17 November 2019
Emergence of Airbnb and an influx of foreign visitors has led to a jump in the number of MInshuku in Japan. Photo: Reuters
Emergence of Airbnb and an influx of foreign visitors has led to a jump in the number of MInshuku in Japan. Photo: Reuters

Japan home-sharing business confronts new regulation

Japan’s new law on private home-sharing setups will take effect from this month, prompting Airbnb, the world’s largest private home-sharing website, to remove 80 percent of its listings in Japan.

The equivalent of Homestay or Bed & Breakfast in the West, Japan’s Minshuku are typically are family-run small hotels.

They can be dated back to the 15th century, when Japanese samurais and ronin would stay in these hotels in the countryside.

Minshuku used to be scattered around faraway tourist spots and known only to seasoned travelers.

But in recent years, the private home-sharing business in Japan started to take off, thanks to the emergence of Airbnb, which gives them a platform to list their offerings to tap demand from tourists around the world.

Meanwhile, tourism stimulus policy after the 2011 earthquake and a softer yen led to a jump in the number of visitors to Japan, zooming to almost 29 million last year from just 8 million in 2008.

The number of private home-stay hotels soon spiked to over 60,000 from around 10,000 in the past. The increased availability of affordable accommodation in turn attracts more tourists.

But soon, problems emerged. Many of these private homes are not designed for handling large number of tourists, and they are not up to standard in terms of fire protection and sanitary condition.

The influx of tourists became a source of nuisance to local residents in some cases. There were also reports of owners marking up prices without notice or even harassing their guests.

After two years of study and consultation, the Japanese authorities passed a new law on private lodging business, which will go into effect on June 15.

Hosts are required to register their facilities with local authorities, and comply with relevant fire safety and sanitary requirements.

They are also subject to restrictions, including a maximum operating days of 180 in a year. Individual cities also impose additional constraints.

The rule change highlights the legal risks faced with sharing economy.

Suppose someone has invested in a Japanese property and planned to have it listed on Airbnb, they now have to spend more on fitting out the place to meet the new requirements. The potential return will also diminish, given the shorter operating time allowed.

But in the long run, growth potential of a properly regulated home-sharing market would be higher. That is good news for operators as well travelers.

This article appeared in the Hong Kong Economic Journal on June 7

Translation by Julie Zhu

[Chinese version 中文版]

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Hong Kong Economic Journal columnist