Hotel Management & Transactions 2025 Comparisons

In Japan, hotel transactions are subject to a multidisciplinary legal framework which draws from various areas of both public and private law, the main sources and areas of which include the following.

• Civil Law (Contract and Property Law) – governed by the Civil Code (minpo), this forms the legal basis for contracts such as hotel acquisition and sale agreements, lease agreements, management contracts and franchise and licensing arrangements. Property Law principles under the Civil Code also apply to ownership, security interests and rights in rem.
• Real estate and land use law – the Building Standards Act (kenchiku kijun ho) regulates structural safety, fire protection, floor area ratios and change of use.
• The City Planning Act (toshi keikaku ho) – this establishes zoning classifications and development restrictions.
• Hotel business regulation – the Hotel Business Act (ryokan gyo ho) governs the operation of hotels, inns, capsule hotels and similar accommodation. Licensing, sanitation, room size, ventilation and safety requirements are enforced by the local public health departments.
• Administrative law and permitting – these cover building permits, zoning confirmations, use-change approvals and environmental regulations. Municipal governments have discretionary authority over many procedural approvals related to hotel operations and development.
• Labour and employment law – this is particularly relevant where hotel operators directly employ staff and includes compliance with the Labour Standards Act (rodo kijun ho), employment contracts, working hours, and health and safety obligations.
• Tax law – hotel transactions may trigger various taxes, including real estate acquisition tax, fixed asset tax, consumption tax (VAT) on services and withholding tax on cross-border payments (eg, franchise fees, interest). Tax planning is particularly important in cross-border transactions.
• Foreign investment regulation – the Foreign Exchange and Foreign Trade Act (gaikoku kawase oyobi gaikoku boeki ho) (FEFTA) governs foreign direct investment.

In Japan, both share deals and asset deals are commonly used in hotel transactions. It is difficult to determine which is more common, as the structure often depends on the specifics of the initial scheme used when the hotel business was launched. However, real estate investors tend to select asset deals in most cases due to their risk-return profiles.

When focusing on the acquisition of hotel real estate, investors sometimes choose to acquire interest in the real estate through a real estate fund scheme. This means that investors acquire trust beneficiary interest (shintaku jueki ken) instead of direct ownership of the real estate. One of the advantages of this is the potential for tax benefits. Conversely, due to trust fees and other factors, investors may choose acquisition of direct ownership of the real estate.

When acquiring the hotel operating business, share deals are generally more common, particularly when a company operates one hotel per entity. Share transfers allow for smoother continuity of operations, including the automatic transfer of contracts, permits and employees, and can also help reduce transaction costs such as taxes.

In Japan, hotel transactions and their terms are not automatically public. While certain aspects, such as a change in registered ownership of real estate, can be confirmed through the real property registry (which is accessible to the public for a small fee), the registry does not include the sale and purchase price.

Other transaction details, including the identity of the parties and contractual terms, are generally kept private unless voluntarily disclosed (eg, by listed companies in securities filings or press releases).

In general, there are no restrictions on foreign investors acquiring hotels in Japan, including both land and buildings. Foreign entities may freely acquire real estate, and hotel operations are not typically categorised as Designated Business Sectors under FEFTA. Accordingly, acquisitions of hotel operating companies by foreign investors are usually exempt from prior notification requirements under FEFTA. Depending on investment structures, foreign investors may be required to submit reports after relevant investments under FEFTA, but these are in a simple format and will not hinder investments.

Separately, the Act on the Review and Regulation of the Use of Real Estate Surrounding Important Facilities and on Remote Territorial Islands (juyo tochitou chousa ho) may apply to the acquisition or use of land and buildings located close to designated defence-related facilities or remote islands. However, this law applies equally to both Japanese and foreign persons, and does not restrict foreign ownership per se, although it may require post-acquisition reporting or restrict certain types of use.

As a result, while there are certain regulations that may apply depending on the location and nature of the property, foreign investors are generally able to acquire hotels in Japan without restrictions that are specific to foreign investors.

There are four structures in use in Japan:

• privately owned/independent hotels;
• hotel management agreements;
• hotel lease agreements; and
• franchising agreements.

Traditionally, the most common models in Japan have been the owner-operated structure and lease agreements. However, both place a heavy financial burden on owners due to the need for agile capital investment and rent obligations.

