Terrie's Take 911 (Tourism Edition) -- Spin-off Benefits of Airbnb and Minpaku

Mon Aug 28 09:06:28 JST 2017

* * * * * * * * 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, Aug 27 2017, Issue No. 911

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+++ Spin-off Benefits of Airbnb and Minpaku

As we continue the countdown to next March and the expected rules and 
implementation of the new Minpaku Law (the Airbnb law as we like to call 
it), investors, sociologists, and little old ladies alike are all 
expecting the sector to become a major contributor to the economy - in 
sometimes unexpected ways.

To start with, we shouldn't underestimate what a socio-economic catalyst 
Minpaku could become, especially in countryside areas. Until now, the 
means for producing an income has been limited to factory owners, 
wealthy investors, crazy risk takers, and a select few with special 
skills. For everyone else, the only realistic path to financial security 
has been to "work for the man", with the actual amount of money you can 
make being determined by which school you went to.

But with Minpaku, and in time the Sharing Economy in general, there will 
be a new way to achieve financial security, and that is by using assets 
that are already paid for (or being paid for) and which relatively 
speaking need little additional upfront investment or special skills. 
Really the only requirements will be: a) not minding having strangers in 
your home, b) being willing to communicate - body language and pointing 
to a vocab list will be fine, c) keeping your space clean (a Japanese 
natural act), and d) being nice to your guests (another Japanese natural 
act).

Of course, most Japanese DO mind having strangers in their home, and so 
this hurdle is being overcome in two ways: i) by a few first-movers 
(underemployed freelancers needing income and lonely singles with spare 
rooms) who over time chat with and influence their neighbors about the 
surprisingly benefits of Minpaku, and, ii) by relatives of ailing 
elderly renting out unoccupied whole homes and making occasional 
obligatory appearances with the guests to keep things friendly. Illegal 
or not, Airbnb already has more than 50,000 listings around Japan, and 
about 5% are whole houses. Given that Japan has more than 8m empty 
homes, mostly due to tax laws discouraging demolitions of aging and 
derelict properties, we anticipate that reforming old homes will gain 
popularity. Home Improvement store chains could be big beneficiaries of 
this trend.

[Continued below...]

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But today's Take is about the secondary benefits of Minpaku income 
flowing into the hands of people not used to receiving such 
opportunities, especially housewives and rural folk. After a couple of 
rentals due to curiosity, will they start learning the tax laws in order 
to maximize their returns? Will they start deducting all the new 
furniture, electronics and electrical upgrades, sports gear, home 
improvements, and other paraphernalia that foreign customers might 
conceivably want? We believe that they will, and already we are seeing a 
small real estate boom in inner Tokyo as investors flock to apartments 
that could conceivably be put on Airbnb or one of the other planned 
exchanges.

And think about that name "Airbnb". Part of it means breakfast. So will 
housewives start improving the diets of both their guests, and their 
families (on the leftovers), then turn around and deduct those costs 
against their income? Yep, of course they will. So we predict that 
unless the Tax Office acts to limit spending on so-called luxury foods 
(they do limit entertainment for companies after all), then there will 
be both a boom in gourmet foods and an improvement in the nutritional 
quality of family diets. This will translate into higher sales for 
specialty stores like Seijo Ishii and Kaldi Coffee (Camel Coffee Ltd.).

What about vehicles to pick the guests up in? Everyone "knows" that 
guests like a little bit of luxury, and so we predict an increase in 
larger 4WD vehicles, especially in tourist-centric regional towns. 
Likewise, what about modern kitchens and bathrooms, private gyms, 
swimming pools, barbecues, landscaping, etc? Actually, for Japan, 
landscaping and replacing ugly prefab materials with aesthetically 
pleasing traditional ones may become defacto "commonsense", since it 
will help make homes look more authentic and thus more valuable. Just 
take a look at the high-grade interior decoration improvements already 
being made in Kyoto Machiya houses to see this principle in action.

If all of this seems a bit far-fetched, you should know that after Italy 
changed its laws in the 1990's to allow agritourism to be considered a 
farming activity and thus applicable for various (many) government 
incentives and favorable tax rates, all the above phenomena occurred. 
One interesting study found that farmers who installed gyms and pools so 
as to charge premium rates also found that after the peak summer season 
the farmer's own family would use the facilities themselves - thus 
vastly improving their lifestyles and the attractiveness of living out 
in the countryside. Maybe this is one way to reverse the rural 
brain-drain? Either way, knowing that the government is paying half (by 
virtue of tax deductions) will be a powerful motivator.

We expect the Japanese Minpaku sector, especially in regards to 
Agritourism, to follow the Italian experience because the background 
situation is/was very similar. Italy has about 1.6m farms, most of which 
are small holdings that are heavily subsidized and protected. The 
farmers themselves are aging and are unable to recruit young blood. 
Traditional crops and dairy products are no longer competitive with 
imported products.

But after the law changed, although it has taken 15 years, there now 
about 21,744 (2014) farms that are hosting tourists, mostly from 
northern  Europe and many of whom are repeat visitors. Compared to 
crops, tourist stays are a high value activity and a couple of spare 
bedrooms in a converted barn during the high season will easily cover a 
family's costs for a year. It's not hard to translate this experience to 
Chinese and Korean guests repeat visiting a favorite farm in Saga-ken or 
Ishikawa-ken, for example.

Just as important, because many of the farming hosts will be aged, and 
the physical exertion involved in serving guests is lower, hosting 
foreign guests will become seen as more age-appropriate and may increase 
the number of folks who could technically call themselves "farmers". 
It's also going to be a lot more fun, since you will get paid for 
chatting to guests about something you know about - your local 
neighborhood. Indeed, this new format for farming has been so successful 
in Italy, now a full 39.5% of registered farm-stay hosts there are women.

Of course none of this will come to pass if the Japanese Tax Office 
decides it doesn't like the idea of families leading extravagant 
lifestyles at the expense of the state. So to see if Minpaku is really 
going to be a national golden goose or not, watch the tax portion of the 
new rules. No new tax regulations will mean that the Tax Office is 
prepared to let this new sector of the economy prove itself first before 
ramping up its take.

*****************

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