Lodging tax revenue in Kutchan, Hokkaido rose to ¥640 million in FY2025, and FY2026 — the first year at a 3% rate, up from 2% — is projected at about ¥800 million. That is what Norihiko Suzuki, secretary general of the Kutchan Tourism Association, said in a talk, Travel Voice reported on October 13. Most coverage of lodging taxes focuses on the rate and on what guests pay. This article shifts the lens to what happens after the money is collected. We overlay the town’s published annual settlement accounts with MetroEngines Research’s monthly estimated settled ADR for Kutchan to show when, and how much, a percentage-based (ad valorem) tax accumulates through the year — and how the proceeds are allocated to uses such as free shuttle buses and resident discounts.

Scale of revenue — from ¥180 million to ¥800 million in seven years

Start with the scale, using the town’s primary documents. Kutchan introduced a percentage-based lodging tax of 2% of the room charge in November 2019. Most lodging taxes in Japan are flat amounts per person per night; according to Ministry of Internal Affairs and Communications (MIC) documents, the idea came up during the town’s consultations that “in an area with many condominiums rented by the unit, it is hard to track the number of guests, so could a system applying a fixed percentage to the room charge be introduced?” The normal-year revenue estimate at launch was ¥380 million. The settlement figures on the town’s “Programs Funded by the Lodging Tax” page show ¥176.48 million in the first year (five months, November 2019–March 2020) and ¥52.49 million in pandemic-hit FY2020. After that, according to the Hokkaido Shimbun, FY2024 revenue reached ¥568 million, up 28.0% year on year, setting a record for the third straight year.

On top of that, the talk presented ¥640 million for FY2025 and about ¥800 million for FY2026. In the consultation on raising the rate to 3%, which MIC approved in July 2025, normal-year revenue was estimated at about ¥750 million, so the ~¥800 million projection exceeds it. The driver is rising room rates. Because the tax base of a percentage-based tax is the room charge itself, revenue grows whenever rates rise, even with the tax rate unchanged. We check this against monthly rates later in the article.

Source: Compiled by the HotelBank Editorial Team from Kutchan Town, “Programs Funded by the Lodging Tax” (settlements and budgets by fiscal year); Hokkaido Shimbun (FY2024); Travel Voice (FY2025 actual and FY2026 projection). FY2023 is a reference value back-calculated from FY2024’s 28.0% year-on-year increase. FY2020 allocations are not listed on the town’s page

Alongside revenue, it is worth looking at the “lodging tax allocations” on the same page. Allocations grew from ¥150 million in FY2021, ¥50 million in FY2022, ¥200 million in FY2023, ¥286.3 million in FY2024 and ¥351.55 million in FY2025, reaching ¥550 million in the FY2026 initial budget. The difference from revenue is set aside in the “Kutchan Lodging Tax Fund”; in FY2019, ¥150.75 million — 85% of revenue — went into the fund. Rather than spending everything in the year it is collected, the town has expanded its programs step by step while keeping a reserve against seasonality and demand swings — a design that can be read from the sequence of settlements.

Translating the scale into per-resident and per-bed terms gives the table below. Population is the town’s resident register figure of 14,147 at the end of September 2026; bed count is the roughly 27,000 beds cited in the talk.

Source: Compiled by the HotelBank Editorial Team from Kutchan Town (population and households, end of September 2026) and Travel Voice (revenue and bed count)

The Kutchan Tourism Association’s presentation posted on the Japan Tourism Agency website divides FY2024 revenue of ¥560 million by a population of 15,000 to get ¥37,333 per resident, shown alongside Kyoto City at ¥3,741, Tokyo at ¥310 and Fukuoka Prefecture at ¥374 (all FY2023). We do not read this as a ranking of municipalities. It simply confirms a structure: in a town of just over 10,000 people that receives visitors on the scale of 1.35 million guest nights a year (FY2024, foreign guest nights across the Shiribeshi subprefecture), revenue per resident naturally runs at a different order of magnitude from urban areas.

Half of a percentage-based tax accrues in three winter months — from monthly estimated settled ADR

Another feature of a percentage-based tax is that revenue mirrors the seasonality of room rates. MetroEngines Research’s estimated settled ADR for Kutchan (two guests per room, tax-excluded equivalent, median of covered properties) shows ¥13,100 in October 2025, rising to ¥36,100 in December, ¥61,600 in January 2026 and ¥63,500 in February, then falling back to ¥29,000 in March and ¥19,800 in April (N=20–24 properties). February’s rate is 4.9 times October’s. Year on year, January was up 28.4% (January 2025: ¥48,000) and February up 19.1% (¥53,300), so the winter peak moved up another step. Where Kutchan’s winter rates sit among 98 snow-country municipalities is covered in Snow Country Hotel ADR Jan 2027: Kutchan ¥49k, Hakuba ¥29k, 5 Tiers.