Hotel management agreements (commonly referred to as “management contracts”) have become more prevalent in Japan in recent years. This shift is largely influenced by the encroachment of foreign hotel brands, which have rapidly expanded their presence by adopting “asset-light” models – primarily management contracts and franchising agreements – where they neither own the hotel assets nor assume employment or operational risk. Unlike typical international operators, however, it is not uncommon in Japan for hotel operators under management contracts to directly employ hotel staff, thereby assuming part of the operational burden.

Hotel lease agreements remain widespread, particularly among domestic operators. In such arrangements, the operator leases the hotel from the owner and assumes full responsibility for management, bearing the profit and loss. Recently, however, some lease contracts have adopted variable rent structures linked to GOP (gross operating profit), making their economics increasingly similar to those of management contracts.

Franchising agreements are also gaining traction. In these arrangements, the owner operates the hotel independently while utilising the brand, reservation systems and operational support of the franchisor in exchange for royalty payments. Operational control remains with the owner.

Hotel management agreements (MCs) in Japan are typically structured as service agreements based on the legal framework of a mandate (inin). Under MCs, the hotel owner retains both ownership of the property and ultimate responsibility for the hotel’s operations and financial performance, while delegating the day-to-day management to a professional operator.

Key terms of MCs typically include the following provisions (which may be subject to the negotiations of the parties).

• Term and renewal – these are flexibly determined by agreement and are not subject to leasehold laws, in accordance with the Leasehold and Tenancy Act (shakuchi shakuya ho).

• Fees – operators receive a management fee from the owner, typically structured as a base fee plus an incentive fee linked to gross operating revenue (GOR) or profit (GOP).

• Profit and cost allocation – the owner generally bears all operational costs and receives all profits; sometimes the operator manages the hotel using funds provided by the owner in a designated account.

• Termination – as a default rule under the Civil Code, MCs can, in principle, be terminated at any time by either party. However, in practice, contracts often limit termination to specific causes such as breach of contract or failure to meet performance test thresholds.
• Surrender and restoration – upon termination, the operator must cease hotel operations and return the property and FF&E. If it is necessary to cause the operator to bear restoration obligations, they must be explicitly stipulated in the agreement.
• Employee arrangements – typically, employees are employed by the owner; however, it is not uncommon in Japan for the operator to directly employ staff.
• Monitoring and control – the owner is often granted approval rights for major operational matters and receives regular reports such as budgets and monthly performance updates.

• Performance tests and non-compete clauses – it is common to include clauses that allow for termination if the hotel’s performance (eg, GOP or Revenue Per Available Room (RevPAR)) falls below a specified threshold over a defined period. Operators are often restricted from operating competing properties within a defined area.

As hotel management agreements are generally treated as mandates under the Civil Code, they are not subject to the mandatory provisions of the Leasehold and Tenancy Act. This allows greater flexibility in designing the contractual terms, including termination rights and operational oversight. However, this flexibility can also be a challenge in practice, as MCs provide limited legal protection to operators compared to lease agreements. Operators may find it difficult to assert ongoing rights – particularly where ownership of the property is transferred – unless properly protected by step-in rights or non-disturbance clauses. Please note that non-disturbance agreements between the operator, the owner and relevant lenders, which can be seen in other jurisdictions, are not frequently used in Japan, and lenders may be reluctant to enter into them if requested by the operator.

Further, foreign operators’ use of cross-border standardised contracts can sometimes create conflicts with Japanese legal norms, particularly where these contracts do not adequately address local employment, tax, or regulatory obligations. Negotiating the balance between brand standards and Japanese legal enforceability is a key challenge.

Hotel lease agreements in Japan are structured as real estate lease contracts governed by the Civil Code and, in many cases, the Leasehold and Tenancy Act. Under such agreements, the hotel operator leases the building from the owner and operates the hotel independently, assuming all operational and financial risks.

Key terms typically include the following.

