Rent rigmarole
Where does Japan’ s new minpaku law leave Chinese guest house investors?
Wang Hailin, a Chinese national and former escrow agent who ran 500 guesthouses in Japan, recently quit the business following the enactment of the country’s new minpaku law.
The term minpaku (guesthouses) refers to private residences that are rented out by their owners to shortterm lodgers.
The new Japanese minpaku law, which went into effect on June 15, stipulates that a guesthouse host needs to file a successful license application to the local government before they can begin renting their property out, otherwise their business operation would be deemed illegal.
The law also rules that a single room cannot be rented out for more than 180 days in one year, which guesthouse owners have complained will pull down their profits.
A report released by the Nanfang Metropolis Daily in June said that 80 percent of Japanese guesthouses were delisted from American short-term lodging platform Airbnb in one single night after the law went into effect.
Furthermore, Japanese lawyers have said that hosting tourists in residential buildings brings similar responsibilities as managing a hotel. However, since operators do not possess the necessary skills and business certifications, their leasing activity is now deemed illegal, according to media reports.
Raising thresholds
The certification application process, however, is relatively easy, said Wang. “It doesn’t cost much, and there are detailed application instructions online. The required documents do not cost too much either.”
By June 8, the Japanese government had already received 2,707 applications for minpaku licenses, according to statistics from the Japan National Tourism Organization.
Wang said that what concerns guesthouse owners the most is whether their applications can meet the requirements.
“In the past, any vacant room could be used as a guesthouse, but under the new law, the local government needs to check the location of the room, looking into whether it is in a business district, residential area or in the vicinity of schools, and to determine whether the complex’s management board agrees with allowing short-term lodging to take place in their buildings,” Wang said.
“If anything fails to meet the standards then the applicant will not get their license.”
On top of that, many regions in Japan have set their own rules stipulating that guesthouses in residential areas can only operate during weekends, according to Wang, adding that the 180-day cap also dampens the interests of guesthouse owners.
“With those limitations, investing all this time and money into the business isn’t worth it anymore,” she remarked.
Further regulations needed
Japan’s guesthouse industry has for many years been running in a gray area due to legal ambiguity, with any vacant room or even just a bed traditionally being able to get listed online for renting.
For years, this has helped make up for hotel room shortages during peak seasons while allowing property owners to earn some extra money.
However, due to the lack of tight regulations and proliferation of unregistered guesthouses, safety concerns and hazards have arisen.
For example, there have been incidents whereby male landlords have secretly photographed or filmed female tenants, and in some cases, they have even molested and raped them. Meanwhile, some guesthouses have been used as drug dens.
Potential opportunities
The Japanese government plans to attract 40 million visitors annually by 2020, when the capital city of Tokyo hosts the Olympic and Paralympic Games. This is expected to bring big opportunities to guesthouse operators, as many cities in Japan are likely to face hotel shortages during the international sporting event.
US-based real estate consultancy CBRE estimated in a report released in January that there will be a shortfall of around 3,500 rooms from the government’s 2020 target.
“When running a guesthouse, location is everything,” Wang told the Global Times. “The return rates for guesthouse hosts in good locations and near transportation hubs are quite high. The occupancy rate can even reach 70 to 80 percent, with 22 days of guaranteed booking each month. Such rooms are unlikely to lose money.”
The guesthouses that Wang once operated in Tokyo’s special wards of Shinjuku and Shibuya were very profitable, she said, as those two places are the most popular destinations among foreign tourists. “Most foreign travelers would not visit the areas in Tokyo they didn’t know or had never heard of.”
The competition for guesthouses located near tourist hotspots will be fierce in the future, she predicted, suggesting that Chinese investors who intend to enter Japan’s lodging industry must weigh up the pros and cons and be prepared to invest a lot of money.
Zheng Fangru, a Chinese national who currently operates three guesthouses in Japan, said she has already invested 30,000 yuan ($4,432) in her properties to ensure there are necessary facilities and to ensure she meets the government’s requirements.
From Zheng’s point of view, Chinese guesthouse operators in Japan can still gain market shares, thanks to the increasing number of Chinese tourists to the country.
“Chinese operators know how to better meet the needs of Chinese tourists compared to their Japanese counterparts,” Zheng opined.
During the first half of the year, the number of Chinese tourists to Japan rose 23.6 percent year-on-year, accounting for more than one quarter of the country’s total annual foreign visits of 15.89 million, according to a report published by Nikkei Wednesday.
In 2017, 7.35 million Chinese tourists traveled to Japan, with many of them choosing to stay at guesthouses to ensure an authentic experience, according to statistics released by the Japan National Tourism Organization. However, a new law to regulate minpaku (guesthouses) was officially enacted by Japanese authorities on June 15. And as a result, 80 percent of Japan’s guesthouses have been delisted from Airbnb. The Global Times conducted interviews with several Chinese guesthouse hosts to discover the pros and cons of such a change in Japan’s home-sharing industry, including potential business opportunities for the future.