TT-899 (Tourism Edition) -- Airbnb Home Buyer Reports From Higashi Kujo in Kyoto

* * * * * * * * TERRIE'S (TOURISM) TAKE - BY TERRIE LLOYD * * * * * *
A bi-weekly focused look at the tourism sector in Japan, by Terrie
Lloyd, a long-term technology and media entrepreneur living in Japan.
(http://www.terrielloyd.com)

Tourism Sector Edition Sunday, June 05, 2017, Issue No. 899

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+++ Airbnb Home Buyer Reports From Higashi Kujo in Kyoto

I've been talking about Airbnb a lot recently, especially now that
enabling legislation is expected "any moment now" for home sharing, and
have been getting some interesting email as a result. One of the best of
these was from a friend who with his partner has carved out a stake
converting Kyoto "slum area" houses into Airbnb stays. This is a great
example of how you can help lift the fortunes of an entire neighborhood,
while also observing the simple economic rule in real estate of
"location, location, location". I replay his email here:

***********************
[Reader's email]

"Airbnb recently estimated that its services contributed 920 billion yen
(US$8.35 billion) to the Japanese economy in 2016. While the estimate
includes lodging charges, local consumption such as food and shopping,
and increased hiring, there are other benefits that are more difficult
to calculate, such as the effect of enabling communities to boost their
local economy.

One interesting case study can be found in our efforts in an area south
of Kyoto Station called Higashi Kujo. This district includes a large
population of Korean nationals who historically worked in unclean
occupations such as embalming, leather preparation, butchers, and waste
disposal, probably because it is downstream of Kyoto's main Kamo River.
These days it could be called Kyoto's only international town, with a
variety of great Korean restaurants and interesting stores dotting the area.

We recently moved to the area to set up Airbnb lodgings and were amazed
how cheap the houses were. North of the station was still quite pricey
so we decided to buy two houses in on the south side, which was still
considered slummy and unfashionable by Kyoto standards. But due to it's
handy location and easy access to the Kamo River cycling tracks, that is
quickly changing and the area is on the verge of drastic transformation.
The Hachijo exit south of the station has been recently renovated, and
hotels, restaurants and specialty shops are popping up in rapid succession.

[Continued below...]

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As soon as we listed our houses on Airbnb "bang!" they were fully booked
and have been ever since. These were older houses that were pretty much
worthless up until 2 years ago, only the land was considered to be of
any value.

We underwent Kyoto's rigid guest house licensing process, which is
particularly strict compared to other parts of Japan, including
provisions for a reception area located at the entrance of the house. We
believe we are savvy investors and specifically chose dwellings that
could be converted to match the regulatory requirements. Once we
successfully received the licenses, we renovated the houses with a
down-to-earth "cheap but good" local builder and had them ready for
listing on Airbnb within a matter of months.

You may be surprised to learn that our neighbors have been very
supportive. Our strategy from the get-go was to integrate with the local
community as much as possible. If ever there is a local working bee, or
help needed with festival preparations, we have always been ready to put
our hands up. Japan is an aging society, and any infusion of youth and
enthusiasm is most welcome to them.

The houses are now worth at least double what we paid for them, and our
neighbors are gradually realizing that they are sitting on a gold mine -
mostly because of the proximity of the area to the station - and thus
very attractive for tourists. The local restaurants here are much
cheaper and more "authentic" than touristy central Kyoto, and there is
convenient transport to any part of the city via trains, buses and bicycles.

Kyoto is facing an acute shortage of accommodation, leading to the rise
of online bookings at private residences, known as minpaku. Major hotels
in Kyoto are almost fully booked all year round with occupancy rates of
around 90 percent. Japan is expecting 40 million international tourists
annually by 2020 when Tokyo hosts the Olympics and Paralympics. By then,
Kyoto is expected to receive 4.4 million to 6.3 million foreign visitors.

Airbnb has seen enormous growth in Japan and currently has no rival.
Until minpaku laws are changed sometime this year or next year, Airbnb
will dominate the scene. But surprisingly very few Japanese tourists are
using the service, probably because Airbnb cannot openly advertise in
Japan, and those who do know about it believe the service is only for
sharing a house, rather than renting an entire house.

Given this situation, we decided that we would start a club to buy old
Kyoto houses and renovate them for listing on Airbnb. We are looking for
others who are interested in doing the same thing. Our target
properties, including the purchase, renovation, licenses, etc., will be
in the 20 to 25 million yen range. Other foreign investors, particularly
Chinese investors, are starting to see a similar opportunity, so when a
home comes on the market, not so often, we need to be quick to move. The
advantage that we have is that we have our ears to the ground and know
in our local neighborhood what is coming up. If someone wanted to come
in on a deal with us, we'd charge a fee of 25% of the Airbnb listing
income, otherwise they will be investing in the property at cost."

***********************
[Back to Terrie's commentary]

The two houses that the reader and his partner run so far are here:

http://inari.kyototownhouse.jp
http://minami.kyototownhouse.jp

Anyone wanting to speak to him about his experiences in the Kyoto Airbnb
market can contact me directly at terrie@lincmedia.co.jp and I will pass
your email on.

...The information janitors/
-----------------------------------------------------------

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