• Lease term and renewal – i) ordinary lease: this requires the owner to demonstrate “just cause” to refuse renewal; and ii) fixed-term lease: this does not automatically renew; there are no renewal rights.
• Rent structure – this can be fixed, variable (eg, linked to GOR or GOP), or a combination. Both parties generally have the right to request a rent adjustment under ordinary leases. In fixed-term leases, rent-reduction rights for the tenant may be contractually waived.
• Profit and cost allocation – all profits and losses belong to the operator, who also generally bears all operational costs, while owners bear certain capex or structural repair costs under the lease terms.
• Termination – termination by the owner is strictly limited by the Leasehold and Tenancy Act and the principle of a trust-based relationship breakdown (shinrai kankei hakai). Performance clauses may be included, but are of uncertain enforceability under Japanese law.
• Surrender and restoration – operators typically have obligations to vacate and restore the premises upon lease termination, subject to contractual terms. Operators may remove their FF&E, unless otherwise agreed. Claims for reimbursement of necessary or beneficial expenses and requests for purchase of tenant-installed fixtures may be contractually excluded.
• Employee arrangements – staff are employed by the operator.
• Monitoring and control – in fixed-rent models, the owner’s consent rights are often limited. The owner may require budget submissions and monthly performance reports similar to MCs.

Hotel lease agreements are governed by the Civil Code and the Leasehold and Tenancy Act, which provide significant statutory protections to tenants. These protections include limited grounds for lease termination and renewal refusal by the landlord, making it difficult for owners to exit unfavourable lease agreements. This legal framework creates challenges for hotel owners seeking flexibility in asset management. In response, fixed-term lease agreements – where termination and renewal rights can be contractually limited – have become increasingly common.

Another challenge arises when distinguishing lease agreements from management contracts, particularly where the lease includes variable rent structures tied to GOP or performance metrics. In some cases, the economic profile of the lease begins to resemble a management arrangement, complicating regulatory and contractual interpretation.

In Japan, hotel franchising agreements typically follow the global model, where the franchisor licenses its brand, reservation systems, marketing platforms, and operational know-how to a franchisee, who is responsible for owning and operating the hotel. This model allows for rapid brand expansion without the franchisor owning or operating the underlying asset.

Key elements of franchising agreements in Japan include the following.

• Brand licensing – the franchisor grants the franchisee the right to use its trademarks, logos, and brand standards. This is often formalised in a separate licence agreement.
• Support services – franchisors provide access to global reservation systems, loyalty programmes, marketing tools, and sometimes limited operational support, often through a system services agreement.
• Fees – royalty fees are typically based on a percentage of gross room revenue. Marketing contributions and system fees may also be charged separately. Initial franchise fees may apply upon contract signing.
• Franchisee responsibilities – the franchisee bears full responsibility for hotel operations, compliance with brand standards, employment, and financial performance. The franchisee is generally required to submit regular financial and operational reports.
• Contract term – franchise agreements typically have fixed terms, sometimes with limited renewal options subject to performance and compliance.
• Renovation and capex obligations – franchisees are often required to renovate the property periodically to meet updated brand standards, which can be costly and require planning approvals.
• Non-compete clauses (area protection) – agreements sometimes include provisions restricting the franchisor from allowing the same brand (or competing brands) within a certain geographic area.

In some cases, hybrid arrangements are used, where the franchisee also enters into a separate management agreement with a third-party operator.

Franchise agreements in Japan are primarily governed by contract law under the Civil Code. There is no franchise-specific legislation similar to that found in some other jurisdictions (eg, the US Franchise Rule). However, certain aspects of the Act against Unjustifiable Premiums and Misleading Representations (futo keihin rui oyobi futo hyoji boshi ho) and the Antimonopoly Act (shiteki dokusen no kinshi oyobi kosei torihiki no kakuho ni kansuru horitsu) may apply, particularly regarding disclosure, fair competition, and abuse of superior bargaining position.

In Japan, a wide range of financing options are available for hotel transactions, depending on the nature of the project, the profile of the investor, and market conditions. With respect to share deals, a share purchase is a typical method of equity financing, and a corporate loan is a typical method used for debt financing. For asset deals, foreign investors tend to select non-recourse financing for Special Purpose Vehicles (SPVs).

Typically, a godo kaisha (GK) or a tokutei mokuteki kaisha (TMK) is selected as the SPV, and foreign investors make equity investment in this. As discussed in 2.1 Common Sale and Purchase Structures, in some cases, the properties are acquired in the form of trust beneficiary interests. If the acquisition vehicle acquires the property in this way, the trust company leases the property to a master lessee (which can be the acquisition vehicle if it is a GK – a TMK cannot become a master lessee for regulatory reasons), which becomes the operator, or engages a third-party operator to operate the hotel. If the acquisition vehicle acquires the property as a hard asset, it leases the property to a master lessee, which may, in turn, engage a third-party operator; or, in some cases the acquisition vehicle itself engages the operator, if the acquisition vehicle is GK – again, the TMK itself cannot engage the operator for regulatory reasons.

