The Silicon Valley home-sharing accommodation business has faced first-mover angst. While customers seeking cheaper, more varied accommodations are using Airbnb more and more, the hotel industry in particular is pushing back, lobbying local governments to put a stop to these unregulated competitors.
Even in San Francisco, its home base, Airbnb faces pressure from the government to prove that the Airbnb hosts are indeed residences of the rooms they rent out, not companies that own various condos or houses and rent out rooms like hotels.
But Airbnb, while it has faced push back from authorities, have just been given a very bright green light in Japan. On Friday, March 10, the cabinet of Prime Minister of Shinzo Abe “approved rules…limiting home-sharing by private citizens to 180 days a year,” according to The Japan Times. Prior to this, hosting a room in your home to rent was essentially illegal in Japan.
The impact will be significant. According to this report, hotel vacancies in Tokyo are currently limited, as occupancy rates in recent years have consistently been over 80%, which has allowed the average daily rate (ADR) to climb significantly. With foreign tourist numbers expected to climb, and with the inevitable spikes in demand for hotel rooms for the World Rugby Cup scheduled for Tokyo in 2019 and the Olympics scheduled for Tokyo in 2020, there is continued fear of angry visitors from outside Tokyo and Japan screaming for hotel rooms, certainly with hopes of less expensive options.
But also significantly, this is an opportunity to expand the number of accommodations available to travelers in the more remote parts of Japan where corporations are reluctant to invest, as well as put tourist money into the pockets of rural folks whose towns have been hollowed out by loss of youth, and a lack of energy to continue with the labor intensive agricultural business.
Japan hand, Terrie Lloyd, believes Airbnb Japan is going to grow the number of room listings significantly thanks to this law, which is expected to be passed easily in the not so distant future. And he believes the impact will be great:
- People owning homes in areas under served by hotels (pick almost any countryside area in Japan) will now be able to step into the breech and offer accommodation with little/no development cost. This will significantly increase the flow of tourists out to more remote areas, which of course will be a shot in the arm for local economies.
- 180 days a year means that the average household out in the countryside could make up to JPY900,000 or so a year (JPY5,000 average per night) that would have been impossible otherwise – and with very little outlay – thus offering a low barrier to entry per household.
- There will be a regional property boom, at least in those areas which have visually attractive tourist assets, and this will encourage other regions who haven’t preserved their traditions to do more conservation work to pull visitors.
- There will be a rebuilding boom, as relatives of hospitalized elderly and the recently deceased start to realize that instead of allowing a home to decay into a rotting ruin, it can be restored and rented out to local and foreign tourists.
- There will be a surge in demand for rental cars, as the proximity of accommodation to the train station no longer determines where you want to travel.
- There will be a surge in demand for services to maintain rooms and to look after foreign guests.
When I saw the CEO of Airbnb give a talk last year, I remember him waxing poetic about the possibilities for the graying countryside of Japan, where curious foreigners meet elderly entrepreneurs who gain a financial reward, and perhaps a personal reward in opening their homes up to the world.
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