FOR Japan’s growing flood of foreign tourists, one of the top Internet search terms is “onsen,” the traditional hot springs where travelers have soaked since the days of the samurai. Now some of the world’s oldest businesses are attracting big new money.

Private equity (PE) funds like SoftBank-owned Fortress Investment Group LLC and Hong Kong-based Odyssey Capital Group are spending billions to tap into the appeal of traditional inns amid a tourism boom that’s ramping up ahead of next year’s Tokyo Olympics. The big funds are moving in as centuries-old spas, many of them still family-run, struggle to find successors in an aging country where small towns and villages are losing young people.

Odyssey, along with two other investors, last year purchased its first Japanese onsen, an inn with 28 tatami-floored guest rooms near the Sea of Japan called Kagetsu, or “flowering moon.” Christopher Aiello, managing director of Odysey’s Japan real estate business, says the firm plans to spend US$500 million in the next three years buying about 20 more traditional Japanese hotels, which are known as ryokan.

“The Japanese hospitality sector has tremendous opportunities for investment,” Aiello said. “Many of these ryokan are very undervalued after experiencing so much recession and mismanagement, but a lot of them are located in beautiful natural settings.”

At Kagetsu, the founder’s granddaughter, Tomoko Tomii, greets her guests at the inn’s stone-paved entrance, dressed in a delicate pale-pink garment like a kimono. The 40-year-old says the family decided to sell to the Odyssey group last year because debts had piled up and they needed money to update rooms and design an English-language website.

“We had no choice but to look for a sponsor,” she said. “We appreciate that our buyer is stabilizing the business, but not kicking us out.”

Odyssey and its partners sent two professional managers to help streamline operations, but agreed to let Tomii and the family’s 30 employees stay on after the sale. That was important because concern for the welfare of employees deters many small business owners from selling, even when they’ve fallen into desperate straights. Japanese proprietors, in particular, have a reputation for being “allergic” to selling.

Japanese hot springs have become hot investment targets for other big businesses, too. Yokohama-based Breezbay Hotel Co. is looking to acquire 100 lodges and onsen inns over five years, according to its chief executive officer, Noritada Tsuda.

Bain Capital LP has been buying onsen since 2015, when it purchased a chain of 29 Japanese spas and resorts, including one on an artificial island in Tokyo Bay. Last month, the Boston-based private equity firm opened a new ocean-view property in the rural prefecture of Mie, bringing the number of its Japanese hospitality assets to 36, with plans for more.

Fortress is also in the game. In February, the firm opened a downtown Osaka spa the size of two city blocks where day trippers can soak in tubs on the edge of a traditional Japanese garden, with a hotel-and-mall complex next door and a 51-story tower rising above. (SD-Agencies)