The investment structures are selected based on regulatory and/or tax considerations, and it is important to arrange the overall investment structure with advice from legal counsel and tax advisors.

Generally, there are no significant restrictions on foreign lenders providing financing for hotel transactions in Japan. Foreign lenders can obtain security interests over Japanese real estate, including hotel assets, so long as they comply with Japanese legal procedures.

However, it seems that Japanese asset managers seldom choose foreign financial institutions as debt finance providers due to the necessity to withhold taxes on interest payments. In addition, while foreign entities are allowed to lend, engaging in lending activities as a business within Japan may trigger registration requirements under the Money Lending Business Act (kashikin gyo ho).

Asset deals are primarily taxed as follows.

• Real estate acquisition tax (fudosan shutoku zei) is imposed on the acquirer of real estate as a hard asset under the Local Tax Act at a tax rate of 3-4% of the property’s value, whereas the acquisition of trust beneficiary interests is not subject to this tax.
• Registration and licence tax (toroku menkyo zei) is imposed on the person receiving registration under the Registration and Licence Tax Act (toroku menkyo zei ho). For transfers of ownership of real estate, a tax rate of 1.5% to 2.0% of the property’s value applies. For trust transfers of ownership of real estate, a tax rate of 0.3% to 0.4% of the property’s value applies, and a change of the settlor and/or beneficiary in connection with the transfer of trust beneficiary interests is subject to a fixed tax of JPY1,000 per case.
• Consumption tax (shohi zei) applies for the acquirer of buildings under the Consumption Tax Act at a rate of 10% of the property’s purchase price, regardless of whether the building is acquired as a hard asset or as a trust beneficiary interest; the acquisition of land is not subject to this tax.
• Stamp duty (inshi zei) is imposed on the party preparing the taxable document under the Stamp Duty Act (inshi zei ho). For a real estate purchase and sale agreement, stamp duty amounts to as much as JPY600,000 (or up to JPY480,000 under the current special tax treatment) depending on the contract amount. For a trust beneficiary interest purchase and sale agreement, stamp duty is a fixed tax of JPY200.

Share deals are not subject to real estate acquisition tax, registration and licence tax, consumption tax and stamp duty. In addition, a share purchase agreement is, in principle, not subject to stamp duty.

In Japan, land use and zoning regulations are governed primarily by the City Planning Act and the Building Standards Act.

The national zoning system classifies urban land into 13 use zones, each with specific permitted and restricted uses.

• Hotel development is generally permitted in the Commercial Zone, the Semi-Commercial Zone and the Quasi-Industrial Zone.
• Residential Zones: small-scale or limited-service hotels may be allowed in certain residential zones, particularly the Quasi-Residential Zones and Category 1 and 2 Residential Zones; however, with respect to Category 1 Residential zones, larger hotel developments are generally restricted. Compatibility with the residential environment is a key concern. If the accommodation is operated as minpaku (private lodging), which satisfies certain requirements, it can be operated at residential zones.

In practice, changing the zoning classification or obtaining an exception (derogation) to allow hotel use in Japan is highly challenging and rarely successful, particularly for private developers.

In Japan, hotel construction and refurbishment are subject to a complex framework of national and local regulations, primarily under the Building Standards Act, City Planning Act and related ordinances. Key regulatory aspects include the following.

