Unlike the extravagant palace that Ichigo and Renji walked into upon arriving in Ōetsu's city, the actual palace takes the shape of a simple shack, located on the edge of a cliff. The only distinguishing feature denoting the importance of the building is the sign on the entrance, which, in kanji, states the building's name, Hōōden. The inside of the palace, however, is much bigger than what the exterior suggests it to be. Instead of being a small room, there is instead a deep pit that, if one is not careful, people will fall into immediately when they set foot inside the palace.
Ōetsu Nimaiya's Forge
A water slide at the palace can be taken to reach an enclosed cavern structure at the base of the cliff, that is surrounded on all sides by torrents of water. Ōetsu states that this is the reason the Hōōden is on a cliff as he uses all the water to restore Bankai.