Investing in Shima Spain Village — and effectively withdrawing (1990)

Why the second earnings pillar took nine years to unwind

President Kanamori’s underlying reading — that the railway business was running out of growth — was not itself wide of the mark. With population growth slowing in the Kansai region, the idea of making use of land the company already held along its lines lay on the extension of the rail–property–tourism vertical integration Kintetsu had always been good at. But a theme park requires continuing investment after opening simply to avoid going stale, a continuing capital burden of a different nature from ordinary line-side development. The third-sector structure, saddled with the regional role of sustaining employment on the Shima peninsula, appears also to have narrowed the freedom to withdraw as a matter of business judgement.

In fact, Shima Spain Village kept receiving financial support on the order of ¥17 billion even after it fell into negative net worth, and a fundamental cleanup slipped as far as the full write-down of the buildings in 2002. It is hard to deny that the banner of being the first project designated under the Resort Law, and the framework of joint investment by local authorities, delayed the decision to cut losses as a matter of management. Even so, the tourism assets of the Shima peninsula, lightened by writing the buildings down, appear to have marked a turning point that led to the reallocation of resources into Abeno Harukas and the Shimakaze sightseeing express in later years — a case that still poses questions today about the limits of line-side tourism investment for a railway company, and the need to redesign it.