• Building height and Floor Area Ratio (FAR) – maximum building height and FAR (Floor Area Ratio) are determined by the land’s zoning classification and are set forth in municipal zoning maps under the City Planning Act. For example, in commercial zones, FARs of 200–1,300% may be allowed, while building height may be limited by slant plane regulations and sunlight access rules. Local governments may further restrict or relax height/FAR through District Plans or Special Urban Renaissance Districts.
• Building Coverage Ratio (BCR) – BCR limits the portion of the land that can be built upon, typically ranging from 60% to 80% in commercial zones.
• Parking requirements – parking obligations vary by municipality and are often set under local ordinances. Where applicable, parking spaces must comply with size and accessibility standards, including barrier-free parking.
• Fire safety regulations – hotels must comply with stringent fire protection standards under the Building Standards Act and the Fire Service Act (shobo ho), including installation of fire-resistant materials and compartmentalised construction, smoke control systems and automatic fire detection, sprinklers, fire extinguishers, emergency lighting, and evacuation signage, and fire drills and employee training requirements.
• Disability and accessibility standards – hotels must comply with the Barrier-Free Act (Act on Promotion of Smooth Transportation, etc of Elderly Persons, Disabled Persons, etc) (koreisha, shogaisha to no idoto no enkatsuka no sokushin ni kansuru horitsu, particularly for new constructions and major renovations.
• Minimum room size and layout – under the Hotel Business Act, minimum usable floor area per guest is nine square metres (if room with a bed), and certain facility standards, such as sanitary and ventilation standards, are imposed. There was a minimum standard for number of rooms, but such standard under the Hotel Business Act was abolished.
• Health and safety considerations – hotels must comply with health-related regulations under the Hotel Business Act, which includes regular inspection and cleaning of water systems, waste disposal compliance and sanitation in kitchens and common areas.

Obtaining a building permit for hotel construction or refurbishment in Japan involves a formal building confirmation process (kenchiku kakunin) under the Building Standards Act. This process ensures that the proposed building complies with structural, fire safety, zoning, and other legal standards.

Procedure Overview

• Preliminary design and zoning check – architects and developers first verify that the intended hotel use and design are compatible with the site’s zoning classification, building-to-land ratios (FAR/BCR), height limits, and local ordinances. Informal consultation with local planning and building departments is highly recommended before submission.
• Design preparation and technical compliance – licensed architects prepare detailed drawings and calculations addressing structural integrity, fire protection, barrier-free access, environmental concerns, and mechanical systems. Special attention is given to requirements under the Fire Service Act, Barrier-Free Act, and local disaster prevention codes.
• Submission of building confirmation application – the application is submitted either to the local municipal building department or a designated confirmation and inspection agency.
• Review and issuance of building confirmation – the authority examines whether the building plan complies with the Building Standards Act and related laws. If compliant, a Building Confirmation Certificate is issued.
• Post-permit procedures – notification of the construction start must be submitted. Periodic on-site inspections during construction are required. A final inspection is conducted upon completion before the hotel can begin operations.

Average Timelines

• Simple refurbishment projects (eg, interior renovation without structural changes) are typically completed within two to four weeks, assuming the documentation is complete and no special approvals are required.
• For new hotel construction or major refurbishments involving structural changes, the statutory processing period for building confirmation under Japanese law is up to 35 days for standard projects. For projects requiring additional reviews, such as structural safety assessment or energy-efficiency compliance, the process may take up to 70 days, as the law permits an extension of 35 days in such cases.
• Designated confirmation and inspection bodies often process standard applications within three to five weeks in practice, although complex or large-scale hotel developments – particularly those subject to fire-department coordination or technical reviews – may require a total of 1.5 to 2.5 months or more.

It is worth noting that the statutory period refers only to the authority’s internal review time. It does not include the applicant’s time to correct or supplement documents.

In practice, close coordination with a licensed architect and early engagement with local authorities significantly improves approval speed and project success.

In Japan, the building confirmation (permit) process under the Building Standards Act is a technical and legal compliance procedure, not a discretionary or political one. As such, there is no formal public objection or appeal process available to third parties once a building confirmation has been issued, provided that the project complies with all applicable laws and regulations.

However, in practice, hotel developments, particularly in residential or mixed-use neighbourhoods, may still face indirect objections or resistance from local stakeholders. These objections typically arise outside the formal permitting process.

Who Can Object (Practically)

• Neighbouring landowners or residents – may voice concerns regarding noise, increased traffic, privacy, or change in neighbourhood character.
• Neighbourhood associations or community groups – can organise opposition campaigns and petition local governments or politicians.
• Local politicians or municipal council members – may intervene informally in response to local pressure, potentially slowing down related administrative procedures (eg, use change approvals, hotel licence issuance).
• Heritage or environmental groups – may raise concerns if the development affects protected areas or culturally significant sites, particularly in scenic or conservation zones.

