That's correct, but not applicable to this case. You can't make up in volume what you're losing in margins for the same product. In this case there are two products:
1. Hotel room (100Y, loss margin) x 1
2. Live stream (whatever CPM he can get on YouTube) x many
It still seems like it would be a struggle to make this profitable though. How many viewing hours would be needed per day? Most of the time it's going to be an empty room or have the light off. The rest of the time probably not much of interest is going on.
If he's savvy, he's not really intending to make it up with ads or perhaps even keep this room deal. It's a promotion that takes the ryokan from "just another place to stay" to at least having some notability. Not sure it actually makes more people stay there, but perhaps it's worth a shot.
