TOKYO DOME CORPORATION

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Management Message

Shinji Kushiro

Looking Beyond Shin-Kijiku “Innovation”:
We will Focus Our Efforts on Launching New Flagship Businesses for the Group to Achieve Sustained Growth

Representative Director, President and COO
Tsutomu Nagaoka

Shinji Kushiro

Management’s summary of fiscal year ended January 31, 2017, the first year of Shin-Kijiku “Innovation” medium-term management plan

In the Shin-Kijiku “Innovation” medium-term management plan (from the fiscal year ended January 31, 2017 to the fiscal year ended January 31, 2021), we have formulated eight action plans to comprehensively resolve eight management issues recognized by the Group. We are seeking to achieve the targets by steadily executing these plans one by one over a period of five years.

The previous Kidou “Activate” medium-term management plan (from the fiscal year ended January 31, 2012 to the fiscal year ended January 31, 2016) was launched under tough conditions, in part due to an amusement park ride accident and the Great East Japan Earthquake that struck during its first year. Nevertheless, we ultimately managed to build a structure that is capable of securing a certain level of profits.

The Shin-Kijiku “Innovation” plan was formulated with the aim of taking over the results obtained and the issues recognized during the period of the Kidou “Activate” plan, and creating a rock-solid foundation for generating profits looking beyond 2021. The key is to solidify the foundations to attain growth into the future, and for this purpose, increase investments and proactively take on new challenges.

In the fiscal year ended January 31, 2017, the first year of Shin-Kijiku “Innovation,” we were able to exceed the performance forecasts set out at the beginning of the period, but in our mind, we are not yet closer to achieving the final targets in five years’ time that have been set in Shin-Kijiku “Innovation.” We are currently in the stage of working on how to create a “new axis,” and in that sense, we seem to have made a good start in the first year.

Financial Highlights for FY2017

Millions of yen

FY2017 YoY
Net sales 87,761 +2.2%
Operating income 12,589 -1.2%
Ordinary income 10,771 +1.3%
Net income attributable
to owners of the parent
6,635 +45.5%

Progress in fiscal year ended January 31, 2017 regarding eight action plans for resolving management issues and initiatives expected in the second and subsequent years

1. We will work on developing the environment for the sustained creation of value at Tokyo Dome City into the future.

Although Japan is experiencing a declining birthrate and an aging and dwindling population, we believe that the future growth potential of Tokyo Dome City is still high, as it is conveniently located in the city center and is home to a wide range of facilities including a stadium, amusement park, hotel and spa facilities. In order to increase the value of Tokyo Dome City and turn it into higher profitability, we are developing its environment in both tangible and intangible terms, such as updating its facilities and improving the standard of its services.

For Tokyo Dome, we are undertaking the biggest renovations since its opening by spending approximately ¥5.0 billion in a three year period, especially to improve its environment for baseball spectators. Tasks completed to date include the refurbishment of seats, the conversion of arena lighting to LEDs and the introduction of a state-of-the-art sound system. Plans for the future include developing the environment around Tokyo Dome.

A major initiative for the fiscal year ending January 31, 2018 is the refurbishment of Spa LaQua. This will be first large-scale renovation since its opening in 2003, and is slated to commence in September 2017.

We designed and opened new facilities in the spring of 2017, namely, CuBAR LOUNGE, a bowling alley furnished with a bar counter to offer a new way of enjoying bowling, and Gallery AaMo, a gallery where visitors can play. Both facilities have made a smooth start.

We are also making gradual progress in making Tokyo Dome City barrier-free, including the area inside Tokyo Dome. While we have already ensured that pedestrian traffic areas are barrier-free, some sections are still in a condition that is not user-friendly to everyone (e.g., persons with physical disabilities and mothers with children) and thus not completely barrier-free. Acknowledging that these are matters to be addressed for the future, we aim to ultimately make Tokyo Dome City user-friendly and barrier-free for all customers.

[Three-year period from January 2016] Renovation of Tokyo Dome underway

We are carrying out the first large-scale refurbishment of Tokyo Dome since its opening in 1988. We have already completed such tasks as the installation of new high-value-added seats, the conversion of the lighting to LEDs, the introduction of a state-of-the-art sound system and the installation of toilet seats with warm-water bidet functionality. Development of Tokyo Dome building’s external structures will also be carried out in the near future.

[Scheduled for October 2017] Renovation of Spa LaQua

We will carry out the first large-scale refurbishment of Spa LaQua since its opening in 2003. We seek to attract more customers by presenting a space where they can relax as if they are in their own living room at home, in addition to building a new cypress bath and a carbonate spring, for a more enjoyable spa experience than ever before.

