How is AirBnB Doing in Japan One Year After Licensing Starts? Steady Progress But Some Problems Remain

It has been a year since operators began applying to do business under the new Minpaku law. Although notifications under the law got off to a slow start, the number of new businesses applying to become a registered minpaku has steadily grown, and there have now been over 2 million foreign visitors to Japan who have stayed in a registered minpaku. Minpaku is the Japanese word for private home-sharing accommodations that are rented out on a short-term basis (basically, AirBnB-style rentals).

Nevertheless, there are still many illicit minpaku businesses run all over the country, and often times the local authorities lack the resources to properly police minpaku businesses in their neighborhoods.

Airbnb-style accommodations remain a popular way to visit Japan, especially for those on a tight budget. Although minpaku are generally cheaper than hotels, they also compete in ways hotels can’t: by offering a home-style stay experience. People often rave about the fun they have cooking and interacting with their Japanese hosts on an informal basis. And with a room for four people costing about 10,000 JPY at some minpaku in Tokyo, most hotels can’t compete with the low price point either.

Steady Growth

According to the Japan Tourism Agency, there were 1,986,417 visitors who stayed in a registered minpaku during the time from June 15, 2018 to January 31st, 2019. This number of visitors, however, represents less than 4% of the total number of visitors at Japanese city hotels during the same period. Minpaku visitiors may seem like a drop in the bucket, but they are growing rapidly every quarter. Alone in the period from December 1 2018 to the end of January 2019, there were 730,000 minpaku visitors, and of these, approximately 80% were visitors from abroad.

As of February 15th 2019, there were 13,660 registered minpaku under the new law. This is up over six-fold when compared to the number applying for business (2210) in the period from March to June last year. Adding in minpaku operated under the Hotel Business Law, and minpaku operated under license in special economic zones, there are a total of roughly 30,000 legal minpaku businesses in Japan. It is likely there were over four million visitors in all types of legal minpaku in the last year.

What about occupancy ratios? Airbnb Japan doesn’t release its data, but according to Metro Engine, a data analytics firm in Tokyo, in the last half of 2018 the occupancy rate at Airbnb Japan-listed properties nationwide was approximately 48-59%. This compares favorably with the 2018 occupancy data for ryokan released by the Japan Tourism Agency (39%). Furthermore, 59% is the typical occupancy rate level at resort hotels.

When the law first came in, the number of those applying to run a minpaku business was unexpectedly low. The 180-day minpaku operation limit seemed to outweigh the benefit of being allowed to operate a minpaku in an exclusive residential zone. Then there were worries about noise and garbage disposal, so that many would-be operators on the fence adopted more of a wait and see approach.

However, Family Mart, 7-11 and Lawson’s all began services to help operators, such as taking custody and giving out keys, carrying out personal I.D. checks of visitors, etc. Mizuho Bank started a loan program for minpaku operators. Rakuten Communications started selling sensors to detect and report undue noise. All of these fostered the growth in the number of registered minpaku.

But still room for much more growth

Although there is steady growth in the market, the number of registered minpaku at Airbnb Japan is around 40,000 properties, off 20,000 from the peak before the new law. Considering the fact that Airbnb has over 760,000 registered properties in the US, they believe the market in Japan has just begun. Still, the Japan Tourism Agency reports that roughly 20% of the registered minpaku were not used once in the last year, so apparently visitors are being careful in their minpaku selection by using reviews, chat boards, etc. in advance of staying in Japan. However, many commentators still forecast that the minpaku market, in 2018 terms, will grow to be 80% larger by 2020.

Lead photo: Genki-jirushi no Saen-bakke Farmstay (Wikimedia Commons)