🎙️ | Peter Douglas, Japanese Hospitality and Nozawa Onsen

Ep. 53

Apologies, I forgot to send this last week, so forgive me! But a very special guest on the podcast, Peter Douglas!

We chat:
♨️ The Japanese onsen tourism industry,
🗾 Differences between domestic and foreign tourism in Japan,
✈️ and his transition from the financial services and asset management industry in Singapore to hospitality in Japan.

Peter has some unique experiences and I’ve loved listening to them, so I’m sure you will too.

Enjoy!

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Listen to this episode on Apple Podcasts, Spotify, Stitcher, Castbox, Google Podcasts, or on your favourite podcast platform.

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My takeaways and lessons:

• Bullish on Nozawa Onsen
  “I think the future of this village generally is very interesting. […] there’s 600 ski resorts in Japan, and most of them are probably not worth more than an hour or two. There’s probably 15 or 20, which you would consider as a destination, as an inbound traveler. You would choose Nozawa Onsen because it is a mountain village, because it has this long history, because it has a distinct culture. So it is crucial for the village that it maintains that.
  But with growing popularity, with more people coming in, more people investing, with everybody who invests having their own vision of how it should be. So the challenge for the village is to keep its character, and that could go either way. I’m on balance, optimistic. It’s actually quite a wealthy village, so the wherewithal, both in some of the local families’ pockets here, and at the village level, the wherewithal is there to put some teeth behind strategies to keep the village doing what it’s doing.
  It’s a very sporting village, around 3,400 residents that are 14 Olympians. and heaven knows how many international, national athletes, which means that, a surprising proportion of the village when they were younger, competed against us white people and probably beat us. There’s a certain sort of confidence about the village and it has a reputation in this region for being very commercial. So I think it’s got the tools to keep its culture and tradition, but that’s absolutely the challenge. It’s gonna get a lot more expensive. It’s a small village. You can’t expand up the mountain because it’s inside the ski resort and some of it is public land. You can’t expand down because that’s rice fields and it’s almost impossible to rezone a rice field, so it’s a bit of a pressure cooker.

  It’s gonna get more expensive. How it manages that while continuing to provide accommodation for young people I think is an interesting challenge. So again, it’s not about us, it’s about the village.

• Don’t think, Just do!!!
  “one of his [Audley Twiston Davies’] favourite sayings was “When you have no idea what to do, for God’s sake do something”. which is just the best bit of business advice possible, cause it may or may not be right, but just making a decision empowers you, whereas sitting around going, “I have no idea”, you feel you are the victim.

• Remote working paradise for me!
  “we’re just over two hours from Tokyo if you need to be there, a gorgeous environment; all the things it says on the brochure. And with pretty much the whole of the Japanese countryside on fiber optic internet, you can work very effectively remotely. So there’s gotta be four or five folks in the village, who have Tokyo-based or international-based responsibilities that choose to live full-time here. We get a steady stream of people coming here for 2, 3, 4, 5 months doing their thing here. And I think that is gonna be such a big thing that’s just gonna grow”

Show Notes:

[00:00:31] – [First question] – Peter’s and Nozawa’s Background
[00:02:40] – Why did Peter go from Finance to Hospitality and from Singapore to Japan?
[00:05:54] – And did his skills transfer?
[00:07:23] – What’s it like running a large accommodation provider in a small village?
[00:10:12] – Comparing domestic and foreign tourism for Nozawa Onsen
[00:12:42] – How are Japanese online travel agents different?
[00:14:49] – The seasonality around ski mountain hospitality
[00:19:20] – Why diverse teams are more successful
[00:20:25] – Is the flight of rural residents to larger cities a problem?
[00:22:15] – How Nozawa navigated the past 3 years
[00:28:36] – The future of Nozawa
[00:31:00] – Most undervalued life experience?
[00:32:45] – Influential people or books?
[00:36:16] – How did Peter end up in Asia?

Connect with Peter:

• Nozawa Hospitality

• Connect with Peter on LinkedIn

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Transcript

[00:00:31] Kalani Scarrott: Alright, how are we doing? My guest today is Peter Douglas. Peter is the senior executive of Nozawa Hospitality, a boutique provider of accommodation services in the unique Mountain Village of Nozawa Onsen. He’s responsible for funding and financial strategy and runs the business. But in today’s super fun conversation, we cover the Japanese onsen tourism industry, Nozawa hospitality, and his transition from financial services and asset management to hospitality in Japan and the reasons why and the story there.

