Executive Summary — 226 Properties, 11,449 Rooms, 85.8% Concentrated in a Single-Core Hakodate Market

Four numbers frame the Donan trade area. First, the single-core nature of supply. Of 226 properties and 11,449 rooms, Hakodate holds 173 properties and 9,818 rooms; adding Hokuto and Nanae brings three municipalities to 93.1% of rooms. The towns of the Hiyama subprefecture — Matsumae, Esashi, Kaminokuni, Imakane — each have only one to four listed properties, with room counts in the double digits. Donan is all but synonymous with the Hakodate market, and the surrounding towns are unlikely to stand alone as investment targets: that is the first fact from the supply side.

Second, record demand. According to the Hakodate City Tourism Department, visitor arrivals in FY2025 reached 6.058 million, a record for the second consecutive year, of which overnight guests numbered 5.043 million, up 6.7% year on year. First-half foreign overnight guests came to 226,000 (up 12% year on year); Taiwan accounts for 47%, while China grew 41% and South Korea 55%. Demand is unambiguously rising.

Third, rates are not following demand. Hakodate’s settled-ADR estimate averaged ¥8,100 over January–July 2026 (N=87 properties), down 2.7% from ¥8,300 a year earlier. Over the same period Hokkaido as a whole moved from ¥9,300 to ¥9,900 (N=952 properties), up 7.3%, meaning Hakodate sits outside the prefecture’s rate-growth phase. Read the other way, it is the major Hokkaido market where an investor can underwrite the lowest entry rate assumption.

Fourth, land price movement at a single point. Only the station front is rising; Goryokaku and Yunokawa Onsen are flat to slightly down. That asymmetry in the price signal dictates where in Donan one should build — or buy. The measured evidence follows.

Supply Inventory — Hakodate Has 173 Properties and 9,818 Rooms; All 15 Other Towns Together Add Only 1,631

For the 16 Donan municipalities (those in the Oshima and Hiyama subprefectures where OTA listings could be confirmed), we counted properties observed as listed for check-in dates from 19 August to 30 September 2026 and summed their master-registered room counts. Fukushima and Okushiri had no confirmable listings in the period and were excluded.

On size structure, 18 properties of 200 rooms or more hold 4,905 rooms (42.8% of all rooms); adding the 21 properties of 100–199 rooms with 3,025 rooms (26.4%) means 39 properties control 69.2% of inventory. At the other end, 118 properties in the 1–19 room band account for just 592 rooms (5.2%). Small properties dominate the count while room inventory concentrates in large ones — the two-tier structure typical of a regional core city. In practice, the lot sizes that work as investment targets are limited to the top 39 properties.

The vintage distribution is more telling still. Forty-five properties with 2,986 rooms opened in or before 1989, meaning 26.1% of rooms are in buildings more than 35 years old. Adding the 1990s brings the total to 86 properties and 4,705 rooms, or 41.1% of inventory at roughly 30 years or older. At the other end, 71 properties with 2,549 rooms (22.3%) opened or were first listed in the 2020s, including 13 large projects of 100-plus rooms totalling 2,280 rooms. Donan holds both an ageing stock ripe for renewal and a wave of supply from the past five years, and the room base open to repositioning or conversion runs to roughly 4,000 rooms.

Price — The Settled-ADR Estimate Sits at the Bottom of Hokkaido’s Major Markets, Down 2.7% YoY in Jan–Jul 2026

Turning to price: Hakodate’s settled-ADR estimate for July 2026 was ¥9,600 (N=87 properties). That is 53.0% of Sapporo’s Chuo Ward at ¥18,100 (N=137), 50.3% of Otaru at ¥19,100 (N=26), and 54.9% of Kutchan at ¥17,500 (N=22). Among Hokkaido’s principal accommodation markets, Hakodate sits in the lowest rate tier.

Single-month comparisons pick up seasonality and changes in the property mix, so it is worth checking the seven-month January–July average as well. Hakodate went from ¥8,300 in 2025 to ¥8,100 in 2026, down 2.7%, while Hokkaido as a whole went from ¥9,300 to ¥9,900, up 7.3%. Even on a seven-month average, Hakodate stays flat while the prefecture rises.

Breaking the market down by category makes the rate structure clearer. For July 2026 in Hakodate: business hotels ¥8,700 (N=47), ryokan ¥8,800 (N=25), city hotels ¥15,100 (N=5) and resort hotels ¥15,800 (N=10). The business and ryokan categories that carry the bulk of room inventory are pinned around ¥9,000, and only 15 properties sit above ¥15,000. That structure implies that the thinness of the upper price bands is itself the opening for entry.