[March 2017] Opening of CuBAR LOUNGE

We renovated certain parts of Tokyo Dome Bowling Center, turning the bowling alley into a stylish place of amusement for adults in a classic atmosphere. A bar counter is also in place, allowing visitors to have a drink even while waiting.

[April 2017] Opening of Gallery AaMo

The “A” of “AaMo” stands for “Art” and “Amusement,” and “aMo” stands for “and More.” Gallery AaMo will host events in various genres targeted mainly at visitors in their twenties and thirties, serving as a “gallery for adults to play.”

2. We will work on the renovation of Atami Korakuen Hotel.

At Atami Korakuen Hotel, operation of Misaki Building and Hall ceased in August 2016. At the site of these discontinued facilities, we are working on the construction of a resort complex consisting of a combination of lodging facilities and spa facilities for day trippers. With project costs totaling approximately ¥11.0 billion, this is the largest investment during Shin-Kijiku “Innovation.”

Atami’s appeal lies in its ocean, fresh seafood and hot springs. Over the past few years, the number of tourists has been increasing at this familiar resort area, which is located one hour away from Tokyo by Shinkansen. And as Atami is the gateway to the Izu Peninsula, there is promising demand among day trippers who can stop over on the way in and out of the area.

As the Group has continued its hotel operation in Atami for 50 years, and given that the brand is well-established, we decided to go ahead with the investment, based on the view that it is possible to ensure sufficient profitability by operating the facilities in light of travelers’ needs. The new facilities are due to open in the spring of 2019.

[Scheduled for spring 2019] Opening of resort complex in Atami

We will invest approx. ¥11.0 billion to construct a resort complex in Atami, where the Group has a track record in hotel operation. Combined with the existing Tower Building, which was renovated in 2016, the lodging facilities and hot spring facilities are expected to attract 150,000 guests and 250,000 visitors, respectively, per year.

Source: Takenaka Corporation

3. We will pursue new businesses and aim to gain new customers outside Tokyo Dome City.

In pursuit of new businesses, we are making efforts to commodify our wealth of expertise in facilities and events accumulated over many years at Tokyo Dome City and apply it outside the City. An example is “Japan Local Donburi Championship,” which is one of the popular events of Tokyo Dome: an event was held in Hong Kong and became our first project that expanded overseas. Another example is Gallery AaMo, which opened in April 2017 and is scheduled to host a different event once every one to three months; we believe that the possibility of successful projects being expanded outside the City is high.

Also noteworthy is Audio guide Q, which we jointly developed with Showcase-Tv Inc. This is a service that provides voice guidance used at galleries and other facilities in the form of a smartphone app, and has been utilized within Tokyo Dome City including TeNQ. In April 2017, we realized the sale of Audio guide Q outside the City, with its adoption by “The Little Prince Museum (Musee du Petit Prince de Saint-Exupery a Hakone).” Going forward, we intend to continue proactively expanding sales targeting museums, galleries and tourists facilities nationwide.

[July 2016] Launch of Audio guide Q

We have designed and developed a system that makes an audio guide used in museums, etc. available in the form of a smartphone app. Since Audio guide Q has multilingual voice recording capabilities, we are making sales expansion efforts in anticipation of service demand from overseas visitors.

4. We will seek to maintain and improve the feasibility of existing businesses outside Tokyo Dome City.

The Group had been operating businesses in seven segments, including the Tokyo Dome City business. From here on, however, the Group’s businesses will consist of six segments as a result of its withdrawal from the operation of Tokyo Dome Hotel Sapporo, which had been operated under the Sapporo business.

Tokyo Dome Hotel Sapporo was a business that we had continued to operate based on leased property since 1988, and at the beginning of Shin-Kijiku “Innovation,” we had no plans for withdrawal and had been seeking to improve its profits. Regrettably, negotiations over the lease agreement with the property owner resulted in the termination of the Hotel’s operation in April 2017.

With regard to shop in, a cosmetics specialty store developed by the retail business segment, recent performance has continued to be poor. Although shop in is deemed to have established itself as a brand to a certain extent, we have reviewed its longstanding single-brand approach based on the view that it is necessary to establish a powerful brand for the retail business, so we are switching to a multi-brand strategy through the development of new brands. As the first step, we have launched a new brand called Crème et Rouge, and opened its first store in Umeda, Osaka in April 2017.

[April 2017] Opening of Crème et Rouge

As a new form of retail business following shop in, we opened the first shop of Crème et Rouge in “Hankyu Sanban Gai” adjacent to Hankyu Umeda Station in Osaka Prefecture. This shop is targeted at “vibrant women” in their thirties and older age groups, and provides all-in-one support for their beauty needs.