[00:01:00] So super fun and varied conversation. I had an absolute blast and I’m sure you will too. So please enjoy my conversation with Peter Douglas. So Peter, thank you so much for coming on today, but maybe just to set some context, could you briefly explain maybe your background and also Nozawa hospitality as it is today, and then we’ll dive into the details in between.

[00:01:22] Peter Douglas: Well, hello. Thanks for the opportunity. My name is Peter Douglas. I’m British. I am 60 something. 62, I think; no, 61 and, born, and raised, in the UK. but I spent most of my adult life overseas, Japan for three years in the 1980s, a year in France studying, 20-21 odd years in Singapore and now eight years in Japan.

[00:01:51] Most of my career I spent in the asset management industry. Initially, the conventional industry, managing mutual funds. And then for 15 years, I ran my own consulting business in Asia. I did a lot of work with industry groups, et cetera. and then for all sorts of reasons which I guess we should go into, decided to do something completely different. Nozawa Hospitality now is an accommodations business, so we own and operate various different types of accommodations from really simple one-bedroom apartments through to super high-end hotels. all in Nozawa Onsen, which is a mountain resort in the north of Nagano on the main island of Japan.

[00:02:39] Kalani Scarrott: Yeah. So how the, how the change from finance to hospitality and also geographically you said, you mentioned you had a bit of time in Japan, but Yeah.

[00:02:47] Peter Douglas: So geographically I’ve always had a bit of touch with Japan, and through my work in the finance business, I would visit Tokyo frequently. so moving to Japan actually didn’t really feel like a big change. It felt very natural from a lifestyle and personal point of view.

[00:03:08] And Singapore was a wonderful place to run a knowledge business, and a great place to bring up my kids. But with all due respect, it was not a real home. When you come to Japan, it’s everything that Singapore isn’t.  So the move felt very natural. However you can always explain any sort of life change, with supreme backward-looking rationality!

[00:03:30] Basically [the transition] was kind of serendipity. Through my hedge fund research business, I became very good friends with a Singapore-based hedge fund manager who made vast amounts of money in the Lehman shock, and he decided to want to set up a family office. A family office is, as you know, basically an investment management organization that only has one client.

[00:03:55] He asked me to run that for him.  This is going back 12, 13 years.  We made all sorts of investments in all sorts of industries, in all sorts of weird and wonderful parts of the world, with a normal distribution of outcomes. So some worked really well. Most did more or less what they were supposed to do, and some, well, some didn’t.

[00:04:15] One of those investments [that wasn’t working] was, in Japan here. The thesis then was no more sophisticated than, “Japanese real estate looks cheap”. But what could make it expensive? And at that point, the only obvious segment that we could see was inbound tourism. Japan has always felt like absolute tourist heaven, but back then there was like no more than two or 3 million tourists a year coming in.

[00:04:36] It made no sense. So we decided we wanted to invest in the hospitality industry. We looked at Niseko as a proof of concept that you could build a business purely on inbound business. We didn’t particularly want to be in Niseko for all sorts of reasons. We did lots of desk work and we chose Nozawa. We bought some properties.

[00:04:51] In our glorious naivety we thought we’d buy a few properties, we’d pay somebody to run them, and we would sit back and collect the checks. Couldn’t be easier! That didn’t work so well; and so I gradually got more and more involved trying to make the thing work. I then, got rather tired of the monthly commute between Singapore and, butt-nowhere Nagano, and realized that actually from a personal life stage point of view as well, this move made sense.

[00:05:20] As I mentioned, it felt intuitively right.  It made total sense from a business point of view; so I basically moved full-time here and full-time into managing this business. So yes it was a complete change, but in some ways it was very osmotic.  It felt absolutely right after 30 years which is a long time to be in any one industry.

[00:05:39]  Financial services is an intellectually stimulating and pretty intense game and you don’t wanna be the old guy in the corner who used to know what he was talking about. The secret of a long life is know when it’s time to go.

[00:05:54] Kalani Scarrott: Yeah, that’s true. So how did the skills transfer across? How much was a fresh start and how steep was the learning curve? 

[00:06:01] Peter Douglas: The learning curve was, well, vertical. If you’re into bouldering, it was more like an overhang than a vertical. What was the transferable skillset? Well, the main transferable skillset was running a small business, that’s pretty much the same as everywhere else.

[00:06:16] It’s about dealing with people, trying to get a fairly random bunch of people to work as a team. So it’s about a very general kind of small business skillset. Everything else was a learning curve. I knew nothing about the Hospitality Business. I knew nothing about the real estate business. Never ran a business in Japan,

[00:06:33] never had to run a business in a foreign language…  keep that list coming! But actually, from a very selfish point of view, that was great because it means that, every day is an intellectual challenge. So, you know, it was actually very refreshing in a way, though not sure it was quite so wonderful for my shareholder!

