Terrie's Take 828 (Tourism Edition) -- Airbnb moves a step closer to legality

[Terrie's Take]

* * * * * * * * 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, Nov 15, 2015, Issue No. 828

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+++ Airbnb moves a step closer to legality

Ever since we ran a story on TT-810 (June 29, 2015) about Airbnb 
possibly becoming legal, we have had a steady stream of people both in 
Japan and abroad asking us for more information. Given the recent events 
relating to rental of personal premises to tourists it seems like a good 
time for an update.

As background, readers will recall in TT-810, PM Abe's Cabinet Office 
last year 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 Japan. In what seems to have been a 
trial balloon, the Cabinet Office focused on the Special Zones (i.e., 
those areas designated as centers for national revitalization), and so 
by default Osaka and Tokyo became the first regions for airbnb-type 
rentals to be decided.

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. On the 27th of last month 
(October) after last year voting down the idea, Osaka approved home-stay 
rentals, albeit with a variety of conditions attached. This last week, 
Ota-ku here in Tokyo announced that they would pass a similar ordinance 
early next year.

The devil is in the details, however.

For example, you 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 25m2 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 7 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 
(JTA) quarterly report on inbound travelers, the average stay of foreign 
tourists in Japan is 6 days, based on a sample size of 6,630 people. 
Hmmm, curious how the authorities set a 7-day limit isn't it? Surely 
it's JUST a coincidence...?

Ah, yes, Japan's bureaucrats hard at work, pretending to help change a 
law due to public pressure, then turning around and making it pretty 
much impossible for anyone to actually comply with said law.

So, we will have this 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 
2-4 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 foreigners running too many places in competition to the 
local hotels and inns.

[Continued below...]

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The attraction of Airbnb is very easy to understand. In Japan, unless 
you're running an export business things are still pretty depressed, and 
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 
JPY180,000 a month, hired one of those new Airbnb rooms management firms 
for 5% 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 JPY15,000 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.

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 that customer numbers fell back 25% over 
August-September because his customers couldn't find hotel rooms. That's 
not something the 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, and 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 PM Abe siding with Airbnb, and the 
Cabinet Office (as the perceived true seat of power) is feeling the 
pressure.

Also, there is the fact that 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 
4-year old falling to her death from the 12th floor balcony of a Shibuya 
apartment that 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 was subletting 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.

Actually Airbnb has been very skillful in tamping down negative 
publicity about deaths and injuries of customers who rented properties 
in locations where they didn't know the rules or dangers. If you want to 
see how bad it can get, read this rather sad account and related facts 
about pay-offs by the company in the USA, Europe, and Taiwan. If any of 
these things happened in Japan, the door for Airbnb and other home-stay 
rentals would quickly slam shut again.

http://bit.ly/1QFnq8G

So the moral of this still-developing story is that 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. In 
our opinion, you could probably go ahead and dip your toe in the water 
with a single apartment or two, but we wouldn't dive headlong into an 
Airbnb real estate strategy just yet. A more appropriate time would be 
when the Japanese government itself (versus individual cities) passes a 
clear and easy-to-understand set of laws governing home-stay rentals. 
Unfortunately we don't see this happening any time soon.


...The information janitors/

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+++ ABOUT US

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