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Issues to address

The Seibu Group aims to achieve sustainable and strong growth. To achieve this, under the Seibu Group's Long-Term Strategy, the Group expands the areas and added value in which it can provide a combination of various businesses and services in order to develop as a corporate group that will support customers in all scenarios of their everyday lives.

The Company has prepared the three-year “FY2019-FY2021 Seibu Group's Medium-term Management Plan” as a road map aiming for its long-term target, revising its individual measures and numerical plans based on the FY2017-FY2019 Medium-term Management Plan. This medium-term management plan continues to take as its theme “Sustainability & Dynamism,” and guided by the basic policies of “tackling innovation with speed from new perspectives” and “establish a growth platform from a long-term perspective,” the Group will address the key issues of “create new business areas” and “expand existing business fields.”

Specifically, the Group will promote initiatives or the following six points as key strategies.

(a) Strengthen marketing function

The Group will respond to paradigm shifts such as increasing numbers of foreign visitors to Japan and changes in the composition of the population by expanding its targeting of markets, including inbound tourism, senior citizens and children, in order to develop new business models. As an initiative in response to the increase in inbound tourism, the Group will develop Prince Smart Inn, its newly-established next-generation accommodation-focused hotel brand to meet diversifying demand for accommodation. The Group will also develop the PRINCE VACATION CLUB membership hotel business, which it has recently entered, with a view to capturing new customers especially among the active senior segment.

Furthermore, the Group plans to “create Group customers” by making use of digital technologies to strengthen its marketing functions.

(b) Make effective use of the Group's assets

The Group holds large scale assets as business properties, mainly hotels, in highly convenient central urban locations, such as the Takanawa and Shinagawa area, and the Shibakoen area. The Group seeks to unleash their potential earning power in order to maximize the Group's corporate value. To this end, the Group formulated the Seibu Group's Asset Strategy.

Specifically, the Group is maximizing the value of its assets from the three perspectives of i) enhancement of the value of existing assets, ii) portfolio re-balancing, and iii) concentration of management resources on core businesses.

With regard to enhancement of the value of existing assets, the Group will continue to make investments to enhance the value of its existing hotel guestrooms, lobbies, restaurants, and other areas. At the same time, it will promote development of the Tokorozawa area, such as Grand Emio Tokorozawa Phase II and the Tokorozawa Station West Development Plan, and the conversion of the MetLife Dome area into a ball park, while also undertaking initiatives for increasing the value of areas along site railway lines, such as the redevelopment of the Seibu Shinjuku Line.

With regard to re-balancing its portfolio, the Group will take Tokyo Garden Terrace Kioicho as a model case for considering multipurpose developments, including the Takanawa and Shinagawa areas and Shibakoen area.

By concentrating management resources on its core assets, the Group will use cash generated by expropriating and selling its assets, and other means, to reinvest in assets with potential to increase its revenues in line with the Group management strategy. The Group will also make use of underutilized land and other under-utilized assets and areas underneath overpasses to make efficient use of, and to realize earning capability of its assets.

Looking ahead, the Group will utilize its characteristics as a holder of large-scale assets and work to further increase asset efficiency and profitability.

(c) Strengthen collaboration inside and outside the Group

To create new business areas, the Company will collaborate with partners inside and outside the Group to grasp customer needs and acquire management resources such as human resources and business expertise.

The in-house organization Seibu Laboratory will play a central role in initiatives including open innovation programs.

The Company will also utilize external resources, pursuing business process automation by using digital technologies such as AI and robots at train stations, leisure facilities, hotels, and other facilities. In addition, having acquired the business of StayWell Holdings Pty Ltd in FY2017, the Company will leverage its expertise to accelerate new hotel openings in Japan and overseas.

(d) Conduct rigorous and efficient capital expenditure

The Company will strive to steadily increase value by rigorously selecting investments with an awareness of WACC (weighted average capital cost). Having determined the hurdle rate, the Company will strictly and efficiently conduct capital investments and will rigorously ensure that investment effects are verified.

(e) Create an organization and corporate culture conducive to generating innovation

The Company will create an environment conducive to generating innovation. Specifically, the Company will promote diversity management to foster a workplace culture of respecting individual employees and enabling them to their diverse capabilities and ambitions to the fullest extent. In addition, the Company will utilize digital management to increase productivity through automation and sophistication and promote new works styles, for example by implementing flextime and teleworking. Moreover, the Company will make capital investments that will enable operational reforms, such as office relocations and rebuilding.