[00:06:51] Kalani Scarrott: I was gonna say, and you’re looking in good nick, for your sixties, but most people are retiring. You’ve sort of cracked it, had a new start.

[00:06:56] Peter Douglas:   It drives me nuts. People I know in this financial services industry, go, “oh yeah, Pete’s retired to a ski resort in Japan”. I’m working! I’m working harder than I ever worked before.  You know, we live in this very sort of traditional rural Japanese community, and the philosophy really is, you stop working you’re basically just waiting to die, so you might as well carry on working.

[00:07:23] Kalani Scarrott: totally agree. and yeah, given it’s a relatively small community, but you’ve got 15 plus properties and the whole community is just over 3000 residents. So how is it actually running the largest accommodation provider in the village? What’s that like? 

[00:07:35] Peter Douglas: So, first of all, I’m not sure we are necessarily the largest, I mean, I genuinely haven’t counted. Maybe we are, maybe we aren’t. This place has been a vacation destination for 250 years. It was a summer resort for folks from the cities, cause it’s in the mountains, it’s cooler. and then a hundred and something years ago

[00:07:52]  they started skiing, so they became a ski resort. There’s a long history of welcoming guests here and there’s well over 200 accommodations in the village. So, you know, we may be one of the largest, but we by no means dominate. We are nowhere close to a monopoly. We have to, (maybe I’m doing it right, maybe I’m not) but what I think is we have to work very hard to integrate and be part of the community.

[00:08:24] We’re outsiders. But we’ve been made very welcome. It’s actually surprisingly a very good business environment here. But, you know, we’re outsiders. A lot of our local friends and neighbours are fourth, fifth, sixth, seventh, eighth-generation residents. Obviously, I didn’t go to primary school with anybody, so we have to be very careful about local relationships,  But that all works very well.

[00:08:47] Being visible is the same as if you are visible, in any industry.  You’ve gotta be the guy that keeps his nose clean. You can’t cut corners. If you are running one B&B on the street corner, you can maybe be a  bit more flexible in your interpretation of regulations,

[00:09:05] but we can’t do that. The challenges and the objectives and the strategy don’t really have much to do with us being big or small. it’s much more absolute in the sense that I need to make sure that my shareholder gets a return on his money.. And… you think the hospitality business is about making guests happy?

[00:09:23] It’s not, it’s about making staff happy. If that works, your guests will be fine. It’s about taking the business from being very winter focused to being year-round.  When we started, we’d make money in the winter and then try not to lose too much in the summer. So moving to the point where we make a bit of money year-round,

[00:09:43] has been a big challenge and obviously through the pandemic where there were no inbound guests at all, wrestling the company to a point where we can attract and service and make satisfied domestic guests as well. So I guess we’d spent, apart from some community relations and being good neighbours, we actually spend more time looking at our navels rather than thinking about what the outside world is thinking of us.

[00:10:12] Kalani Scarrott: There are a couple points I wanna touch on there, but I’ll start with domestic tourism versus foreign tourism. I saw you post on LinkedIn today, that two thirds of tourists there are, yeah. Japanese local domestic tourists. But how different are the needs of domestic tourists compared to international?

[00:10:25] Because I’ve actually got a mate happens to be going to Nozawa soon, so I was like, oh, I’ll ask and see how he goes. So yeah. 

[00:10:31] Peter Douglas: Great, you should put us in touch!  So that’s a very smart question. Let me take it from a slightly different angle. You know, our business is predicated on making our properties attractive to inbound guests;

[00:10:48] having a service that makes sense to an international audience, and having properties which are physically comfortable for an inbound audience. What we’ve found is that when we’re looking after Japanese guests, that actually is also very attractive for middle-class urban Japanese as well.

[00:11:06] Like most conclusions, it’s blindingly obvious when you think about it. The needs of urban middle-class Japanese are surprisingly similar to the needs of middle-class urban Sydneyites, Singaporeans, Honkies, whatever. So once our Japanese guests are here, I’d like to think they are pretty happy and they keep coming.

[00:11:22] And I guess they are. The service delivery – well, you know, there’s no way we can be a full-on high-end Ryokan, a traditional Japanese inn, because we’re a bunch of foreigners. but we can provide friendly, flexible, helpful service. So we don’t differentiate too much in the service delivery between Japanese guests and inbound guests.