Strategies to Limit or Manage Objections

• Early community engagement – proactively engaging with neighbours and community groups before submitting the building confirmation application can reduce opposition. Holding informational meetings or distributing explanatory materials can build trust and clarify project intentions.
• Site selection – selecting sites within commercial or semi-commercial zones, where hotel use is clearly permitted, significantly reduces legal and social risks. Avoiding densely populated residential areas or sites near schools or temples can minimise resistance.
• Design sensitivity – incorporating design elements that blend with the local landscape, reduce noise, and protect privacy (eg, setback distances, green buffers, soundproofing) can help appease local concerns.
• Political risk assessment – assessing local sentiment and political dynamics is essential, particularly in smaller municipalities where individual opposition can have outsized influence.
• Regulatory compliance and transparency – ensuring strict compliance with all applicable zoning, environmental and licensing requirements is crucial. Transparency in the application and construction process helps reduce suspicion and rumours.
• Working with local partners – involving local developers, architects, or consultants familiar with municipal expectations and informal practices can ease communication with stakeholders.

In summary, under Japanese law, while no formal objection mechanism exists once a building permit is issued, social and political opposition can impact timelines and public perception. Careful stakeholder management and proactive risk mitigation are key to avoiding delays and reputational damage.

In Japan, the conversion of hotels into other uses – or the conversion of existing buildings into hotel use – is subject to a number of regulatory requirements under various laws, depending on the nature and extent of the proposed change. While there is no blanket prohibition on such conversions, several key limitations and compliance obligations apply, as follows.

• Zoning and land-use regulations – zoning classification determines whether a particular land parcel can be legally used for hotel purposes. Converting a non-hotel building into a hotel requires confirming that the zoning permits hotel use (typically allowed in commercial, quasi-commercial, and quasi-industrial zones). Conversely, converting a hotel into residential, office, or retail use may require confirmation of compatibility with zoning and building use categories. If the proposed new use is not permitted under current zoning, conversion will not be allowed without a formal zoning change, which is highly difficult to obtain (as discussed previously).
• Change of building use under the Building Standards Act – if the intended use category of the building changes – eg, from hotel to residential or from office to hotel – a formal application for change of use must be filed with the local building authority. The proposed new use must comply with applicable structural, fire safety, barrier-free, environmental, and sanitary regulations, which may differ significantly from those applicable to the building’s original use. If the building exceeds certain thresholds (eg, the total floor area exceeds 200 square metres), a building confirmation (kenchiku kakunin) may be required even for internal renovations.
• Hotel business licensing requirements – for conversions into hotel use, compliance with the Hotel Business Act is essential. This includes obtaining a business licence from the local public health authority, meeting requirements for minimum room size, ventilation, sanitation, noise control and fire safety.
• Heritage and cultural property restrictions – if the hotel building (or the building to be converted) is located in a designated scenic, historic, or conservation area, or is a Registered Cultural Property, additional permits and preservation obligations may apply.

Condominium and Co-Ownership Restrictions

For buildings under condominium ownership, conversion into hotel use is typically restricted or prohibited by the management bylaws. Use of individual units as hotel rooms may violate both the Building Standards Act and civil regulations on residential use.

In summary, while hotel-to-non-hotel and non-hotel-to-hotel conversions are possible in Japan, they are subject to a multi-layered regulatory review process involving zoning, building standards, and operational licensing. Early legal and architectural due diligence is essential to assess feasibility and cost implications.

Regulation on Buildings

In Japan, buildings or sites designated as Cultural Properties under the Act on the Protection of Cultural Properties (bunkazai hogo ho) may be subject to restrictions on alteration, repair, relocation, or demolition, regardless of their use, including as hotels.

If a hotel building is designated as an Important Cultural Property or a Registered Tangible Cultural Property, renovations or structural changes generally require prior approval from the Agency for Cultural Affairs or the relevant local government. There may also be obligations to maintain the property in accordance with prescribed standards.

Regulations Due to Designated Districts

Even if the hotel building itself is not designated as a Cultural Property, location within certain legally designated districts may impose restrictions on design, construction, or alteration. Examples include the following.

• Landscape Districts (under the Landscape Act (keikan ho)) – if the hotel is located in such a district and changes to the building may affect an Important Cultural Landscape designated under the Act on the Protection of Cultural Properties, submission of a notice to the Agency for Cultural Affairs may be required.
• Traditional Building Preservation Districts – local governments may impose restrictions on alterations to buildings within such districts. If a hotel is located within such a district, these restrictions may apply.
• The Ancient Capitals Preservation Act (koto ni okeru rekishiteki fudo no tokubetsu hozon ni kansuru ho) – certain cities, including Kyoto, Nara, Kamakura, and Zushi, are designated under this law. For hotels located within these areas, construction work may require prior notification to, or in some cases permission from, the prefectural governor. If the property is within a Special Historic and Natural Preservation District, stricter regulations apply, such as requiring approval for building extensions, exterior colour changes, or installation of advertisements.

