Terrie's Take 810 (Tourism Edition) -- Airbnb To Become Legal in Japan After All?

Sun Jun 28 22:43:54 JST 2015

* * * * * * * * TERRIE'S (TOURISM) TAKE - BY TERRIE LLOYD * * * * * *
A bi-weekly focused look at the tourism sector in Japan, by Terrie 
Lloyd, a long-term technology and media entrepreneur living in Japan.
(http://www.terrielloyd.com)

Tourism Sector Edition Sunday, June 28, 2015, Issue No. 810

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+++ Airbnb To Become Legal in Japan After All?

The week before last, a reader alerted us to an article on Yahoo Japan 
News about a new development in the Special Zones Law, Article 13, a law 
which could be easily dubbed the "Airbnb Law". The gist of the article 
was that it was highly likely that short-term hosting of private rooms 
to travelers would become legal, under the framework of the Special 
Zones law (thus bypassing the Hotel Business law). Unfortunately, not 
only was the article light on details but in the intervening 7 days, it 
has also been deleted from Yahoo's news list, which is kind of strange.

We then went searching on other media about the new events relating to 
Article 13, including Yahoo Japan, Google, and various Japanese news 
sites, but found nothing besides the original Cabinet Office order 
passed last year. That too is strange and maybe it indicates that there 
is still a bit of a battle going on behind the scenes. Maybe someone at 
Yahoo was a little too quick to publish the news and the rest of the 
media have been told to hold their horses.

We can only imagine the machinations going on. But it's likely that the 
incumbent hotelier faction (i.e., the All Japan Ryokan Hotel 
Association, which hates the idea of private rentals) is fighting a 
rearguard action to get Airbnb's business model quashed. Given that the 
order is already law, though, the only avenue of attack we can think of 
is for the incumbents to pressure the leadership of the two cities 
containing those special zones: Tokyo and Osaka. And of these, Tokyo has 
the most to gain and appears to be receptive to moving forward with 
private rentals. So barring any unforeseen problems, it appears to be 
only a matter of time before Airbnb will become semi-legal within Tokyo 
at least. This is a big deal because it will up-end the hotel industry, 
and maybe signal the grudging acceptance of the sharing economy as a 
whole (e.g., Uber and others).

As a bit of background, the Cabinet Office last year put forward a 
proposal to deregulate private room rentals as part of its effort to 
ensure sufficient accommodation availability for the 2020 Olympics. This 
was a prudent move, given that Tokyo hotel accommodation is already at 
90% capacity, meaning that as of now (July-October) it's getting really 
difficult to find vacant rooms. The subsequent Cabinet Office order was 
submitted last December under the Special Zones law, a maneuver 
presumably intended to avoid a full-scale battle in the Diet over 
rewriting the Hotel Business Law.

Our understanding is that the order became law from April this year, so 
we presume that at least two firms (local firm Tomareru and Airbnb) will 
have made applications so far, and must now be waiting for acceptance 
and approval by Masazoe, the governor of Tokyo. Our guess is that he 
will approve them.

[Continued below...]

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Another important consideration in the Cabinet order is that the minimum 
duration of stay will be somewhere between a suggested 10 days and 7 
days. Either period seems impractically long for most foreign tourists, 
so even if the law is changed it may still not be of much help to Airbnb 
in its quest for legal standing. But at least it will provide a 
beachhead for them to continue pushing for a more reasonable minimum 
stay of 2-3 days.

It's no surprise that there is a battle going on between the various 
vested interests. Running a hotel is no small undertaking, and those 
investing in their properties would rather to see a saturated market and 
a few disgruntled foreigners than to give away market share, especially 
when thinking ahead to the expected slide in numbers and glut of new 
hotel rooms after the 2020 Olympics.

Currently there are four distinct categories of accommodation: Hotels, 
Ryokan, Bed-and-breakfasts (Minshuku), and Boarding Houses/Homestays. 
This last category includes low-cost accommodation such as capsule 
hotels, youth hostels, and campgrounds. The regulations covering the 
hotel industry are comprehensive and are certainly beyond the capacity 
of individual renters to meet. Here are some (19) of them:

Building Standard Law (application), Building Standard Law (special 
building), Fire Defense Law (fire prevention), Accessibility "Heart 
Building" Law, Building Management Law (sanitation), Energy Saving Law, 
Metropolitan Building Safety Ordinances, Local Fire Ordinances, Public 
Services Ordinances, Buildings in School Zones Ordinances, Inns and 
Hotels Law (business licenses and building standards), Law for 
Improvement of International Tourist Hotel Facilities, Japan City Hotel 
Association Registration Criteria, Law Concerning Regulation and Improving
of Adult Entertainment Businesses, Food Sanitation Law (business 
licenses and building standards for eating and drinking facilities), 
Public Bath Houses Law (covers pools, not just sento), Law Concerning 
Parking Lot Businesses (licenses for paid parking lots), Barbers Law, 
Cosmetologists Law (if you have beauty spa facilities), oh, and last but 
not least the Laundries Law...!

There is of course a huge opportunity in deregulating casual 
accommodation and Airbnb competitors (Rakuten, Daikyo, and others) are 
champing at the bit, although none other than Tomareru is ready to start 
yet.

We met with one of the Airbnb founders some weeks ago and suggested to 
him that his company would get better political support if he was to 
offer some local innovations in his business model. For example, money 
and social standing "talk" in Japanese politics and getting some big 
firms involved in the Airbnb model would make a huge difference in 
influencing the regulators.

We suggested to him that Airbnb could enter into arrangements with a 
number of property companies to build and sell entire buildings whose 
rooms serve as Airbnb accommodation. Each room could be sold to a 
private investor and these people could either look after the room 
themselves or hire someone in like Zens, a pretty cool new service that 
does everything for the renter. Tomareru has taken this teaming approach 
in a tie-up with accommodation media giant, Able, which is helping them 
to source, refurbish, and negotiate the homes that they put up for rent.

The Zens guys are here: http://www.en.zens.tokyo/
The Tomareru guys are here: https://tomarina.com/

The problem is that the founders of Airbnb want to stay true to their 
model of renter hosting, because in their minds that reinforces the 
quality of the sharing experience. No doubt this keeps users coming back 
for more and we understand this. But just as Airbnb is adapting abroad 
and has now started moving upmarket and away from the couchsurfing 
mentality, it may also have to review its business model in countries 
like Japan as well. Right now we get the sense that the company has a 
good chance of being legal for stays of 7 days or more, and this will be 
a huge strategic win. Add this advance to the fact that Airbnb is also 
on the shortlist of companies to supply visitor accommodation to the 
2016 Rio Olympics, then it will provide huge leverage for them in 
negotiating better terms before the 2020 games in Tokyo.

...The information janitors/

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Speaker: Brian Nelson - Co Founder and CEO, Director (Chairman of the 
Board) of BNC K.K
Title: "Replacing Cash and Protecting People Utilizing Smart Phones"
Details: Complete event details at http://www.icajapan.jp/

Date: Wednesday, July 22nd, 2015
Time: 6:30 Doors open, Buffet Dinner included and Cash Bar
Cost: 4,000 yen (members), 6,000 yen (non-members) Open to all. No sign 
ups at the door!!!!!!!
RSVP: By 5pm on Monday 20th July 2015. Venue is The Foreign 
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http://www.fccj.or.jp/about/access.html
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Written by: Terrie Lloyd (terrie.lloyd at japaninc.com)

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