[00:11:49] We might have to tweak the breakfasts a bit. That’s all.  The real difference is in the marketing and the backend. The channels to reach Japanese guests are very different, both in terms of, not so much advertising, but the advertising communication channels, and the booking and reservation channels are completely different.

[00:12:09] Japanese online travel agents work very differently from international online travel agents. That’s a whole different skill set. And then the way that Japanese book is different. Much more high touch. They require much more information. Japanese websites and information sources tend to be intensely information rich.

[00:12:29] It’s not just about translating them. Japanese tend to stay for one or two nights, whereas inbound guests, cause they’ve made the effort to fly to a different country, they’ll stay for longer, so the economics are different.

[00:12:42] Kalani Scarrott: Yeah. Interesting. Okay. just one point there. I don’t know if you know, but I’ll just go on the fly here.

[00:12:47] Japanese online travel agents, very different. How, how so? 

[00:12:51] Peter Douglas:  Well, there’s a joke amongst long term Japan residents that the biggest book in Japan is the Book of Because…  because there are so many questions about why does this happen this way in Japan? And the answer is “because”!  So, partly because (going back to comment about information intensity), the amount of information that you need to upload and keep fresh on something like Rakuten or Jalan is of a different order than what you need to keep live on Booking.Com or ….. Maybe..

[00:13:22] And the way the booking is made is a different premise. This is is a hospitality industry detail: Most of the hospitality industry globally works on booking a hotel room, and you know, it probably says you can get two or three people in there, but you’re charged for the hotel room.

[00:13:46] In Japan, you’re charged per person. So the fundamental premise of how the booking goes through is different. I’ll tell you what, another interesting thing too: you’ve probably heard about how Japanese technology is a barbell, some super advanced stuff like robotics and all the rest of it, and some super backward stuff, which is most office technology.

[00:14:06] So we have one of these OTAs where you, as the customer, book online through their website or through the app on your phone or whatever. And then they sent me a fax to confirm it.  So basically, we have to have a couple of staff who look after our reservations and revenue management

[00:14:25] and they need a lot more local support dealing with Japanese distribution. That really was a cliff to climb [in pivoting the business to domestic] but it’s worth it because, blindingly obviously, Japan is a big wealthy country and we’re in it, so we might well market to them.

[00:14:41] Kalani Scarrott: Fair enough. I wouldn’t even know how to send a fax though.

[00:14:43] Peter Douglas: Well, you know, I, I’d kind of forgotten, but, it’s like riding a bicycle ^ it comes back to you.

[00:14:49] Kalani Scarrott: and seasonality around your work. So you mentioned from winter focused on going to summer. How have you transitioned? Is that a case of marketing or how have you approached that?

[00:14:57] Peter Douglas: It’s a bit of marketing, although I’m not sure that our marketing or any hotels marketing is particularly effective at getting people to change their travel habits.

[00:15:05] it’s much more holistic that, you know, the village generally gets more and more attractive. Japanese guests have always come here in the Summer, because it’s cooler than the cities. They can walk around in their yukata, their cotton dressing gowns. They can do lots of onsen baths. They can enjoy the kind of rural mountain feel,

[00:15:25] it’s very different from the city. But the village has been regular at building on that.  So the ski resort’s, main gondola operates for four months during the summer, takes people up the mountain. There’s a cafe up there, there’s nice gardens, stuff to do. Going back to my earlier comment, now, urban Japanese who like the idea of coming to a kind of very rustic environment with lots of hot springs, blah, blah, blah, can do all that..  and still find a dozen places they can get a great coffee, stay in a room that’s got an attached bathroom, go out and have meals in half a dozen nice restaurants.

[00:16:01] I wish I could say it’s just us, but it’s the village holistically. Obviously, we make a bit of an effort. We keep all our properties open through the green season, whereas a lot of the foreign-owned properties kind of don’t, although that’s changing slowly.  Zooming out to a more helicopter level, 

[00:16:22] one of the reasons that it’s a joy running a business here is the place, the village. There’s plenty of politics and plenty of people have strong ideas, but basically the village is all shooting in the same direction. The ski resort, the village administration, the accommodation businesses, the F&B businesses.

[00:16:40] There’s lots going on. there’s people coming into the village, young people that grew up here, went to the cities coming back; everything kind of reinforces everything else. We definitely couldn’t do this all on our own.

[00:16:55] Kalani Scarrott: Yeah. And you mentioned before about keeping staff happy.

[00:16:58] So one, how do you do that? And two, how do you manage with seasonality of staffing? So yeah, how do you approach that?