Rates in the surrounding towns rest on samples of only one to seven properties and must be treated as indicative. Even so, the pattern is that Nanae at ¥9,800 (N=4) and Kikonai at ¥11,500 (N=2) come in above Hakodate, while Yakumo at ¥7,600 (N=7) and Hokuto at ¥6,800 (N=4) fall below. That Hokuto — home to Shin-Hakodate-Hokuto Station — prices some 30% below Hakodate shows that a Shinkansen station location has not yet converted into rate. This reading is consistent with the land price data discussed next.

Location — Only the Hakodate Station Front Is Moving; Goryokaku Has Been Flat for Four Years

From the MLIT Real Estate Information Library we pulled the official land price survey points in Hakodate (commercial and quasi-residential zones) for 2023 through 2026 and arranged them as a time series. The result is unusually clear-cut.

The commercial site in front of Hakodate Station rose from ¥132,000/m² in 2023 to ¥160,000/m² in 2026, up 21.2% over three years. The annual pace has accelerated year by year: +1.5% in 2024, +8.2% in 2025 and +10.3% in 2026. By contrast, Goryokaku-koen-mae, the city’s highest-priced site, has printed 0.0% for three consecutive years from 2024, as has the point 300m away. Yunokawa Onsen has declined for three straight years since 2024.

That asymmetry matches the movement of accommodation supply precisely. Of the 13 large properties of 100-plus rooms (2,280 rooms) that opened in Donan from 2020 onward, more than half sit within a 1km radius of Hakodate Station. Listed-REIT acquisitions are likewise concentrated on the station and bay side, so capital on the demand side is clearly heading for the station front. Land prices are moving there because that is the only place investment is going.

The likely slippage of the Sapporo Shinkansen extension to around the end of FY2038 cuts two ways for Donan investment decisions. In the near term it pushes out the upside of “more through-traffic demand from the extension”, but it also means Shin-Hakodate-Hokuto stays the terminus for arrivals from Honshu for roughly another decade. Work is proceeding on the basis that the Hakodate–Shin-Hakodate-Hokuto section will keep passenger service, so the link between the transfer flow on that section and accommodation demand at the Hakodate station front and bay area will not change for the foreseeable future. For projects underwritten on a 10–15 year payback, the delay reads as a stabiliser of assumptions rather than a setback.

On the Hokuto side, land price data shows that the development potential of the Shinkansen station front has yet to materialise. In the 2026 survey, the only points obtainable near Shin-Hakodate-Hokuto Station were residential sites at ¥19,200/m² 2.6km away (down 0.5% year on year) and ¥15,100/m² 3.7km away (down 0.7%); no commercial survey point has been established at the station front itself. Accommodation rates in Hokuto, at ¥6,800 (N=4), run 30% below Hakodate. In both land price and room rate terms, the area in front of Shin-Hakodate-Hokuto Station is still at the stage where no market has formed. How an extension opening eventually converts into rates and investment headroom is a question that markets such as Fukui, two years on from the Hokuriku Shinkansen reaching Tsuruga, are only beginning to answer.

Ground and Disaster Risk — Assess Bay-Area Liquefaction and Tsunami Inundation Separately

The Hakodate station front and bay area attract the most investment on both land price and demand, yet they also demand the most careful scrutiny of ground conditions. Pulling the MLIT Real Estate Information Library’s liquefaction tendency map (250m mesh) for the tiles around Hakodate Station gives the following breakdown across 208 mesh cells.

The bay area’s 40 reclaimed-land mesh cells (19.2%) fall in the “highly prone to liquefaction” class. This is precisely where scenic value is high and room rates are easiest to command, yet the difference in foundation work costs feeds straight into project economics. The sandy-gravel terrace on the Goryokaku side (90 cells, 43.3%) is classed as “not prone to liquefaction” and is favourable on ground conditions. Note that the ground-risk assessment runs in the opposite direction to the price signal of flat land prices at Goryokaku and rising ones at the station front.

On tsunami, Hakodate publishes a hazard map based on the megaquake models for the Japan and Kuril trenches. Roughly 32.2% of the municipal area falls within the projected inundation zone, with a maximum projected depth of about 10.0m. Many points at the station front and in the bay area fall inside that zone, so in practice, acquisition and development work should start from the city’s web hazard map, confirming point-level inundation depth and reference water level before setting the ground-floor use plan, evacuation plan and insurance structure. Put the other way, these are risks that can be designed around, not factors that negate project viability. The practical framing is to treat hazard conditions as a fourth axis of location assessment, quantified alongside rate levels and disaster-resilience capex rather than handled as a separate compliance checklist.

