Takayama - Mountains or Town?

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The key to understanding what's happening with your hotel search is that Japanese cities are administrative units that cover a lot more than the actual city core. For example, Tokyo-to (metropolis) extends far west into basically uninhabited mountains and 1000 miles south to cover a bunch of tiny islands too, and Takayama-shi covers most of northern Gifu prefecture:

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So. The Japan Alps area of Takayama-shi is known for hot springs inns (温泉旅館 onsen ryokan), and most resorts in the mountains focus on this. There's also skiing in the winter (you might still manage this in March) and hiking in the summer (but most trails won't open until June-July).

Takayama the actual city has attractions too, most notably the Hida Minzoku Folk Village, but other than that it's "just" a smallish city and not a major draw.

Personally, I would definitely go with the mountain hot springs: I've stayed at one in nearby Oku-Hida and it was one of the best I've been to in Japan (and I've been to a few!). Public transport in these parts is pretty spotty, so renting a car is a good idea, but most ryokan can come pick you up from the nearest train station if you arrange this in advance.

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