[00:17:02] Peter Douglas:  It’s a real challenge. but moving to year round operation also allows you to retain a slightly bigger, and hopefully better, core team. It’s very hard when, you know, everything stops at the end of the winter.

[00:17:18] and then you’ve got a standing start in the autumn. Keeping a core team going year-round is really helpful with skills transfer. So when we get our winter staff coming in, there’s people that know what they’re doing that can train them. You obviously can service guests who come in the green season, but there’s a little bit of slack to do

[00:17:36] maintenance and special projects and stuff. But the seasonality of the staff is a big issue. We have 13 staff year round and we probably, at the moment I think we have 41 as a winter team.  Finding all those people, training them, managing them is probably one of the biggest challenges that my general manager has.

[00:18:00]  Even that is getting a bit easier. As long as its reputation grows, it’s not only more attractive for holiday makers, it’s more attractive for people that want to come and experience the season here, so it gets easier. You asked earlier about skills transfer; one of the things I noticed, you know, when I was managing a team of financial analysts, The more diverse the team, the better the outcome.

[00:18:23] and it’s the same with running a, hopefully highly motivated, but low-skill team in the hospitality business, the more diverse the team, the better the outcome. So we make a conscious effort now to try and get as mixed a team as possible. Back in the day, we probably relied too much on middle-class white kids on a working holiday visa, and God bless their little cotton socks.

[00:18:50] they very often converge on the lowest common denominator. So right now we have Australians, we have Brits, we have Kiwis, we have Americans, we have some Mongolians (if you can find that on a map), we have Taiwanese, obviously we have Japanese. Diversity is the only free lunch in management.

[00:19:11] Kalani Scarrott: Yeah, I’ve got a few mates doing working holiday visas in snow resorts and yeah, we do tend to take the piss even I’ll admit that. 

[00:19:18] Peter Douglas: Well, we noticed.

[00:19:20] Kalani Scarrott: but yeah, so the more diverse the team, the better the results. Why, why do you think that is maybe?

[00:19:25] Peter Douglas: This is pop psychology. I have absolutely no genuine idea.

[00:19:28] My working assumption is that, first of all, with a knowledge-based team, you have different approaches to a problem. The more ways you look at a problem, the better solution you get. And I also suspect there’s a little bit of subconscious competition.

[00:19:45] If you’ve got a dozen of your Uni mates from Sydney, it’s about who can get drunkest quickest.  But if you’ve got a mixed team, then the little Chinese bloke doesn’t want to be seen as inferior to the rugby playing Aussie.   It’s just pop psychology, who knows?

[00:20:04] And it’s diversity by age, by cultural background… and social background is huge. Funnily enough I don’t think gender and ethnicity are particularly relevant. although they’re obviously the Instagrammable ones. I don’t really know, but it works. 

[00:20:25] Kalani Scarrott: no, fair enough. and with staffing, is it something you’ve noticed or even been affected by, is the flight of rural residents to larger cities, is that something that you’ve really come across or noticed?

[00:20:35] Peter Douglas: We kind of – slightly smugly – see it in the other direction.

[00:20:40] Well, very noticeably actually. and it’s building.  Local kids who’d gone to work in the cities now see that they can come back. They can afford a nice big house. They’ve got grandpa and grandmother to babysit. The cost of living is diddly-whatsit, and they can make a good living. So we’re getting lots of what Japanese call U-turners.

[00:20:59] We’re also getting I-turners, which is Japanese kids from elsewhere in the world just coming cause they think it’s a fun place to be; and with lots of young people coming back, there’s great dating opportunities and stuff, so that’s a real thing, although the village population is still slightly declining because we have a lot of old people, and old people die,

[00:21:22] it’s declining way, way more slowly than it was 10 years ago. The other thing which we’re seeing, which we could have seen coming (and it’s surprising that Japan was so slow), is the rise of remote working. It’s a nice place to live. Lots of place to a get decent coffee,

[00:21:39] we’re just over two hours from Tokyo if you need to be there, a gorgeous environment; all the things it says on the brochure. And with pretty much the whole of the Japanese countryside on fiber optic internet, you can work very effectively remotely. So there’s gotta be four or five folks in the village, who have Tokyo-based or international-based responsibilities that choose to live full-time here. We get a steady stream of people coming here for 2, 3, 4, 5 months doing their thing here. And I think that is gonna be such a big thing that’s just gonna grow and.

[00:22:15] Kalani Scarrott: Okay, cool. And you’ve been at Nozawa Hospitality for a while now, but could you walk me through just how you navigated the past three years?

