In northern Japan where winters are long and cold, kerosene heaters are definitely more common than other kinds in buildings and houses more than 5-10 years old. Recently, new apartments and houses seem to be changing to electric heating. Two of the advantages of the portable kerosene heaters are that they are much cheaper to run than electric and usually they are portable, so you can hide them away in the summer months.
It sounds like you got a bit unlucky with your hotel. That heater looks a little old. Maybe it hasn't been cleaned properly or the exhaust is not as good as it should be. It could also be because winter has only just started and it hasn't been used recently. Sometimes it takes a few cycles to burn out all the old kerosene. Most kerosene heaters should burn clean with very little or no smell.