Yamanashi City is once again seeking an operator for the former Hoken Noen Hotel Fufu Yamanashi (旧保健農園ホテルフフ山梨) in the Makioka district. According to the Yamanashi Kensetsu Shimbun (Nippon Kogyo Keizai Shimbun, October 30, 2026), expressions of interest will be accepted from November 2 to 27. Applicants choose either to buy the land and building or to lease them for 20 years, and submit a business proposal. The site comprises 46,154㎡ of park land and 23,971㎡ of forest, plus a building with 2,154㎡ of floor area that is 30 years old. The city ran tenders on the same framework in FY2021 and FY2023; this third round revises the terms by adding a substantial reduction of usage fees in the early years of operation and support for renovation costs. In this article we line up the room stock remaining around the former property, the estimated settled ADR of the three Kyōtō (峡東, eastern Kofu Basin) cities, and the site conditions shown in the MLIT Real Estate Information Library, and estimate how many rooms and what renovation budget would make the 2,154㎡ building viable under a sale and under a lease.

Room stock in this article covers accommodation facilities with 1 or more rooms (excluding leisure/love hotels) within a 5,000m radius of the former Hotel Fufu Yamanashi. “Operating” refers to properties with sales prices confirmed on major booking sites in the most recent 3 months (September–November 2026) (as of November 3, 2026, compiled by MetroEngines Research).

The conclusion first. If the 2,154㎡ of floor area is converted into a small, high-rate format of around 14 rooms and the renovation scope is held to roughly 30% of the new-build-equivalent cost (about ¥442 million), the investment can be recovered in about 13 years even without city support — within the 20-year lease term. If the renovation scope widens to 45–60% of new-build equivalent, payback exceeds 20 years, so viability depends on the level of renovation support and fee reduction the city offers. The more a plan adds rooms and lowers the rate, the longer the payback. In a location where operating room stock within 5km is only 4 properties and 38 rooms, building the plan around rate rather than room count is the more likely path to profitability.

Tender Terms — Sale or 20-Year Lease, with Support Measures Added in the Third Round

First, the terms of this tender. Applicants choose either “sale” or “lease.” For a sale, they propose a desired price with reference to the assessed value of nearby residential land; for a lease, they propose an annual rent. The rent may include a percentage component linked to sales, the term is 20 years, and re-contracting is possible by agreement. The schedule: expressions of interest from November 2 to 27, presentations around March 2027, selection of the preferred bidder in April 2027, and contract negotiations from FY2027.

What stands out as new in this round is the support package. The city has indicated that, depending on the proposal, it will substantially reduce usage fees at the start of operations and also support renovation costs. However, the size of the reduction and the cap on support had not been disclosed at the time of reporting. Our estimates therefore do not fix a support amount; instead they work backward to “what share of support would make the project viable.”

Some background. The city also ran tenders in FY2021 and FY2023 and selected a preferred bidder each time, but neither led to an actual project. As reasons, the city cited the impact of Russia’s invasion of Ukraine and the burden that initial costs — including renovation of the 30-year-old building — placed on profitability. That the city itself recognizes the weight of initial costs and has newly prepared renovation support and fee reductions is what defines the character of this third tender. As an example of a municipality entrusting an idle facility to the private sector as lodging, the case of Yoshino Town, Nara, reviving the former Yoshino Elementary School as an inn is also a useful reference.

Site Assessment — Mountain Land Outside the City Planning Area, Sediment Disaster Warning Zones Scattered Nearby

Site conditions were checked in the MLIT Real Estate Information Library. Around the coordinates of the former property (35.7583°N, 138.6860°E), no zoning or city planning area designation could be confirmed, suggesting mountain land outside any city planning area. Restrictions on building use are lighter than in urban areas, but procedures for extensions or changes of use need to be confirmed individually with the city and prefecture.

Because the site adjoins forest, checking sediment disaster warning zones is essential. The coordinate point itself is outside any zone, but the nearest debris-flow warning zone (Idogawa) and special warning zone are about 80m away, and the steep-slope warning zone (Toyohara) is about 150m away. Within a 1.2km radius there are 43 zones, counting warning zones and special warning zones separately: 26 debris-flow, 14 steep-slope and 3 landslide. Since the site spans approximately 70,000㎡ including park and forest, any plan to add guest-room buildings or use the grounds must start by checking against drawings which areas fall within the zones. Liquefaction tendency is classified as “mountain land, unlikely to liquefy,” and no flood inundation assumption zone was shown nearby.

The land price level gives a sense of value for those choosing a sale. The nearest benchmark site (Makioka Nishiho-shimo) was ¥6,000/㎡ in 2026, down about 3% a year from ¥6,800/㎡ in 2022. Because the sale price is proposed “with reference to the assessed value of nearby residential land,” even if 10,000㎡ were assumed to be valued as residential land, the benchmark-price basis would put it only in the ¥60 million range. Compared with the renovation costs discussed below (¥400–900 million), the land acquisition cost is small; the structure is such that setting the renovation scope matters far more for profitability than the choice between sale and lease. The economics of conversion projects with a small acquisition cost and heavy renovation are also analyzed in detail in our article on the hotel conversion of the former JR Kyushu headquarters building.