Hotel Business Act (ryokan gyo ho)

If hotel operations fall under the category of “hotel business” as defined under the Hotel Business Act (ryokan gyo ho), a licence from the prefectural governor is generally required under the Hotel Business Act. The term “hotel business” refers to a business that provides lodging to guests in a facility in exchange of lodging fees.

It should be noted that, in practice, even real estate leasing businesses such as monthly or weekly rental apartments may fall within the scope of “hotel business” and therefore require a licence under the Hotel Business Act. The Ministry of Health, Labour and Welfare, which administers the Hotel Business Act, identifies two key elements in determining whether a business constitutes a “hotel business”:

• the operator bears responsibility for maintaining the sanitary conditions of the facility; and
• the guest does not use the facility as their primary residence.

While the determination is made based on an overall assessment, it is generally considered that use of the facility for a period of less than one month is likely to be regarded as not involving a primary residence and may therefore fall within the scope of a “hotel business”. Conversely, if the period of use exceeds one month, and the guest is responsible for cleaning and other similar tasks, the operation is more likely to fall outside the scope of the Hotel Business Act.

To obtain a licence under the Hotel Business Act, an applicant must comply with the structural and sanitary standards set forth in the Hotel Business Act. Since additional standards may be imposed by local ordinances, it is common practice to consult the relevant public health centre in advance when applying. Furthermore, it should be noted that the party responsible for obtaining the licence may differ depending on the structure of the operational scheme. The Ministry of Health, Labour and Welfare takes the view that the entity in charge of maintaining sanitary conditions at the facility should be the one to obtain the licence. Accordingly, it is also advisable to consult the relevant public health centre in advance on this matter, particularly where the scheme is complex.

Under the Hotel Business Act, hotel operators are required to prepare a guest register and retain it for three years from the date of its creation.

It is common for facilities licensed under the Hotel Business Act to be publicly listed on the websites of prefectural or municipal governments.

Residential Accommodation Business Act (jutaku shukuhaku jigyo ho)

If hotel operations fall under the “private lodging business” (commonly referred to as the “minpaku business”) as defined under the Residential Accommodation Business Act (jutaku shukuhaku jigyo ho) (commonly referred to as the “minpaku shinpo”), a licence under the Hotel Business Act is not required; a notification to the prefectural governor under the Residential Accommodation Business Act is sufficient.

The term “private lodging business” refers to a business that provides lodging to guests in a residence in exchange for lodging fees, with the total number of lodging days limited to 180 per year. While the scheme lacks flexibility compared to a licence under the Hotel Business Act due to restrictions such as the requirement that the facility be a residence and the limitation on the number of lodging days, it allows operators to begin hotel operations with fewer regulatory burdens since the notification process is generally less burdensome than licensing. Moreover, it offers certain advantages, such as allowing hotel operations in residential-only zones and not requiring on-site staff. As a result, hotel transactions utilising the Residential Accommodation Business Act have been increasing in recent years.

Under the Residential Accommodation Business Act, hotel operators are required to prepare a guest register and retain it for three years from the date of its creation. In addition, if the operator is to be absent from the residence, it is mandatory to entrust the management of the residence to a registered residential accommodation management business operator.

In some designated areas, short-term rental operations may also be conducted under the National Strategic Special Zone system (Tokku Minpaku) under the Act on National Strategic Special Zones (kokka senryaku tokubetsu kuiki ho). Unlike the standard private lodging business, Tokku Minpaku allows for longer operating periods (more than 180 days per year) and is subject to requirements different from the standard private lodging business, such as different zoning requirements, depending on local regulations. Unlike hotels licensed under the Hotel Business Act, Tokku Minpaku requires approval from the local government under a special certification process, with specific conditions such as minimum stay requirements (typically two nights or more) and pre-submission of operational plans.

Act on Development of Hotels for Inbound Tourists

Hotel operators may also choose to register under the Act on Development of Hotels for Inbound Tourists, although this registration is voluntary, unlike the mandatory licence under the Hotel Business Act. To register, applicants must meet not only the Hotel Business Act standards but also additional facility and staffing requirements and must prepare and submit accommodation terms and conditions (yakkan).