[00:22:20] So with the pandemic, what were the challenges? What were the solutions? Yeah. , you still got your hair, so…

[00:22:25] Peter Douglas: Not much of that!  So look, I guess here we got some stuff right, some stuff wrong. Right at the beginning of the pandemic, a 30 second Google search would tell you there’s no such thing as a three-month pandemic; 

[00:22:40] pandemics last years, not months. So, first base, was to make the decision that crawling under a rock and waiting for a few months wasn’t an option. We had to make some changes. and the main one, as I say, was to pivot from being an international-focused business to being domestic.

[00:22:59] And we’ve done that, not perfectly, but reasonably well. We were very lucky to be operating our business in Japan; so very quickly there was very strong public sector support. In the first half year of the pandemic, we could furlough a lot of our staff. and the government was paying pretty much everything.

[00:23:23] We got “just do it grants” –  just … “here have some money”. We got subsidized loans from the government. I raised a little bit more money from my shareholder. I stopped taking a salary for a year, and, the remaining staff we had, we basically put everybody onto doing sort of maintenance and stuff, so we weren’t paying contractors, but we were still using our staff productively.

[00:23:47] So the first six months we really were ducking and diving. But again, if you are used to running a small business, ducking and diving is what it says on your t-shirt! I had to change my GM [General Manager]. That was the really the most painful change. We had a very good, professional general manager leading into the pandemic,

[00:24:05] however she’d grown up in the hospitality industry, she was quite mature, and clearly was not gonna be comfortable ducking and diving. So we brought in a much younger GM, with less experience, but who had studied hospitality, who saw this huge career opportunity.   So changing the operational management to a very, very flexible, experimental approach helped. And then the Japanese government supported domestic tourism with various incentive packages. Japan actually managed the pandemic really well, and for example, people’s mask discipline was pretty much universal,

[00:24:51] so a lot of it was just, we were in the right place thank heavens! But yeah, an interesting experience.

[00:25:00] Kalani Scarrott: Is there anything you’d do differently?

[00:25:02] Peter Douglas: Managing through the pandemic… well, I mean, I’m sure the stuff I should have done differently. I can’t think of anything that was an obvious landmine that we trod on. Well, we also, the other thing I’ve forgotten to mention, we also did a very, substantial real estate project. We took a 25-room hotel that we owned and we turned it into eight high-end apartments which we put up for sale.

[00:25:28] So that maintained quite a bit of activity, kept some money flowing, and we generated some money from real estate sales, which was helpful. I don’t think I did anything perfectly by any means, but I can’t think of anything I specifically got very wrong.

[00:25:44] Kalani Scarrott: Fair enough. Yeah. And how do you view growth going forward now? How much has that changed?

[00:25:50] Peter Douglas: We’re a bit of an interesting case, in that, Nozawa Onsen’s popularity is growing rapidly.

[00:25:57] There are lots of people trying to get in, lots of people building their businesses here. My shareholder, scrolling back to 12, 13 years ago when we started, took a very scattergun approach to his investments globally. But over the last decade, conversely, has focused down hugely to a couple of major sectors,

[00:26:15] and this [Nozawa Hospitality] to be honest, is a fleabite, tiny part of his portfolio. He has no strategic need to be Japan and certainly no strategic need to be in deep rural nowhere Japan. And at some point I would like to go off and do my own thing. So part of my brief is to lighten our balance sheet. so basically get his capital back and then some, and move the company to a operation and management business,

[00:26:48] Basically doing what we do, but increasingly moving to fee-based rather than just selling hotel beds.  That project of taking a big Ryokan and turning it into apartments was a way to lighten my balance sheet. So probably more of that. And hopefully in three or four years time, what I would hope is that we own a lot less real estate than we do now.

[00:27:16] Conversely, we will be managing and operating more properties than we do, and that we are even more a year round business with our revenues increasingly smoothed over the year, and with a customer base that is much more evenly balanced between domestic and inbound.  The composition of that inbound is probably going to be more like two-thirds Asian middle class, one-third Australian in the long haul, I suspect.

[00:27:53] Kalani Scarrott: So you mentioned you head off. Where do you want to go? What do you wanna do after?

[00:27:56] Peter Douglas: Well, I’m physically not moving anywhere. This is home. I’m not going anywhere. but separately from Nozawa Hospitality, my family owns a hotel here, which my wife operates. That’s a pretty good business, so we could perfectly, comfortably develop that, or I dunno, do something completely different, but, but this is home.

[00:28:15] I’m absolutely not going anywhere. .

[00:28:18] Kalani Scarrott: Living a good life. I’m very jealous, I’ll admit.

