Beyond Airbnb: Minpaku market poised for growth

Firms look to cash in as law outlines rules for short-term lodgings

by

Staff Writer

Needing a place to stay before moving to a new home, James Degan recently went on Airbnb and found an apartment in Tokyo’s upscale Minato Ward. At ¥8,000 per night with a double bed and fully equipped kitchen, it came cheaper than staying in a hotel and was conveniently located near a station close to his workplace.

Degan, a Franco-British financial trader, said he looked at other short-term minpaku (private lodging) sites but couldn’t find any operating in Japan with the variety offered by Airbnb. He attributed that advantage to the service’s early entry into the nation.

“I think Airbnb benefits from the innovator’s edge,” he said.

An impending law change, however, could shake up Airbnb’s dominance in a market experiencing an unprecedented tourism boom.

Airbnb’s success here took a similar trajectory the American firm has followed elsewhere: fighting often difficult regulatory environments and sometimes operating in legal gray zones.

While Japan has no laws specifically outlawing short-term lodging services, the hotel law lays out conditions few private homes can meet.

Facing a surging number of visitors and an accommodation shortage, however, the government of Prime Minister Shinzo Abe in June passed a new law giving the green light to such services. The change brought on a roster of new players looking to play catch-up in one of the hottest areas of the sharing economy.

E-commerce giant Rakuten Inc. recently announced the launch of a joint venture with real estate listing operator Lifull Co. Rakuten Lifull Stay Inc. aims to begin offering services after the law takes effect sometime in the first half of next year.

Rakuten is a household name in Japan, with 90 million members, its own professional baseball team and a platform that offers myriad services from banking and credit cards to travel and e-books. Lifull, on the other hand, operates a real estate and housing information site with around 8 million listings, and the firm has a network of more than 22,000 affiliated real estate stores.

“I think it’s an ideal joint venture — Lifull can reach corporate clients while Rakuten can reach out to individual customers,” Munekatsu Ota, representative director and chief operating officer of the new company, told The Japan Times in an interview.

The venture has so far announced a series of partnerships with major players, including American powerhouse HomeAway and China’s largest vacation rental site, Tujia.

Rakuten said it will supply the firms with property listings from its tentatively titled Vacation Stay minpaku service. In return, the overseas operators will drive demand for Japanese properties by promoting travel to Japan through their platforms.

Ota said his company also plans to offer property management services for hosts and said it has its eyes set on eventually working to convert the growing number of vacant homes — a product of the nation’s aging population — into lodgings.

With an estimated 8 million empty houses in the country, even having a small portion renovated would lead to a boom in listings, he said. “I think we are looking at property listings in the league of hundreds of thousands,” Ota said.

Hitoshi Sato, a senior analyst at InfoCom Research, said despite its global popularity, many in Japan are still unfamiliar with Airbnb and its services.

“In that sense, Rakuten’s strong presence here is an asset which it can use to lure domestic property owners who may feel more comfortable working with a well-known Japanese company,” he said.

The bill passed in June will let people rent out property for a maximum 180 nights a year if lodging providers register with local governments. It also calls on absentee landlords to outsource property management to firms that can guarantee hygiene and safety.

Meanwhile, service platforms like Airbnb and HomeAway will be required to register with the tourism agency, which plans to create an online system to grasp the accommodation situation at all minpaku businesses.

The push to loosen related restrictions comes as the number of inbound visitors continues to rise thanks to a weaker yen and the easing of visa requirements.

Japan saw 13.4 million visitors in 2014, 19.7 million in 2015 and 24 million last year. The government wants to increase that number to 40 million by 2020, when Tokyo will host the Olympic Games.

The surge in visitors has also seen travel spending swell to a record high ¥3.7 trillion in 2016. The government projects that figure to double to ¥8 trillion in 2020.

But the rosy tourism numbers are dogged by a shortage of accommodations, particularly in popular destinations such as Tokyo, Kyoto and Osaka, where room occupancy rates at city hotels exceed 80 percent.

The introduction of the minpaku law could help ease that crunch by prompting players who had been on the sidelines to enter the market.

Japan’s largest travel booking site JTB Corp. last week said it is throwing its hat in the ring via a partnership with Japanese startup Hyakusenrenma Inc. The collaboration will allow visitors to JTB’s multilanguage travel booking site Japanican to access the roughly 800 minpaku properties listed on Haykusenrenma’s vacation rental site, Stay Japan.

Yuki Okuno, business development manager for Squeeze Inc., a company that runs a management system for minpaku properties, hotels and ryokan inns, said businesses like monthly apartments are looking at using the law change to increase occupancy rates by filling vacancies in between reservations with short-term guests.

At the same time, he said the 180-day cap and legal penalties could see some hosts opt out of the minpaku model due to risk and profitability issues.

Hosts making extra cash from listing rented apartments may not be able to turn a profit under the new law because of the 180-day cap. A revision to the existing hotel law is also up for deliberation in the Diet, possibly raising the maximum fine for unlicensed hosts to ¥1 million from the current ¥30,000.

“Still, I think the overall size of the market will get bigger,” Okuno said.

Spike Data, which tracks the minpaku market in Japan, estimates the sector will swell to ¥200 billion by 2020 compared with ¥13 billion in 2015 as the number of minpaku businesses and users grow.

Foreign players are also eying a piece of the pie.

In announcing its partnership with Rakuten in Tokyo last month, Tujia Chief Operating Officer Yang Changle said the company is confident it can boost its presence in Japan by focusing on serving Chinese visitors through its experience and strong name recognition back home.

Chinese tourists accounted for one-fourth of all visitors to Japan last year, and could reach 10 million by 2020 and 13.5 million by 2025, said Tomoko Suzuki, Tujia’s Japan head.

HomeAway, a subsidiary of Expedia Inc. that operates one of the world’s largest vacation rental sites, is also increasing its presence since opening a Japan office last year with a focus on luxury properties.

Airbnb, meanwhile, has been expanding the breadth of its services beyond private rentals, embracing broader categories of accommodation, including boutique ryokan and hotels through partnerships with travel startups.

It also has the first-mover advantage, which it can capitalize on.

The San Francisco-based company lists over 3 million properties in 65,000 cities in 191 countries. In Japan alone, Airbnb lists over 55,000 properties, by far the largest such provider in the nation. It began selling travel experiences like bonsai art and sake and food pairing this year, and in June launched its first television commercial in Japan.

Yasuyuki Tanabe, Airbnb’s Japan chief, said he welcomed the new legislation for its clarity and simplicity, adding that Japan is the company’s most popular destination in Asia and saw 5 million guest arrivals in the past 12 months.

“Hospitality is a large, growing market and we strongly believe that helping more people to travel is good news for everyone,” he said.