Source: Compiled by the HotelBank Editorial Team from MetroEngines Research (Kutchan, estimated settled ADR, N=17–24 properties). October 2026–March 2027 are estimates based on listings at the time of research (late October 2026) and are not used for year-on-year comparison with finalized months

Multiplying these rates by the 3% tax rate gives lodging tax per room-night of about ¥1,900 in February and about ¥390 in October. From here we can roughly estimate where in the year revenue builds up, using three assumptions: (1) room-nights are equal in every month (no seasonal occupancy difference), (2) each month’s taxable room charge is represented by estimated settled ADR, and (3) the tax rate is constant through the year. On this basis, the twelve monthly rates for FY2025 (April 2025–March 2026) sum to ¥327,300, and each month’s rate translates directly into its share of annual revenue. The result: 49.3% in the three months of December–February, 58.1% in the four months of December–March, and 41.9% in the eight months of April–November.

Source: Compiled by the HotelBank Editorial Team from MetroEngines Research (rough estimate assuming equal room-nights each month; estimated settled ADR April 2025–March 2026, N=20–24 properties)

In reality winter occupancy exceeds summer, so it is natural to assume the winter concentration is stronger than this estimate. The town does not publish monthly revenue, so a month-by-month check is not possible, but the annual figure can be cross-checked. Dividing FY2025 revenue of ¥640 million by the 2% rate implies taxable room charges of about ¥32.0 billion; dividing that by the annual average rate above of ¥27,300 gives roughly 1.17 million room-nights. At 2.5 guests per room that is about 2.9 million guest nights — around 30% of the annual supply of roughly 27,000 beds (about 9.85 million bed-nights) — a plausible order of magnitude. Note that the ADR here is the median of verified categories such as hotels and ryokan; high-priced condominiums and vacation rentals are less likely to be reflected in the median, so actual room-nights may be lower and rates skewed higher.

In short, the effect of raising the rate by one point, from 2% to 3%, does not spread evenly across the year but concentrates in the high-rate months of January and February. The 2026-27 season is the first winter at the 3% rate, and roughly half of the ~¥800 million FY2026 projection is likely to be locked in during December–February. From the municipality’s budgeting perspective, seasonality also adds predictability: the next year’s program size can be set after the March filings and payments confirm winter results.

How the money is allocated — DMO subsidy takes 70% of allocations, half of it for secondary transport

So where does the collected tax go? According to the town’s FY2025 settlement (list of programs funded by the lodging tax), programs funded by the tax cost ¥391.09 million, of which ¥351.55 million came from lodging tax. The largest item is the program subsidy to the Kutchan Tourism Association, the regional DMO: ¥236.25 million of lodging tax against program spending of ¥265.12 million, or 67% of total allocations. The talk explained that “the subsidy is not an automatic share of tax revenue; it is requested in the budget by building up programs, and as a result it has run at around 40–55% of revenue.” Checking that against the settlement, FY2025 comes to 37% of ¥640 million revenue on an allocation basis and 41% on the subsidy’s program-spending basis; in the FY2026 initial budget, subsidy program spending of ¥338.15 million is 42% of the projected ¥800 million. The range depends on the year and the denominator, but the settlements confirm that roughly 40% of revenue is executed through the DMO.

Source: Compiled by the HotelBank Editorial Team from Kutchan Town, “FY2025 List of Programs Funded by the Lodging Tax (Settlement).” The DMO subsidy breakdown is by the town’s subsidy amounts to the association; the source does not break out the lodging-tax portion of each line

Inside the DMO subsidy, winter secondary transport and traffic measures account for ¥128.43 million, 48% of subsidy program spending — consistent with the talk’s statement that “nearly half the subsidy goes to secondary transport.” Adding the summer shuttle, secondary transport totals ¥144.63 million, or 55%. Secondary transport is the largest use because it follows directly from the town’s 2019 consultation document, which listed “the inconvenience of local transport for tourists” first among the reasons for introducing the tax. The FY2026 initial budget again includes ¥168.40 million for secondary transport and traffic measures, 50% of the ¥338.15 million DMO subsidy.