Room Stock — 6 Properties / 47 Rooms Within 5km; Within 10km, More Properties but Flat Room Count

Next, how many rooms are around the former property. Room stock within a 5km radius was 6 properties and 47 rooms in 2026, 8 rooms fewer than the 5 properties and 55 rooms of 2017. Of these, operating properties with sales prices confirmed in the most recent 3 months number 4 with 38 rooms: an 18-room high-end ryokan, a 15-room ryokan, a 4-room small inn and a whole-house kominka (traditional house) rental. Note that the former property had 13 rooms according to listing history; in the 5km trend in Figure 1 it is included in the 2017–2020 figures but not in the 6 properties / 47 rooms from 2021 onward.

Widening to a 10km radius, the stock went from 28 properties and 455 rooms in 2017 to 37 properties and 458 rooms in 2026. The number of properties rose by 9, but rooms were nearly flat, and the average rooms per property shrank from 16.3 to 12.4. Along the Fuefuki River and in Kyōtō’s orchard belt, supply appears to have turned over not through new large properties but through small inns and whole-house rentals being added little by little. A plan to revive the 2,154㎡ former property at a scale of a dozen or so rooms fits this regional supply trend.

Estimated Settled ADR in Kyōtō’s 3 Cities — Yamanashi City ¥13,900, Fuefuki City +5.2% YoY

What about rate levels? Estimated settled ADR in September 2026 was ¥13,900 in Yamanashi City (N=5 properties), ¥13,300 in Fuefuki City (N=52), ¥14,600 in Koshu City (N=5) and ¥8,300 in Kofu City (N=36). Year on year, Yamanashi City was nearly flat at +0.7%, whereas Fuefuki City rose +5.2% from ¥12,600 and Kofu City +13.4% from ¥7,300. Yamanashi Prefecture as a whole was ¥11,700 (N=306), +7.4% YoY.

However, Yamanashi City and Koshu City each cover only 5 properties, so the median moves easily with a single property’s price revision. Our estimates therefore use Fuefuki City — which includes Isawa Onsen and has a deep sample of around 50 properties — as the main comparison. The estimated settled ADR for ryokan only in Fuefuki City averaged about ¥16,000 over the 12 months from October 2025 to September 2026 (N=39–43 properties per month). Meanwhile, operating properties within 5km include an 18-room high-end ryokan with an estimated settled ADR in the upper ¥50,000s; even along the same Makioka / Fuefuki River corridor, rates range widely from a few thousand yen to over ¥50,000. Room to aim for high rates with a limited room count likely lies within this range. Investment opportunities by area across Yamanashi Prefecture, including the Kofu Basin, have been examined in a separate HotelBank analysis covering Fuji Five Lakes villas, Yatsugatake and the Kofu Basin.

Seasonal peaks fall from November to January and in August: Fuefuki City recorded ¥17,300 in December 2025, ¥16,600 in August 2025 and ¥15,500 in January 2026. The troughs coincide with the rainy season and the post-summer-holiday period: ¥11,700 in June 2026 and ¥12,600 in September 2025. While rates rise with autumn foliage, the New Year holidays and August including Obon, it is worth noting that July and September — when the peach and grape harvests continue — are not rate peaks. If orchard experiences and harvest-season stays are made a pillar of the concept, product design that lifts July and September rates represents upside for revenue.

A rough occupancy check as well. Estimated ryokan occupancy for Yamanashi Prefecture as a whole in September 2026 (OTA listed-inventory basis) was 78.9% (73 properties / 2,184 rooms, based on listings on major booking sites). This is an estimate based on how much inventory sold through booking sites is absorbed; it differs from a property’s overall actual occupancy and tends to run high. Our estimates therefore assume a conservative occupancy of 50–60%.

Development Scenarios — Allocating 2,154㎡ to 14, 21 or 33 Rooms

Now to the development scenarios. We divided the 2,154㎡ floor area by floor area per room to set three scales. 150㎡ per room is a small high-end format with generous shared areas — dining, baths and lounge — in addition to guest rooms; 100㎡ sits between a ryokan and a resort; and 65㎡ is a lodging-focused format with a higher share of guest rooms. ADR was set at ¥45,000 for A — about 20% below the level of the high-end ryokan within 5km — ¥15,000 for C, close to the Yamanashi City / Fuefuki City median, and ¥25,000 for B in between. GOP margins were set conservatively at 20–25%, and 3% of revenue was deducted as a repair reserve.

Room revenue for all three plans came in at around ¥110 million a year. Adding rooms lowers the rate, so room revenue barely changes. The difference comes from ancillary revenue and GOP margin: the small high-end format, which can build up dining and experiences, generates the largest cash flow. The investment recoverable in 15 years is ¥493 million for A and ¥304 million for C, which serves as a guide to the budget available for renovation.