(f) Continue to strengthen the managerial foundation

In terms of the Company's corporate governance, including the management and administrative structure and compliance structure, the Group will continue aiming for effective corporate governance in keeping with the spirit of the Corporate Governance Code, and will implement each principle of the code appropriately. Through its IR activities, which are linked with capital market trends and business strategies, the Company will endeavor to cooperate appropriately with all of its stakeholders, providing full accountability to capital market participants (shareholders, investors, securities analysts, and so forth), engaging in dialogue to build trust relationships, and providing timely and appropriate disclosure of information.

Furthermore, the Group works through its wide-ranging business activities, such as the railway and hotel operations, to conduct initiatives for consideration of the natural and global environments in cooperation with local communities and society. Looking ahead, the Group will continue to take action on sustainability in the form of initiatives to solve social issues aligned with the SDGs in a united Group-wide effort to promote initiatives for sustainable growth.

Specific issues and initiatives for each segment are described below.

Urban Transportation and Regional

In terms of sources of improvement of corporate value, the Company will seek to meet the demands of the environment and local communities based on safety and security, and also to increase the value of areas along the Seibu Railway lines by providing sophisticated services.

The Company will ensure safety by promoting installation of platform doors, introduction of continuous grade-separation crossings on Seibu Shinjuku Line, seismic reinforcement work, and so forth, and strive to provide security. In addition, the Company will endeavor to increase customer satisfaction through initiatives such as operating extra-fare reserved seating trains and the new Limited Express train Laview along with renovating stations. At the same time, it will strengthen its sales measures linked internally and outside the Group, and its systems for accepting inbound tourism. The Company aims to become our customer's “railway of choice” and “preferred railway services.” Moreover, the Company will pursue efficient operations through initiatives such as introduction of low-maintenance equipment and facilities, along with utilization of AI and robots in train stations and other areas.

Hotel and Leisure

To drive its corporate value even higher, the Company will fully leverage its advantages as one of Japan's largest hotel chains while strengthening its services to enhance its net sales, earnings power, level of customer's emotion, and global business development capability.

The Company will invest aggressively in value enhancements such as renewals of existing hotels, while continuing to strengthen revenue management and reputation management and pursue digital marketing. In these ways, the Company will shift its target market in anticipation of environmental changes.

To secure an unrivaled share of the MICE market, the Company will increase the sophistication of its sales activities and proposal management.

Moreover, the Company will engage in new fields, such as the accommodation-focused hotel brand, Prince Smart Inn, and the membership hotel business, PRINCE VACATION CLUB. By leveraging the expertise of StayWell Holdings Pty Ltd, which the Company acquired in FY2017, it will also accelerate the development of new hotels in Japan and overseas.

Real Estate

As the key to improving corporate value, the Company will work to realize its latent earnings potential by effectively utilizing the Group's assets.

The Company will promote efforts to contribute towards increasing the value of areas alongside railway lines, mainly through Grand Emio Tokorozawa Phase II and Tokorozawa Station West Development Plan, and redevelopment of areas along the Seibu Shinjuku Line. The Company will also examine large-scale developments in the Central Tokyo (Takanawa and Shinagawa area, Shibakoen area, etc.) In addition, in order to improve value of areas along the Seibu Railway lines, the Company will aggressively promote renovation of existing commercial facilities, and will develop the Emio commercial facilities, Emilive rental apartments, and Nicot childcare centers inside and close to the railway stations.

Construction, Hawaii Business, and Other

In the Construction business, the Company will work to expand orders in growth fields such as renovation, while striving to increase productivity and lift profit margins by thoroughly implementing order selection, cost management and control, along with utilization of i-Construction and ICT.

In the Hawaii business segment, the Company will increase RevPAR by continuously strengthening revenue management and reputation management at existing hotels, while expanding earning capability through development of the home owner business.

In Other business, the Company will continue strengthening its initiatives to capture inbound tourism in the Izuhakone Business and the Ohmi Businesses, while working to make effective use of its real estate holdings. In the Seibu Lions Business, the Company will take steps to increase the team's capabilities, enhance the appeal of the MetLife Dome area by converting it into a ball park, and bolster the efforts to attract people to events.

The Group will continue to conduct corporate management aimed at maximizing corporate value and shareholder value even further.

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