Source: Compiled by the HotelBank Editorial Team from the Kutchan Tourism Association presentation (posted on the Japan Tourism Agency website). In FY2025, five buses painted in a uniform red operated for about four months (Travel Voice)

Ridership of the free shuttle grew from 7,244 in FY2021 to 86,260 in FY2023, and from the 2024-25 season the “Kutchan Night” bus linking the town center and the resort was also made free. The talk cited making the use of funds visible as the reason for painting all the buses red. Having “buses run by the lodging tax” visibly on the streets is a design that supports public acceptance of the tax, and one that other regions could adopt.

The other pillar is returning value to residents. The resident benefit “Kutchan ID+” verifies town residency using a My Number Card and a smartphone and gives discounts at participating businesses; it was inspired by Hawaii’s “kama’aina discount.” At the time of the talk there were about 2,500 accounts against roughly 7,000 households in town — about one in three households — and for some families with children, food discounts were said to be worth ¥50,000–60,000 a year. The town’s figure for end-September 2026 is 8,246 households (1,146 of them foreign nationals); even on that denominator, usage reaches 30%. Most discounts are funded by participating businesses, with a stated policy of limiting dependence on public support. Related programs include a resident lift ticket priced at ¥3,000 versus the regular ¥11,000 one-day pass, and “Kutchan Magical Experience,” which sells ¥20,000 of coupons for ¥10,000 (the difference covered by the lodging tax). These initiatives received the Minister of Economy, Trade and Industry Award at the 2026 Japan Tourism Awards. Resident-benefit program spending was ¥11.05 million in the FY2025 settlement, and ¥26 million is budgeted for FY2026 as a “community understanding program.” That is only 10–20% of the secondary transport budget, but it plays the role of making residents visible as beneficiaries of the tax.

The FY2026 budget also includes items of a different kind. Of total program spending of ¥863.39 million, ¥550 million is funded by lodging tax; the rest consists of projects combined with other funding, such as parking construction at Hirafu Kogen Chuo Park (program cost ¥255.24 million, of which ¥5.08 million lodging tax and ¥250 million other dedicated funding). Road heating for the station-front sidewalk (¥32.51 million) and road-heating design for Gondola-zaka and Sakura-zaka (¥13.38 million) are also added, marking a year in which uses began expanding from service operations to winter infrastructure.

Relationship with the prefectural tax — combined into 3% as a “town-prefecture lodging tax”

Hokkaido introduced a prefectural lodging tax on April 1, 2026. It is a flat tax per person per night: ¥100 for room charges under ¥20,000, ¥200 for ¥20,000 to under ¥50,000, and ¥500 for ¥50,000 and above. In the consultation with MIC, normal-year revenue was estimated at about ¥4.48 billion. According to the town’s page, Kutchan amended its ordinance in June 2025 to keep its percentage-based system, collecting 3% of the room charge as a combined “town-prefecture lodging tax” covering both the town tax and the Hokkaido tax. The town tax is defined as “the remainder after subtracting the Hokkaido lodging tax from 3%,” and the town’s tax division calculates the prefectural portion and pays it to Hokkaido. The guest’s total burden is 3% of the room charge; the prefectural tax is not added on top. For example, a ¥15,000 night carries ¥450 in tax (¥100 prefectural, ¥350 town), and a ¥60,000 night carries ¥1,800 (¥500 prefectural, ¥1,300 town). The collection incentive paid to lodging operators, who handle collection, was raised from 2.5% to 3.5%, applying to filings from April 2026 through March 2031. The ~¥800 million FY2026 projection should therefore be read as a town-prefecture lodging tax figure that includes the prefectural portion.

Municipalities choosing percentage-based taxes — published figures

When Kutchan introduced its percentage-based tax in 2019 it was the only one of its kind in Japan, but from 2026 more municipalities are choosing the same design. Neighboring Niseko is replacing the tiered flat tax it introduced in November 2024 (¥100–2,000 per person per night) with a percentage rate of 3% of the room charge; it received the Minister for Internal Affairs and Communications’ consent on March 27, 2026 and plans to implement it on November 1, with normal-year revenue estimated at about ¥260 million (versus ¥162 million under the current system). MIC was reported as saying this is the first switch from a flat to a percentage-based tax in Japan (for the per-night tax at Niseko’s actual rates and the break-even point with the flat system, see Niseko Accommodation Tax Goes 3% Nov 1, 2026: ¥1,269 a Room in Winter). Tokyo obtained consent for its ordinance amendment on June 30, 2026 and will move to a 3% rate on April 1, 2027, raising the exemption threshold from under ¥10,000 to under ¥13,000 per person per night. Okinawa Prefecture also plans to introduce a 2% percentage-based tax in February 2027.

