Japan’s minpaku market falling below expectations

A year has passed since the introduction of new regulations covering short-term letting or Airbnb-style rentals in Japan. Take-up has been slow with just 6,438 registered properties across the greater Tokyo area, which includes Tokyo, Kanagawa, Chiba, and Saitama prefectures. Before the new law was introduced in June 2018, there were 16,000 properties listed on Airbnb’s website in Tokyo’s 23 wards alone.

Strict rules limit registered properties to operate for only 180 nights per year, essentially cutting revenues in half. In many local cities, the rules can be even stricter. In Tokyo’s Chuo Ward, approved properties can only be let out on Saturday and Sunday nights. Taito Ward, home to Asakusa and Ueno, has similar weekend rules. Home owner associations in the vast majority of condos across Japan have also explicitly banned it.

According to the Japan Tourism Agency (JTA), a total of 1.41 million guests used minpaku-style accommodation throughout greater Tokyo between June 15, 2018, and March 2019. While this might seem like a high number, it is just 1.5% of the total number of guests that used hotels and ryokans. The recent development of stylish hostels and modern capsule hotels targeting young, budget-conscious travelers may also be stealing part of the market for minpaku accommodation.

Corporate hosts have been feeling the pinch with some seeing lower-than-expected revenues and others leaving the market altogether. One Tokyo-based operator that managed over 700 properties prior to the new law was anticipating annual sales of over 10 billion Yen (approx. 92 million USD) in the next five years but was faced with a 500 million Yen loss due to the long process to legally register their properties. They are now experimenting with a hybrid of overnight stays and monthly rentals in order to improve operating ratios and revenues.

Another Tokyo-based company plans to completely cease all minpaku-style letting in the next few months and convert what they can into licensed hotels. This would allow them to operate all-year-round, although the type of properties and locations that meet hotel licensing regulations are quite limited.

As of June 7, 2019, there were 350 properties in greater Tokyo where the minpaku registration was removed by the host. This is over 5% of the total minpaku properties. The sale of minpaku properties may be contributing to the number of de-registrations. Licensing is attached to the individual host or the corporation operating the property, not the property itself. If the property is sold and the new owner wants to operate it themselves, they must apply for a completely new license of their own or may acquire the corporation that was managing the property.

Bunshun Online, June 29, 2019.
The Nikkei Shimbun, June 13, 2019.

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