5. We will work on developing the environment in view of globalization and universalization.

In recent years, there has been a rapid increase in visitors from overseas at Tokyo Dome City as well. As part of efforts to develop a framework to welcome visitors, we are making signboards and signs available in multiple languages. We are also in the process of revamping our website with the aim of conveying information for overseas in multiple languages. The multilingual website is due to go online in January 2018.

We have also started distributing a web magazine on regional tourism called Stroll Tips, as a branding initiative for surrounding areas, centering on Tokyo Dome City. Stroll Tips conveys information for overseas on facilities in Tokyo Dome City as well as neighboring regions such as Jimbocho, Kagurazaka, Hakusan and Yushima.

[September 2016] Launch of distribution of Stroll Tips

Stroll Tips is a trilingual web magazine (in Japanese, English and Chinese) that reviews cultural, tourist and leisure facilities and restaurants for surrounding areas, centering on Tokyo Dome City. We created a symbol of the region called “Shin-Shin-Haku-Tou,” with the aim of branding the region as a whole.

6. We will make efforts to maintain a safe and secure environment at all times.

On the safety front, it has been our top priority to make efforts especially in developing a culture of safety, having experienced an amusement park ride accident and the Great East Japan Earthquake in the first year of the Kidou “Activate” plan. We are striving to build safety management systems and improve the standard of our responses to accidents and disasters on a company-wide scale.

There are no shortcuts to safety; it all boils down to constant training and awareness-raising among employees. We feel that our safety awareness has reached a certain level but needs to be raised even further. By sharing safety awareness, we hope to eliminate discrepancies in the level of awareness among departments and lift employees’ awareness to a high standard. We are prepared for emergencies in that we have prepared various action plans based on all types of risk scenarios such as terrorism, infectious diseases and earthquakes and we periodically conduct practical drills not only on a company-wide scale but also in each department.

7. We will work on acquiring and developing human resources.

We believe the key to securing human resources lies in developing a workplace environment in which employees can continue to work for many years. To this end, we launched the “Education Center Office” for the development of trainers in April 2017. Employees who have undertaken specialized training return to their respective departments and group companies to educate new employees and part-time workers, and we believe this process helps reduce the job turnover rate. After having launched this initiative a year ago in Tokyo Dome City Attractions, we decided to implement it on a company-wide scale as it has yielded tangible results.

Furthermore, in April 2017, we launched a specialist staff system, which has produced the first generation of specialist staff totaling 21 employees. Now that there is a way to become specialist staff even for those who joined the Company as a part-time worker, we hope this will boost their motivation.

8. We will work on rebuilding the group management structure.

In April 2017, we carried out structural reorganization and newly established the “Marketing Division.” Marketing had previously been carried out by each department, but following this revision, marketing strategies will be formulated and promoted based on a unified approach throughout Tokyo Dome City from here on.

Tokyo Dome Group in 10 or 20 years’ time and the direction of growth beyond Shin-Kijiku “Innovation”

In the Group, sales of the Tokyo Dome City business account for slightly under 80% of total sales. Needless to say, we are convinced that Tokyo Dome City still has growth potential and its profits will continue to increase in the future. That said, if the Group is to seek substantial growth into the future, our possibilities will not broaden unless we expand outside, beyond the confines of Tokyo Dome City.

While the initiative to increase the value and profit of Tokyo Dome City will definitely be promoted as one of our priorities, another new priority that needs to be addressed is to expand our businesses other than Tokyo Dome City.

Based on such policy, what we are currently focusing our attention on is the retail business, as well as the subcontracting business in operation of sports clubs and management of facilities conducted by Group companies as part of our other businesses. If we can combine facilities management and operation subcontracting with our expertise in event planning at Tokyo Dome City and provide services broadly as a comprehensive solution, we believe it will gradually rectify the balance between the Tokyo Dome City business and the other five businesses thereby contributing to the Group’s expansion.

Relationship between Tokyo Dome Group and its stakeholders, and our role to play in society

The Group's management philosophy is to “Enriching society by thrilling and entertaining the public.” We believe that sharing excitement in this sense is the social agenda that the Group should take up. On a daily basis, we are continually carrying out the new construction and operation of facilities as well as making improvements to the environment, in order to share excitement not only with customers but also with all stakeholders including local communities, business partners and shareholders, regardless of which department or Group company we belong to.

I am engaged in daily operations based on the belief that the mission I have been given as a management executive is to mobilize the strengths of everyone working in the Group and seek to fulfill the targets of Shin-Kijiku “Innovation” based on such strengths, with the vision to share excitement with everyone with whom we have a relationship.

We are very grateful for your continued encouragement and support for the Tokyo Dome Group.