Setting the Renovation Cost — Comparing Payback at 30%, 45% and 60% of New-Build Equivalent

Renovation cost assumes equipment renewal (HVAC, water supply and drainage, electrical, kitchen, baths) and interiors for the 30-year-old building, set in three tiers as a ratio of the new-build-equivalent cost. The new-build equivalent is about ¥1.27 billion: the 2025 all-structure average construction cost of ¥1.952 million per tsubo (archi-book “Construction Cost per Tsubo [2026 Edition],” compiled from building construction start statistics) multiplied by a floor area of 651.6 tsubo. Assuming construction in 2028 and building in three years of 5% annual increases in line with Turner & Townsend’s outlook gives about ¥1.47 billion. Renovation cost is then ¥442 million at 30%, ¥662 million at 45% and ¥883 million at 60%.

Only two combinations recover the investment within the 20-year lease term without support: A at 30% (13.4 years) and B at 30% (18.4 years). For a 30-year-old building, the benchmark for self-sustaining economics is to renew the equipment across the board while limiting the scope of work by making use of the existing interiors. If the scope widens to 45%, even A takes 20.1 years — right at the edge of the 20-year term.

Conditions for Sale vs. Lease — What Share of Renovation Support Keeps Payback Within 15 Years

So how much renovation support from the city would make it work? Using a 15-year payback as the benchmark, we worked backward to the part of renovation cost the operator cannot bear. A fits within 15 years without support at 30% renovation; at 45% about ¥169 million (about 26% of renovation cost) of support is needed, and at 60% about ¥390 million (about 44%). C requires ¥138 million (about 31%) of support even at 30% renovation; the lower the rate of the plan, the greater its dependence on support.

Under a sale, differences in acquisition price have little effect on yield. For A with 30% renovation, a yield of 6.7% is achievable at ¥50 million acquisition and 5.6% even at ¥150 million. In an area where land is in the ¥6,000/㎡ range, land acquisition is small relative to renovation, and the economics of a sale are determined almost entirely by renovation scope. Because the operator gains ownership, it is easier to add guest-room buildings on the grounds or make long-term follow-on investments, making this scheme suited to operators who want to run the property beyond 20 years.

Under a lease, the operator must recover the renovation cost within the 20-year term and pay rent on top. Without support, only A at 30% renovation leaves funds for rent (¥3.4 million a year). If half the renovation cost is supported, A can bear rent of ¥10.8–18.2 million a year and B ¥1.9–9.3 million. Combining this with sales-linked rent would make it possible to design a structure that limits the burden in the early years and increases the city’s receipts once rates and occupancy grow. This round’s terms, which allow fee reductions at the start of operations to be combined with renovation support, should work to ease the weight of initial costs.

Moving rate and occupancy together makes the viable range clearer. In Table 8, which varies ADR from ¥36,000 to ¥54,000 and assumed occupancy from 40% to 60% in five steps each, payback is 24.9 years in the pessimistic case (ADR −10%, occupancy −5pt), 20.1 years in the base case and 16.6 years in the optimistic case (ADR +10%, occupancy +5pt). The base case only slightly exceeds the 20-year lease term, and if either ADR or occupancy comes in 10% higher, payback falls to 18.3 years. Conversely, if both fall short, recovery within the term becomes difficult without support. Proposals will need to show which axis they aim to outperform on, tied to concrete products.

In the sensitivity analysis, a 10% rise in ADR shortens payback to 18.3 years, while a 10% fall in ADR combined with a 5pt fall in occupancy extends it to 24.9 years. Since a 10% move in rate shifts payback by around two years, the basis for the rate should be well supported at the proposal stage. Of the fruit-harvest months, July and September are currently not rate peaks in Fuefuki City. If experiential stay products can be built for these months, there is room to push ADR above the estimate.

Summary — Revive Small and High-Rate, and Use Support to Widen the Renovation Scope

The third tender adds renovation support and usage-fee reductions in response to the weight of initial costs. Our estimates point to one combination that pays back within the 20-year lease term without support: limiting the 2,154㎡ building to around 14 rooms, operating at an estimated settled ADR of ¥45,000, and keeping renovation to roughly 30% of new-build equivalent. For plans that want a wider renovation scope, or that add rooms and keep rates low, the amount of city support is the key to viability.

For operators considering an application, the starting point is to confirm, by the November 27 expression-of-interest deadline, the extent of building equipment that needs renewal and the extent of the sediment disaster warning zones, and to estimate an upper limit for the renovation scope. Then, building “what share of support makes it work” into the proposal will make it easier to lay a foundation for negotiations with the city. Operating rooms within 5km number only 38, and small inns have been gradually increasing in Kyōtō. With a site of approximately 70,000㎡ of park and forest, this property offers an investment opportunity to be revived, in step with that trend, as a high-rate destination stay.

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