Source: Compiled by the HotelBank Editorial Team from MIC (consent documents for each municipality), Tokyo Metropolitan Government press release (June 30, 2026), Hokkaido Government, Honichi Lab and Travel Voice. A summary of published figures, not a comparison of merit

What percentage-based taxes share is that revenue rises and falls automatically with room rates, and that they do not depend on counting guests. On the other hand, in areas like Kutchan with large seasonal rate swings, revenue inflows are also skewed by season. How that skew is handled feeds directly into “after collection” design choices such as how the fund is built up and whether budgets are revised mid-year. According to the Japan Tourism Agency, as of January 13, 2026, 19 municipalities had introduced a lodging tax and 39 had obtained MIC consent, and debate continues in December assembly sessions across the country. Effective dates for Tokyo, Niseko, Oita Prefecture and Nagasaki City, and the price bands where a percentage rate raises the burden, are listed in Japan Lodging Tax Changes 2026-27: Tokyo 3%, Niseko, Oita & Nagasaki. Kutchan’s seven years of settlements are among the few actual track records for municipalities considering a percentage-based tax.

Implications for lodging operators — spending as a foundation for winter rates

For lodging operators, the lodging tax is both a cost of handling collection and a source of funds reinvested in their own market. In Kutchan, roughly 40% of lodging tax is executed through the DMO, and nearly half of that goes to secondary transport such as the free shuttle bus. In a market where estimated settled ADR reaches the ¥60,000 range in January and February, a tax-funded environment in which guests can move between ski areas, accommodation and restaurants without a car can be read as part of the stay experience that makes high winter rates acceptable. Suzuki reportedly said in the talk that the “M” in DMO stands “more for management than marketing,” and that “acting only after people raise their voices is too late.” The talk also described his approach, drawing on work experience in Hawaii, of reshaping overseas practices into a “Niseko Model” suited to the region.

The resident-benefit side matters to operators too. The talk set out an approach of passing rising fuel, labor and procurement costs through to prices while applying discounts for residents to protect their livelihoods. The association’s material on the Japan Tourism Agency site cites a bowl of ramen rising from ¥950 in 2021 to ¥1,100 in 2023; resident benefits are positioned as a mechanism to reconcile tourist-facing price levels with residents’ cost of living within one town. The further a resort moves upmarket, the more a design that earns residents’ understanding shapes the long-term operating environment. This approach is also reflected in the park-and-bus-ride scheme, which reduces employees’ commuting cars and continues in the FY2026 budget as part of the secondary transport program.

For municipalities introducing or considering a lodging tax, and for operators considering investment in resort areas, Kutchan’s record boils down to three points: (1) percentage-based revenue concentrates in peak-rate months, so smoothing through a fund and carry-over into the next fiscal year need to be designed in; (2) uses gain acceptance when made visible (the color of the buses, residents’ authentication IDs); and (3) allocations to the DMO should be set by building up programs rather than by a fixed ratio, with settlements published program by program. Lodging tax revenue in the town’s accounts has grown from ¥180 million in FY2019 to a projected ¥800 million in FY2026, but in the words of those involved, the question has moved from how much was collected to “what it was spent on and who it was returned to.”

Summary

Kutchan’s lodging tax revenue was ¥640 million in FY2025, and FY2026 is projected at about ¥800 million on the back of the rate rise to 3% and higher room rates — about ¥56,500 per resident and about ¥29,600 per bed. Applying seasonality via MetroEngines Research’s estimated settled ADR, even under the conservative assumption of equal room-nights each month, 49% of revenue accumulates in the three months of December–February, and the 2026-27 season is the first winter at the 3% rate. In the town’s settlements, 70% of allocations go to the DMO subsidy, nearly half of which funds secondary transport such as the free shuttle bus, with resident benefits and resident discounts as a return to locals. Hokkaido’s prefectural tax is folded into the 3% as a town-prefecture lodging tax, so the guest’s burden remains 3%. As Niseko (November 2026), Okinawa (February 2027) and Tokyo (April 2027) follow with percentage-based taxes, Kutchan’s seven years of settlements offer a reference case for “after collection” design.