[00:28:21] Peter Douglas: We live up the mountain. The village is 600 meters above sea level, the top of the mountain is 1,700 meters, and we live at about 1200 meters, about two thirds of the way up the mountain.  I really do kind of live the mountain life and I absolutely love it.

[00:28:36] Kalani Scarrott: Very good. and is there anything we haven’t talked about today that’s consequential about the future of Nozawa hospitality in your opinion?

[00:28:41] Peter Douglas: I think the future of this village generally is very interesting. So you would come here… you know, there, there’s 600 ski resorts in Japan, 

[00:28:54] and most of them are probably not worth more than an hour or two. There’s probably 15 or 20, which you would consider as a destination, as an inbound traveler.  You would choose Nozawa Onsen because it is a mountain village, because it has this long history, because it has a distinct culture. So it is crucial for the village that it maintains that.

[00:29:20] But with growing popularity, with more people coming in, more people investing, with everybody who invests having their own vision of how it should be. So the challenge for the village is to keep its character, and that could go either way. I’m on balance, optimistic. It’s actually quite a wealthy village, so the wherewithal,

[00:29:40] both in some of the local families’ pockets here, and at the village level, the wherewithal is there to put some teeth behind strategies to keep the village doing what it’s doing. It’s a very sporting village, around 3,400 residents that are 14 Olympians. and heaven knows how many international, national athletes, which means that, a surprising proportion of the village when they were younger, competed against us white people and probably beat us. There’s a certain sort of confidence about the village and it has a reputation in this region for being very commercial. So I think it’s got the tools to keep its culture and tradition, but that’s absolutely the challenge.

[00:30:26] It’s gonna get a lot more expensive.  It’s a small village. You can’t expand up the mountain because it’s inside the ski resort and some of it is public land.  You can’t expand down because that’s rice fields and it’s almost impossible to rezone a rice field, so it’s a bit of a pressure cooker.

[00:30:42] It’s gonna get more expensive. How it manages that while continuing to provide accommodation for young people I think is an interesting challenge. So again, it’s not about us, it’s about the village.

[00:30:54] Kalani Scarrott: Yeah. Fair enough. Okay, so I’m very conscious of your time, so I’ll get into my closing round of more personal questions if that’s cool with you.

[00:31:00] most undervalued life experience that university-aged students don’t give weight to. So what’s an underrated skill or an experience that you think either they should have or what’s something you wish you had?

[00:31:07] Peter Douglas: I’ve been thinking about this, actually, funnily enough, I was talking about this to my wife this morning.

[00:31:12] I think the most valuable life experience that I had, was this: I was a complete layabout as a kid. I spent, after I graduated from high school. I basically bummed around Europe doing odd jobs and not much really for two years before I went to university. Totally unstructured, didn’t look particularly great on the CV.

[00:31:34] And when I finally went to university, I was a bit disjointed because there were all these kind of freshly scrubbed middle class kids and it was this kind of grungy traveler type. But actually having a bit of totally unstructured time when you are younger to work out who you are? invaluable.

[00:31:54] And over the years, with hindsight, it’s been very powerful, though you have to have years of hindsight to see that. So I think the most undervalued experience for young people is, actually to, to create unstructured, unsupervised, unmanaged, time and space – just to lose yourself and find yourself again.

[00:32:18] It’s a bit philosophical.

[00:32:19] Kalani Scarrott: No, serendipity’s good.

[00:32:22] Peter Douglas: What else do I think is important? If you know yourself, then you don’t have to ask anybody else that question cause you already know the answer. For me, life needs to be interesting. It’s always been about the intellectual fascination.

[00:32:38] Keep learning. and make sure new things keep happening in your life. But for some people, well, you know, everybody’s different

[00:32:45] Kalani Scarrott: Yeah. Yeah. Okay. I still love that. and for you, any books or even people that have been influential in shaping your worldview?

[00:32:54] Peter Douglas: Oh gosh, I used to read books. Voraciously when I was younger but I’ve kind of got out of the habit.

[00:33:02] Shaping my world view? Well, during part of my kind of unstructured time, I read far too much Herman Hesse; Steppenwolf, The Glass Bead Game, all that good stuff, and all the books that defined my kind of generation like Zen and  the Art of Motorcycle Maintenance.

[00:33:23] I worked nights in a petrol station for a while, that gave me a chance to read War and Peace. I’ve always read fiction. I’m very proud of never having read a business book end to end. (you never need to, by the way, any business book you read, you just read the preface – everything else is puff).