In operating a hotel, it is also possible to obtain registration under the Act on Development of Hotels for Inbound Tourists; however, such registration is voluntary, unlike the licence under the Hotel Business Act. To obtain the registration, an applicant must satisfy not only the standards under the Hotel Business Act but also additional facility and personnel requirements. Furthermore, the preparation and submission of accommodation terms and conditions (yakkan) to the Commissioner of the Japan Tourism Agency are mandatory.

In Japan, while there is no hotel-specific sustainability certification required by law, hotels are subject to a number of environmental and sustainability-related legal frameworks. In addition to voluntary certification systems, hotel developers must also comply with various laws that aim to protect the natural and built environment.

Certification Systems

CASBEE (the Comprehensive Assessment System for Built Environment Efficiency) is Japan’s government-endorsed building sustainability assessment system. It evaluates factors such as energy efficiency, environmental impact, and indoor comfort.

In addition, the DBJ Green Building Certification, developed by the Development Bank of Japan, is widely used to assess buildings from an ESG perspective, including environmental considerations, disaster preparedness, and tenant satisfaction.

International certifications such as LEED and BREEAM are also obtained for hotels, particularly in developments aimed at attracting international guests or investment, to align with global environmental standards.

General Legal and Regulatory Frameworks

Hotels in Japan may be subject to the following key laws and regulations, among others.

• The Energy Conservation Act (sho ene ho) – this requires large-scale buildings to adopt energy-saving designs and practices.
• The Natural Parks Act (shizen koen ho) – if a hotel is located within or near a National Park, Quasi-National Park, or Prefectural Natural Park, restrictions may apply to protect scenic and ecological value. Construction, alteration, or advertising may require prior approval from relevant authorities. This can be an issue for development of resort hotels in such area.
• The Landscape Act – local governments can designate Landscape Districts and regulate construction, external design, colours, signage, and lighting. Hotels in these districts may need to obtain advance approval or submit notifications to ensure harmony with surrounding scenery.
• The Nature Conservation Act (shizen kankyo hogo ho) – this aims to preserve areas of significant natural value, including wilderness and natural scenic areas. If a hotel development affects designated conservation areas, permits or compliance measures may be required to avoid environmental degradation.

In addition, some municipalities impose further sustainability or environmental obligations through local ordinances.

Landscape Interests and Legal Recognition

Although Japanese law does not recognise an independent “right to landscape”, the Supreme Court acknowledged in 2006 that residents’ interest in enjoying favourable scenery – keikan-rieki – can be legally protected depending on the circumstances. Accordingly, when developing hotels, especially in areas with valued landscapes, it is important to take account of residents’ such interest and avoid undue harm to the surrounding visual environment.

Share Deal

In a share deal, the target company’s shares are transferred to the buyer, but the legal entity that employs the hotel staff remains unchanged. Therefore, employment relationships are not affected, and there is no need to obtain employee consent. All employment contracts, rights, and obligations continue uninterrupted.

Asset Deal

In an asset deal, where the hotel business is transferred to a different entity, the employment relationships do not automatically transfer. Under Japanese law, employment contracts may only be transferred with the individual consent of each employee. If the buyer wishes to retain specific employees, it must negotiate new employment agreements with them. The seller must consult with affected employees in advance, and any dismissals arising from the transaction must comply with Japan’s strict rules on lawful termination, including objective justification and procedural fairness.

Company Split

A company split is a statutory restructuring method governed by the Companies Act, and although it functions similarly to an asset deal (involving the transfer of part or all of a business), it is treated separately under Japanese law. This is because the transaction is executed under a special legal framework and involves an automatic statutory transfer of assets, liabilities, and contractual relationships (including employment), and it requires compliance with specific procedural requirements not applicable to ordinary asset sales. In a company split, the Act on the Succession of Labour Contracts upon Company Split (rodo keiyaku shokei ho) applies, and provides for the following:

• if the relevant business division is clearly defined and transferred, the employment contracts of employees belonging to that division transfer automatically to the successor entity;
• the transferring company must notify employees in advance, and provide an opportunity to object;
• in some cases (eg, partial business transfers), employees may opt out of the transfer and remain with the original employer; and
• the company must also consult with the labour union or employee representatives before implementing the split.