The Endangered Inn

Traditional Japanese inns, or ryokan, are small, family-owned specialists in old-fashioned comfort and cuisine. And that's the problem. Today, Japanese consumers do not necessarily want to navigate complex ryokan pricing (which ranges from $50 to $1,000 per head) to lounge around in a yukata , the cotton kimono that is standard ryokan attire, or soak in a communal bath. They are ditching ryokan for Western-style hotels or cheaper thrills in Thailand or Bali.

As Japan opens to competition, it's often traditional businesses that lose out. During the 1980s bubble, Japanese corporations would sponsor ryokan-hopping tours of Japan for employees, but not anymore. Though no one keeps careful count, the Japan External Trade Organization estimates that ryokan revenue fell from about $30 billion in 1991 to $17 billion in 2003. And Katsuo Tobita of the Japan Ryokan Association says many thousands of inns have closed in recent years, leaving some 45,000 today.

Hope for the ryokan may lie with foreigners eager to see old Japan. Tobita says the inns pool tips on catering to foreigners, creating innovations like plus-size yukata. Isao Sawa, who runs a famous inn in a colorful downtown neighborhood of Tokyo, says his place was on the verge of bankruptcy in 1980, when he added Western-style breakfasts and English guides to local attractions. Now 80 percent of his customers are foreign. Without them, he says, he'd have to "give up."

More foreigners are now becoming ryokan-keepers, too. Jeanie Fuji, an American manager of a small-town ryokan, has become famous for her fluent Japanese and blond-hair-plus-kimono look. Goldman Sachs recently announced a takeover of a 92-year-old inn with an attached hot spring--betting that modern management and marketing can make the business competitive again. American entrepreneur Jeff Aasgaard runs a Web site ( ) that helps foreigners navigate ryokan reservations, including pricing that depends on many factors, from location to day and season. Aasgaard says his business grew more than 40 percent last year.

Indeed ryokan can be intimidating for outsiders. Few accept credit cards. Staff often speak minimal English. Customers are unfamiliar. Aasgaard is full of stories: there was the American guest who pulled the plug on the tub, not realizing it was communal. Another was served a live octopus that continued to flail after it was killed at her table, and then fastened a suction cup to the inside of her cheek. One hopes the ryokan, a charming window into old Japan, prove just as hardy.