[00:33:44] That’s about it on books. People?  My mother passed away when I was a teenager, but she was an extraordinary woman. Her parents were in service, so basically they were a chauffeur and a maid for a big family in London. She decided she wanted to go to Oxford and her parents basically disowned her because that wasn’t what working class kids did.

[00:34:09] And then she built a career while being a single mother, which in that generation was pretty out there. My very first boss, when I started work, called Audley Twiston Davis who was, and I think he would he wouldn’t be upset if I mentioned, thick as a brick academically, but commercially, super successful.

[00:34:32] Whenever I get stuck in a business problem, I think, what would Audley do?  Going back to your question about the pandemic, one of his favourite sayings was “When you have no idea what to do, for God’s sake do something”. which is just the best bit of business advice possible, cause it may or may not be right, but just making a decision

[00:34:59] empowers you, whereas sitting around going, “I have no idea”, you feel you are the victim. He also said there are some lunches after which you should not go back to the office, but that’s different. And then a bit of music. Whenever I get to kind of life inflection points, there’s an album

[00:35:20] which I only ever listened to at life inflection points called Trout Mask Replica by a 1970s, eighties, musician called Captain Beefheart. And it was a very difficult piece of music. but I’ve always listened to that when, not from a business point of view, but from a personal point of view there are things I need to think about and decide.

[00:35:41] No, I mean, going back to your earlier question though, thinking about it I’ve never really had a mentor for any consistent period of time, and I think I would’ve liked to have done, If you can find somebody in your industry, in your company, in your circle, whatever, who is prepared to invest in you as a consistent mentor, that’s very, very useful. It’s like the Japanese word for teacher – sensei – just means somebody who’s lived before you.  A mentor would’ve been kind of helpful.

[00:36:16] Kalani Scarrott: Interesting answer. I love that one. and you’re just curious, how did you end up in Asia?

[00:36:18] Was there a natural curiosity there, or? Family, friends?

[00:36:21] Peter Douglas: No. That was utter serendipity. So I finished university. I needed a job, but I didn’t wanna go straight into one. I didn’t do the, in the UK called the Milk Round. When you finish university, lots of countries come on campus.

[00:36:38] The idea is they hire you and you’re done. I didn’t feel like doing that. So I went and backpacked around Latin America for a bit. Then the money ran out and came back to London. I worked selling insurance, which yeah, it’s not really a job, is it? You force people to buy stuff they don’t need and get paid a commission.  I was applying for a Regular job. and I applied for a job with a unit trust company, not knowing what a Unit trust company was. I turned out that a fund management company had just acquired a unit trust company and therefore they too didn’t know what unit trust were about.

[00:37:11] But they looked at my resume and it said, financial marketing. So they thought, oh, he’s our man and they said they’d give me a car, so that was a done deal. Anyway, I realized in a couple of years I was a terrible salesman and I really needed to do something else. I had actually planned to leave the company and ride my motorbike down to the Sierra Nevada in Spain and write poetry.

[00:37:34] and I had it all organized, the cottage booked, and everything. And then my then managing director called me into his office and said “young Douglas you know this joint venture that we’re doing in Japan”. And I lied and I said, “yes”. He said, well, we’d like you to go out there.  They had promised their Japanese joint venture partners that they would send somebody out there to be the international face,

[00:37:57] and they had a Japanese Equity fund manager, who spoke Japanese, studied Japanese at Oxford, and then she got pregnant, decided she wanted to have her baby in London not Tokyo. I was the spare. I went out to Japan knowing absolutely zippo. I knew these guys made great motorbikes and they didn’t always cook their fish,

[00:38:18] and that was it really. So every day was one of those vertical learning curves. It was quite exceptional. 

Kalani Scarrott but that’s a real story. That’s, I love that. 

That’s the real story. Again, it was serendipity. I mean, I was just gagging for a change. And this one came along and it was definitely a change and it was going to pay money and, so why not? So here I am.

[00:38:49] Kalani Scarrott: That’s unreal. Thank you so much for today. This has been like, unreal. I’m gonna be thinking about this for a long time. So yeah. Lastly, where, like, what do you wanna plug? Where can people find you? Anything you wanna add?

[00:38:57] Peter Douglas: You’ll find me in Nozawa Onsen. One of my children a while back wrote a postcard addressed just to “Peter Douglas, Nozawa Onsen in Japan”, and it reached me!

[00:39:08] That’s probably all you need!  Nozawa Hospitality is the company. My name is Peter Douglas. You’ll find me on LinkedIn.

[00:39:19] Kalani Scarrott: Cheers. Awesome. Thank you so much for today

[00:39:22] Peter Douglas: Thank you, Kalani. Enjoyed it. Much appreciated.