mentioned in the Nihon Shoki (Chronicles of Japan). Guests can soak in mineral-rich waters with the Pacific Ocean sprawling before them. Starting at 17,500 yen per night with two meals included, the resort also impresses with its gourmet buffet, offering 90 different dishes, a daily tuna filleting show featuring fresh catches from nearby Katsuura and a choice of over 30 types of alcohol. A delighted guest remarked, "My skin feels so smooth. It's great," while another lauded the new experience, stating, "Compared to what was here before, the Yukai Resort, the experience is much better now. Of course, the price has also risen, but there is no question that this is a better resort."

The financial and logistical challenges of the merger were palpable from the outset. The decision to consolidate brands under the more widely recognised Oedo Onsen name meant Yukai Resorts’ identity, built since 2003, would disappear. Employees expressed concerns about their roles and the future of their distinctive approach. The integration also demanded innovative solutions.

Mr. Nobuo Yamaguchi, Oedo’s head of menu development, played a critical role in uniting culinary teams. A seasoned chef who trained in Italy and once helmed Marina Bay Sands’ kitchens, he upheld uncompromising standards. "Food will be torn apart and eaten, but if you neglect its looks, then don't call that cooking," he declared. Under his leadership, the new menus for the combined brand now balance Oedo’s artistic presentation with Yukai’s focus on hearty platters. Among the nine selected dishes, a standout is the Yukhoe-style salmon marinade—a dish that epitomises the merger’s culinary aspirations but posed significant hurdles due to its preparation complexity.

Yukai’s head chef, Hiromi Hirayama, candidly admitted, "We simply can't make dishes with so many steps." His kitchens rely heavily on part-time staff with limited training. To bridge this gap, Mr Yamaguchi introduced instructional cooking videos, accessible on mobile devices, to standardise and simplify the preparation process across all properties.

Beyond the kitchen, operational reforms ripple through other properties, such as Gero Onsen in Gifu Prefecture. Here, a three-slot dining system replaced the former two-slot format to optimise seating and eliminate the use of unpopular subfloors. Though staff initially struggled with the faster turnover, the new system significantly improved guest satisfaction, and even freed up resources for value-added services, such as a photo-taking corner featuring local charms like the Saru Bobo, a monkey-shaped good luck charm. "It’s fascinating how much smoother everything is now," noted Yukai Resorts’ General Manager, Mr. Shunsuke Kawasaki, observing the system’s success.

Not all changes have gone smoothly. At Wakura Onsen on the Noto Peninsula, the 115-room Kinpasou property, acquired as a flagship for the premium TAOYA brand, faced severe setbacks after the Noto Peninsula earthquake on New Year’s Day 2024. Its popular open-air baths sustained heavy damage, leaving the building tilted and requiring extensive repairs. While initial surveys hinted at possible closure due to renovation costs, later assessments offered hope, suggesting partial demolition could stabilise the site. Kinpasou is now set to reopen in May 2025, much to the relief of its manager, Kazuo Takeuchi, and the local community.

The merger marks a pivotal moment for Japan’s onsen industry, which has seen a steady decline in properties since its 1990s heyday. The number of onsen hotels has fallen nearly by half, from 76,000 to just 39,000 in 2017. Despite these challenges, GENSEN Holdings has announced plans to open ten new properties by 2027, beginning with Kawaji Onsen in Ibaraki Prefecture, which will debut as a TAOYA resort in February 2025.

"People visit onsen hotels to relax and unwind. They are special places," reflected Mr Kawasaki. By combining Oedo’s bold strategies with Yukai’s rich traditions, the company hopes to revitalise onsen culture and appeal to both Japanese and international tourists. As this ambitious merger unfolds, it aims to bring a new dawn to Japan’s beloved onsen industry.