Star Mica Co., a Tokyo-listed real-estate company founded by an ex-Goldman Sachs Group Inc. banker, plans to double returns from apartments, using Airbnb to house foreign tourists.
The company owns about 2,500 apartments mostly in Tokyo, and is considering renting some of them to overseas visitors from as early as next year using services such as that of Airbnb Inc., said Masashi Mizunaga, the president of Star Mica.
It also acquired a stake in the Tokyo-based startup Squeeze Inc., which provides services to help manage reservations and clean rooms for property owners, to let it sublease rooms of other firms or individuals, he said.
Corporate executives such as Mizunaga are trying to profit from a tourism boom in Japan that saw visitors from abroad jump 46 percent last year to a record 20 million people. While the influx has constricted hotel room availability, Airbnb hosts in Japan operate in a gray market now because current law does not explicitly address house rentals, and the government is considering new regulations. The service has invited its share of controversy, with neighbors of Airbnb-listers worldwide complaining of rowdy renters during major sporting events.
“There aren’t enough hotels. When we take business trips to Kyoto or Osaka, it’s hard to find rooms,” Mizunaga, 51, said in an interview at the company’s 28th floor office in central Tokyo.
On Airbnb, “we’re not going to go ahead with it while we’re still in a gray zone, but it won’t take two or three years: I think something will happen next year,” he said.
Mizunaga said that investment yields on apartments, the ratio of annual rental income to the purchase price of the property, is usually around 6 to 7 percent, but using services such as Airbnb could double that figure. Returns increase when rentals are shorter term and the space provided is smaller, he said.
Other than the demand for accommodations, growth in the real estate market may be reaching its limit, Mizunaga said. His company is not reselling properties, focusing instead on its apartment rental operations, he said.
Shinichi Tatebayashi, the chief executive officer of the startup Squeeze, said he decided to establish the company because of his experience renting out an apartment in Japan while working in Singapore.
The income from Airbnb “was more than three times what I would have gotten renting the place — that’s when I knew this was going to take off,” he said in an interview.
Squeeze raised about ¥420 million in May from investors including Star Mica and venture capital firm JAFCO Co. to expand its operations, Tatebayashi said.
Japan could have a shortage of about 41,000 hotel rooms by 2020 when Tokyo hosts the Olympics, if current accommodation levels are maintained, according to a Mizuho Research Institute Ltd. report released in August last year.
“They tried to stop Airbnb in the U.S. in the past, too,” said Mizunaga of Star Mica. “But we’ll continue to have demand and suppliers. What the government will be able to do is to decide how to regulate the market.”