Trade-Area Population — Residents Within 2km of Hakodate Station Fall 32.6% by 2040 vs 2020; Demand Shifts to Visitors

Set the investment horizon at 10–20 years and the resident population projection becomes unavoidable. Within a 2km radius of Hakodate Station (120 cells of 250m mesh), the resident population was 31,676 in the 2020 census and an estimated 28,874 in 2025. By 2040 it is projected to shrink to 21,365, down 32.6% against 2020 (and 26.0% against the 2025 estimate). On age structure, people aged 65 and over already account for 12,563 residents, or 43.5%, as of 2025, while the working-age population stands at 14,272, or 49.4%.

Applying the same view to the 2km radius around Shin-Hakodate-Hokuto Station (72 cells) gives 2,430 residents in 2020, 2,240 in 2025 and 1,762 in 2040 (down 27.5% versus 2020 and 21.3% versus the 2025 estimate), with an ageing rate of 37.9%. Despite being a Shinkansen station, its 2km catchment holds less than 8% of the population around Hakodate Station. The business demand base is thin too: set against 1,150 establishments, 9,898 employees and a 15.0% office-sector share within 1km of Hakodate Station, the difference in demand structure is stark.

What this demographic trajectory means is that the carrier of Donan’s accommodation demand has shifted entirely from residents to visitors — tourism, business travel and events. The record 5.043 million overnight guests in FY2025, up 6.7% year on year, is precisely what that visitor flow supports. As an investment premise, revenue has to be designed around “how much of the wider flow can be captured,” not around “stable demand underpinned by the local population.”

Listed REIT Ownership — 4 Assets, 812 Rooms in Donan, Acquired at ¥6.7–45.3mn per Room

Querying the ownership master for the seven hotel-focused listed REITs returns four holdings totalling 812 rooms in Donan. All are in Hakodate; no holdings were found in Hokuto, Nanae or any of the smaller towns.

What stands out is how per-room acquisition prices have changed over a decade. The two 2015 acquisitions came in at ¥6.7mn and ¥13.4mn per room, whereas Hakodate Kokusai Hotel, acquired in July 2024, was ¥38.7mn per room and fav Hakodate, acquired in August 2025, ¥45.3mn per room. Within the same city, the acquisition price range has moved sharply upward over nine years. Property grade and location differ, so these are not directly comparable, but it is clear that listed investors re-rated the Hakodate market at the same time the station front began rising in the land price survey.

Operating results at the Hakodate properties are strong as well. Invincible Investment Corporation’s property-level disclosure for June 2026 puts Hakodate Kokusai Hotel at 88.4% occupancy, ADR ¥18,366 and RevPAR ¥16,229. For the same month, the REIT’s 103 domestic hotels as a whole posted 82.2% occupancy, ADR ¥12,306 and RevPAR ¥10,118, so Hakodate Kokusai Hotel runs 6.2 points above on occupancy and about 1.60 times the portfolio average on RevPAR. Hotel MyStays Hakodate Goryokaku also held above the portfolio average on occupancy at 83.4% (June 2026 actual), with ADR ¥9,799 and RevPAR ¥8,174.

Against an area-wide settled-ADR estimate of ¥9,600, upper-grade properties on the station and bay side are achieving the ¥18,000 range. From that contrast follows the reading that Hakodate’s low rates reflect the composition of its inventory rather than a low ceiling on the market. Put together with the structure identified in the previous section — only 15 properties above ¥15,000 — the room to enter the upper price bands is unmistakable.

Positioning — Only 15 Properties Above ¥15,000; the Upper Bands Are Structurally Thin

Setting Hakodate’s category breakdown alongside room counts brings the gaps in the price ladder into focus. Forty-seven business properties and 25 ryokan cluster around the ¥9,000 band, and only five city hotels and ten resort hotels sit above ¥15,000. Demand has built to 5.04 million overnight guests a year, yet just 15 properties exist to catch it in the upper bands.

Development Scenario Modelling — New Builds Land in the 6% Range; Repositioning Older Stock Wins at 7%

Taking the measured values above as inputs, we model three investment scenarios at the Hakodate station front. These are simplified calculations built from public data, and any actual investment decision requires a full feasibility study — a caveat worth stating up front.

■ Modelling assumptions

• Land: Hakodate station front, commercial zone, FAR 600% / building coverage 80%. Unit price taken as ¥160,000/m² from the 2026 official land price survey. New-build scenarios assume a 1,200m² site and 5,500m² of gross floor area.
• Construction cost (stage 1, 2025 actual basis): ¥2.3mn per tsubo (3.3m²) for a rooms-led format and ¥2.5mn per tsubo for upper-middle. MLIT’s building starts statistics put 2025 at ¥2.405mn per tsubo for steel-frame and ¥2.026mn for reinforced concrete, and we adopted this range as the working level for hotel use.
• Construction cost (stage 2, inflation over the build period): assuming a 2031 opening and a three-year build, we applied a compounded factor of 1.155 from construction cost increases of +5.3% in 2026, +5.0% in 2027 and +4.5% in 2028.
• ADR: from the band structure measured for Hakodate in this article, Scenario A is set at ¥12,500 (midway between the ¥8,700 business ceiling and the ¥15,100 city-hotel level) and Scenario B at ¥24,000 (a new-build premium band above the ¥18,366 achieved by upper-tier station and bay properties).
• GOP margin: 45% for rooms-led, 38% for upper-middle and 42% for repositioning. Referencing the GOP actually recorded on Invincible Investment Corporation’s operator-managed properties (38.9%, FY ended December 2024), we set rooms-led above and full-service at or below that level, a conservative stance.
• Definition of yield: GOP divided by total investment. It is stated before rent, management fees, taxes and public dues, insurance and FF&E reserves, and is not an NOI yield.

