■Business Overview, etc.
1. Market-creating business development through space sharing
The “rental conference room business,” where TKP ＜3479＞ has been the main force, rents idle assets, low profit properties, and unprofitable assets from real estate owners at a bargain price, “regenerates” “space” in conference rooms, banquet halls, etc., and provides added value as a sharing economy. Real estate is purchased from real estate owners in large transactions (cheap prices) through leasing, etc., and lighting, carpets, wallpaper, etc. are renovated so that they can be used in rental conference rooms, etc., and peripheral services such as catering, lodging, and various options are added. Customers are corporations that mainly require the use of conference rooms, and there are many advantages for the customer side, such as cost reduction, consolidation of operations, and the possibility of multi-purpose use compared to owning conference rooms in-house. Therefore, it can be said that the company's business successfully connects the supply side, which wants large transactions, and the demand side, which wants small sales and sharing. Furthermore, it also depicts the direction of improving profitability per space by providing solutions with content services (operation operations, systems, training packages, etc.) added to the space to respond flexibly to demand from time to time.
Furthermore, “management without ownership” also has characteristics. Purchases are centered around rental agreements, and since variable rents (sales/profit ratio, etc.) account for about 46%, I would like to note that the impact on real estate prices and business results due to economic fluctuations is relatively small, and it is different from the risks that normal real estate companies have (however, for hotel businesses where a stable high occupancy rate can be expected, they are securing high profitability by daring to own part of the hotel business in-house, and preparations are being made so that they can be liquidated at any time).
2. Characteristics of the revenue model
The “conference room rental business” is a flow-type profit model based on hourly rental. There are a wide variety of uses of TKP rental conference rooms, and since the growth point is how much peripheral services such as food and drink, planning, equipment rental, etc. can be added in addition to the operation of basic conference rooms, the same business uses “sales per square meter” as a KPI (key performance evaluation index) rather than occupancy rate. In addition to recovering demand for food and drink, the policy aims to expand “sales per square meter” by expanding the software area (event production, etc.). Since the break-even point is reached in an average of 3 months from opening, and cruising speed is reached in 12 months, it can be said that it is a profit model that can be monetized relatively early.
3. Network of locations
TKP has 235 locations and 1,938 rooms (144,000 tsubo) of corporate rental conference rooms, mainly in major cities in Japan (as of the end of February 2024). It is divided into 6 grades that match the purpose of use, scale, budget, etc., and the unit price is high, “CIRQ (silk)” 24 facilities/51 rooms*1, Garden City PREMIUM (GCP) 30 facilities/341 rooms, Garden City (GC) 44 facilities/478 rooms, conference center (CC) 54 facilities/672 rooms, business center (BC) 23 facilities/176 rooms, star rental meeting rooms It consists of 27 facilities and 55 rooms. Furthermore, there are 33 facilities and 165 rooms*2 within lodging facilities such as “APA Hotel,” “Lectore,” and “Ishinoya,” which are operated under a franchise.
*1 It started in July 2020 through a capital and business alliance with ESCRI, which operates marriage facilities nationwide. Mainly on weekdays, ESCRI's idle facility will be converted to the joint brand “CIRQ,” and used as a venue for party and social gatherings for client companies.
*2 Of these, 20 are directly managed facilities.
4. Surrounding business
The development of peripheral services is one of the differentiating factors from other companies that do conference room rental business. The company responds to a wide range of customer needs by providing food and drink, options, lodging, etc. As for food and drink, it consists of catering, bento boxes, cafes, and restaurants, and in particular, catering and bento boxes have become essential peripheral services for applications involving meals, such as social gatherings in rental conference rooms. Note, the food and beverage sector (catering), which struggled due to the effects of the COVID-19 pandemic, was temporarily reduced (outsourced), but in-house production is being promoted again as demand recovers.
Moreover, the company also offers a wide range of options. As an example, in addition to providing simultaneous interpretation systems and video conference systems, training coordination, installation/operation of video/audio/lighting equipment, office furniture and equipment rental, there are also COVID-19 countermeasures equipment, etc., and the content enhances customer convenience. In the past few years, demand for online events has increased in the wake of the COVID-19 pandemic, and it seems that webinar projects have grown. Also, along with the resumption of real events, opportunities to produce highly entertaining events are also increasing, and the importance of providing added value through peripheral services is also growing as we evolve from selling spaces to companies that provide content in spaces.
Furthermore, lodging training facilities (20 directly managed facilities) are also provided in response to requests from customers, and they are used during study trips, employee trips, etc. As directly managed facilities, in addition to the resort-type seminar hotel “Lectore” (6 facilities), the high-class resort seminar ryokan “Ishinoya” (2 facilities in Izu Nagaoka/Atami), and the urban resort lodging facility “Bayside Hotel Azur Takeshiba,” we also operate our newly launched in-house brand “TKP Sunlife Hotel"*. Also, as a franchise operation facility, “APA Hotels” (10 facilities) are being developed as hybrid hotels with conference rooms (as of the end of 2024/2).
*Opened on 2022/12/1. It is located directly connected to Hakata subway station, and has taken over the entire business hotel where “TKP Garden City Hakata Chikushi Guchi Mae” is located. The company focuses on development under the APA Hotel brand, but it is a policy to respond flexibly to various situations and needs by having other options.
Nowadays, even large companies rarely own lodging facilities in-house, and even if they do, it is often difficult to operate due to cost. The company takes in such corporate needs and aims to improve repeat rates. Also, “Sekitei,” famous as a high-class ryokan, had fallen into poor management due to a low occupancy rate, but the company rebranded it as “Ishinoya” and improved management by capturing corporate demand on weekdays, so there are many advantages from the viewpoint of effective use of assets. Furthermore, not only rental conference rooms, but also a one-stop series of services are provided, including meals, equipment, lodging places, and transportation arrangements, and it can be said that the reason why the company is supported by a wide range of customers is highly convenient for customers. Currently, companies are revitalizing communication through lodging training and promoting work style reforms through workcations in preparation for the post-COVID-19 pandemic, and demand seems to be expanding. In the future, we are also anticipating the adoption of inbound MICE*, where demand will increase in Asian countries.
* It is an acronym for corporate meetings (meetings), incentive trips (incentive trips) conducted by companies, etc., international conferences (conventions), exhibitions/trade fairs, and events (exhibition/event) held by international organizations, organizations, academic societies, etc., and is a general term for business events where many customer exchanges are expected. (Quoted from the Ministry of Land, Infrastructure, Transport and Tourism Tourism website)
5. customers
TKP's customer base is over 30,000 companies, of which approximately 2,000 are listed companies, and more than half of the listed companies use it. While it has a broad customer base, the top 500 sales companies make up half of sales, and it can be said that it is a structure where the composition ratio (usage frequency and usage unit price) of top customers centered on major companies is high. While we aim to dig deeper into customers through aggressive proposals and detailed responses from corporate sales representatives for heavy users, we are improving efficiency through operations utilizing call centers and TKP rental conference room networks for single-use light users. Also, existing customers account for approximately 85% of sales, and it boasts a high repeat rate.
(Written by FISCO Visiting Analyst Ikuo Shibata)