We have a long-term boarding facility for cats & dogs in Japan, too, out in Osaka.
Any animal that is left permanently to their care (death of owner, etc.) is also placed on their "looking for a home" page, and a fair number do get adopted out into a new family.
For each animal that dies in their care, they provide a Butsudan, the Buddhist shrine/altar that hold the cremated remains.
The one in the Wikipedia article is really gorgeous but the pets each get one walled-off section of a wooden rack, maybe about 30 cm by 30 cm for each.
Next to the butsudan they place offerings to the spirits of the animals-- maybe a favorite food and a small bowl of water-- and some photos of the deceased animal.
Personally, I really like the fact that they take care of the "after death" aspects. I want a Butsudan for my dogs.
This facility also hosts temporary stays (for people having short-term business transfers when they can't take the pet along, people who suddenly have to take care of a hospitalized family member, etc.) and regular (short-term) hotel boarding facilities.
As for the business aspect of it, I think the income from the short-term hotel boarding facility keeps the other aspects afloat.
The problem is that if you do regular pet hotel services, then it necessarily means you have to be near a center of population, which means there won't be a whole lot of run-around space for the dogs. The Osaka one has exactly this problem. They rely on volunteers to walk the dogs, but as you know, rarely are there enough volunteers.
An alternative would be to offer pick-up services in the main population center and then drive the animals back to the larger space in the countryside, but that has its downsides too.