The implication is clear. Once construction inflation is priced in, new-build yields fall to 6.0% for A and 5.5% for B, while acquiring and renovating older stock holds 7.4%. As shown earlier, Donan has 2,986 rooms (26.1% of all rooms) in buildings more than 35 years old. With construction running at ¥2.3–2.5mn per tsubo, the economic value of being able to reuse an existing structure grows precisely in markets like Donan where rates sit in the ¥9,000 range. In Hakodate, conversion of existing stock has already begun to move — the “T9 HAKODATE” project, for instance, regenerates a historic building into a mixed-use complex with accommodation.

Construction cost inflation is also a tailwind for incumbents on the competitive front. The higher the bar for a new build to pencil, the more near-term new supply pressure is held back. After the recent wave of 13 large projects of 100-plus rooms totalling 2,280 rooms opened in the 2020s, there is a good chance of a phase in which supply has run its course while demand keeps growing.

■ Sensitivity analysis (Scenario A, 2025 construction cost basis)

■ Two-axis sensitivity (Scenario A, GOP yield, 2025 construction cost basis)

Read on two axes, lifting the 6.9% base case into the 7% range requires either holding ADR at ¥12,500 while pushing full-year OCC to 85%, or taking ADR to ¥13,750 while holding OCC at 80%. On the downside, falling to ADR ¥10,000 and OCC 75% takes the yield to 5.2%. The grid uses the same assumptions as the single-axis sensitivity above, and the cell for ADR -10% with OCC -5pt (¥11,250 × 75%) matches at 5.9%. Acquiring and renovating existing stock (Scenario C) can hold the 7% range because it keeps that denominator — total investment — to a little over 60% of a new build.

Risk Assessment and Investment Summary

Finally, a word on timing. Land price growth at the Hakodate station front has accelerated from +8.2% in 2025 to +10.3% in 2026, so acquisition costs are still heading up. At the same time, the Sapporo Shinkansen extension has receded to around the end of FY2038, which means there will be no near-term rush of land price appreciation ahead of an opening. Put together, the read is that acquiring land at the station front faces a continued gradual climb but limited risk of a spike. Acquiring older stock, by contrast, is the kind of trade that attracts more competition the longer construction costs stay elevated, and therefore ranks higher on timing priority.

Conclusion — What Re-Counting the “Hakodate Market” Reveals

Sixteen Donan municipalities, 226 properties, 11,449 rooms. Hakodate accounts for 173 properties and 9,818 rooms, or 85.8% of inventory. The other 15 towns together come to only 1,631 rooms, so investing in Donan is in practice investing in Hakodate. For an investor, that single-core structure is also a simplification: the locations worth considering are few, and the decision narrows to roughly three choices — the station front, Goryokaku, or Yunokawa.

On that basis, the price signal points only at the station front. In the 2026 official land price survey, the commercial site in front of Hakodate Station reached ¥160,000/m², up 10.3% year on year and rising for a third consecutive year, with the pace accelerating. Goryokaku-koen-mae, the city’s highest-priced site, has been unchanged for four years, and Yunokawa Onsen has fallen for three. Listed-REIT acquisitions and the large openings of the 2020s are likewise concentrated on the station and bay side.

Demand keeps setting records: 5.043 million overnight guests in FY2025, up 6.7% year on year, including roughly 579,000 foreign overnight guests. Even so, the settled-ADR estimate stays at ¥9,600 and only 15 properties sit above ¥15,000. That mismatch between demand growth and inventory composition is the core opportunity in Donan hotel investment. The fact that an upper-tier station-front property held by a listed REIT ran at 88.4% occupancy with RevPAR of ¥16,229 (June 2026 actual), far above its portfolio average, shows that this market’s ceiling sits well above its current average.

With construction at ¥2.3–2.5mn per tsubo and roughly +15.5% of inflation to price in over a three-year build, new-build yields now fall below 6%. Meanwhile 2,986 rooms — a quarter of the market — sit in buildings more than 35 years old. The next thing to move in Donan is not building something new, but making something that already exists new again.