Japan, AirBnB and the devil in the detail

In 2014 Prime Minister Shinzo Abe passed a resolution to support the establishment of 'home-stay' rentals, including individual rooms, as a means of dealing with the worsening hotel shortage in the country.

"Even with the loosening in regulations, most Airbnb landlords will still have to break the law."
Terrie Lloyd, CEO, Japan Travel KK

In what seems to have been a trial balloon, the Cabinet Office focussed on the Special Zones (i.e., those areas designated as centres for national revitalisation) and so by default Osaka and Tokyo became the first regions for Airbnb-type rentals to be decided upon.

After this very powerful endorsement of the business model from the top, it was then up to the various local government entities in both megalopolises to vote for exceptions to local hotel laws and allow individual residents to rent out their places.

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Photo credit: Vincent St. Thomas / Shutterstock.com

In October, after last year voting down the idea, Osaka approved home-stay rentals, albeit with a variety of conditions attached. In early November, the district of Ota-ku in Tokyo announced they would pass a similar ordinance early next year. But there's a catch.

THE DETAIL

For example, anyone wanting to offer (or use) such a service will definitely have to be in one of the approved zones. Running an Airbnb apartment in Shinjuku, for example, will still be illegal at the local level. Also, you will need to:

• Provide a room of at least 25 metres squared or larger.
• Provide proper ventilation, lighting, moisture-proofing, heating and cooling.
• Provide a bathroom, wash basin, toilet, bedding, cooking facilities, storage area and equipment to clean the room.
• Ensure the room is cleaned prior to each use.
• Provide guidance, in the foreign languages of the guests you plan to have staying, on how to use the facilities, trash-handling, emergencies, etc.
• There may be other requirements depending on the ordinances of each city.
• And, most importantly, your guests must stay at least seven days.
  

This last point pretty much guarantees that even with the loosening in regulations, most Airbnb landlords will still have to break the law.

According to the latest (July-September, 2015) Japan Tourism Agency quarterly report, the average stay of foreign tourists in Japan is six days based on a sample size of 6,630 people. Hmmm, curious how the authorities set a seven-day limit isn't it? Surely it's JUST a coincidence...?

So we have a curious situation where Airbnb is kind of legal but few landlords will be able to meet the duration requirements, thus forcing most home-stay landlords to break the law. My guess is that this will be tolerated, in that people will still rent places for the average two to four nights, and that the authorities will instead keep this new grey area up their sleeves as a means to slap penalties on anyone they don't like - such as newcomers running too many places in competition to the local hotels and inns.

The attraction of Airbnb is very easy to understand. In Japan, unless you're running an export business, things are still pretty depressed. If you want to make money, you have to target foreign tourists. Further, with such a shortage of hotel rooms, it's really easy for landlords on Airbnb to get customers.

I have an acquaintance who decided to "experiment" with Airbnb several months ago after hearing from friends how easy it is. He himself rented an apartment in inner Tokyo for ¥180,000 a month, hired one of those new Airbnb room management firms for 5 per cent of his monthly rental, then put the premises on Airbnb to see what would happen.

Within a couple of days he started getting bookings and now for two months he has been making about ¥15,000 a night for most nights of the week. So he has doubled his money with no major outlay and with someone else looking after the cleaning and the renter problems.

Although there is some risk involved, with thousands of others doing the same thing, he is counting on the authorities not moving against him. As a result, he is now considering renting a bunch more rooms on the same basis. This is happening all over Japan.

STEPS FORWARD

The decisions by Osaka and Ota-ku are monumental steps forward, a foot in the door, and so it's easy to see home-stay rentals ordinances being passed by other cities in Tokyo. Our guess (and it is just a guess) is that Arakawa-ku, Taito-ku, and other somewhat depressed local economic areas will be early adopters.

The recent maxed-out hotel situation in Kyoto and Osaka this summer is reason enough for the government to turn a blind eye to the situation. Indeed, an acquaintance who handles Chinese visas told us recently customer numbers fell back 25 per cent over August-September because his customers couldn't find hotel rooms. That's not something the Liberal Democratic Party (LDP) wants to see happen to its incredible new money spigot.

But local government decisions by Osaka-fu and Ota-ku don't mean the floodgates are open just yet. For a start there are the vested interests who are fighting back. These guys are still very active.

As a writer on Blogos.com points out, every opposition entity you can think of (the police, Japan Hotel Association, Japan Ryokan Association, the Ministry of Health and Welfare) is in the process of meeting with a special committee in the LDP to discuss the situation. Obviously there are a lot of people upset with Abe siding with Airbnb, and the Cabinet Office (as the perceived true seat of power) is feeling the pressure.

Also, there is the fact Airbnb's model is very susceptible to negative publicity, which could easily derail all the deregulation efforts made so far. For example, there was a recent case of a Chinese four-year old falling to her death from the 12th floor balcony of a Shibuya apartment her mother had rented via Airbnb.

The apartment owner rushed to the scene but didn't know who the victim was, nor that his tenant had sub-let out the apartment to tourists. Luckily for Airbnb this incident didn't hit the headline news but there are bound to be more such accidents.

Then there is also a case of a company in Kyoto which got a little too ahead of the game and was hauled in by the police (and the President charged) for renting 36 out of 44 rooms in an apartment building to offer as Airbnb rooms. The company is being accused of violating the Hotel and Inns Management law, which is pretty obvious because Kyoto is not a Special Zone area.

This police activity is not a good sign and shows that even though room availability in Kyoto is at a critical level, the authorities there are not going to sit by and watch usurpers carve out a new business inside their jurisdiction.

Airbnb has been very skillful in clamping down on negative publicity about deaths and injuries of customers who rented properties in locations where they didn't know the rules or dangers.  If any of these things happened in Japan, the door for Airbnb and other home-stay rentals would quickly slam shut again.

The moral of this still-developing story is although there are powerful forces at work to make home-stay accommodation legal in Japan, there are also plenty of people who want to see the initiative fail.

Terrie Lloyd is a long-term technology and media entrepreneur living in Japan. This is an edited version of his weekly blog from Japan Terrie's Take (http://www.terrielloyd.com).