TT-911 (Tourism Edition) -- Spin-off Benefits of Airbnb and Minpaku

* * * * * * * * 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, Aug 27 2017, Issue No. 911

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+++ Spin-off Benefits of Airbnb and Minpaku

As we continue the countdown to next March and the expected rules and
implementation of the new Minpaku Law (the Airbnb law as we like to call
it), investors, sociologists, and little old ladies alike are all
expecting the sector to become a major contributor to the economy - in
sometimes unexpected ways.

To start with, we shouldn't underestimate what a socio-economic catalyst
Minpaku could become, especially in countryside areas. Until now, the
means for producing an income has been limited to factory owners,
wealthy investors, crazy risk takers, and a select few with special
skills. For everyone else, the only realistic path to financial security
has been to "work for the man", with the actual amount of money you can
make being determined by which school you went to.

But with Minpaku, and in time the Sharing Economy in general, there will
be a new way to achieve financial security, and that is by using assets
that are already paid for (or being paid for) and which relatively
speaking need little additional upfront investment or special skills.
Really the only requirements will be: a) not minding having strangers in
your home, b) being willing to communicate - body language and pointing
to a vocab list will be fine, c) keeping your space clean (a Japanese
natural act), and d) being nice to your guests (another Japanese natural
act).

Of course, most Japanese DO mind having strangers in their home, and so
this hurdle is being overcome in two ways: i) by a few first-movers
(underemployed freelancers needing income and lonely singles with spare
rooms) who over time chat with and influence their neighbors about the
surprisingly benefits of Minpaku, and, ii) by relatives of ailing
elderly renting out unoccupied whole homes and making occasional
obligatory appearances with the guests to keep things friendly. Illegal
or not, Airbnb already has more than 50,000 listings around Japan, and
about 5% are whole houses. Given that Japan has more than 8m empty
homes, mostly due to tax laws discouraging demolitions of aging and
derelict properties, we anticipate that reforming old homes will gain
popularity. Home Improvement store chains could be big beneficiaries of
this trend.

[Continued below...]

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But today's Take is about the secondary benefits of Minpaku income
flowing into the hands of people not used to receiving such
opportunities, especially housewives and rural folk. After a couple of
rentals due to curiosity, will they start learning the tax laws in order
to maximize their returns? Will they start deducting all the new
furniture, electronics and electrical upgrades, sports gear, home
improvements, and other paraphernalia that foreign customers might
conceivably want? We believe that they will, and already we are seeing a
small real estate boom in inner Tokyo as investors flock to apartments
that could conceivably be put on Airbnb or one of the other planned
exchanges.

And think about that name "Airbnb". Part of it means breakfast. So will
housewives start improving the diets of both their guests, and their
families (on the leftovers), then turn around and deduct those costs
against their income? Yep, of course they will. So we predict that
unless the Tax Office acts to limit spending on so-called luxury foods
(they do limit entertainment for companies after all), then there will
be both a boom in gourmet foods and an improvement in the nutritional
quality of family diets. This will translate into higher sales for
specialty stores like Seijo Ishii and Kaldi Coffee (Camel Coffee Ltd.).

What about vehicles to pick the guests up in? Everyone "knows" that
guests like a little bit of luxury, and so we predict an increase in
larger 4WD vehicles, especially in tourist-centric regional towns.
Likewise, what about modern kitchens and bathrooms, private gyms,
swimming pools, barbecues, landscaping, etc? Actually, for Japan,
landscaping and replacing ugly prefab materials with aesthetically
pleasing traditional ones may become defacto "commonsense", since it
will help make homes look more authentic and thus more valuable. Just
take a look at the high-grade interior decoration improvements already
being made in Kyoto Machiya houses to see this principle in action.

If all of this seems a bit far-fetched, you should know that after Italy
changed its laws in the 1990's to allow agritourism to be considered a
farming activity and thus applicable for various (many) government
incentives and favorable tax rates, all the above phenomena occurred.
One interesting study found that farmers who installed gyms and pools so
as to charge premium rates also found that after the peak summer season
the farmer's own family would use the facilities themselves - thus
vastly improving their lifestyles and the attractiveness of living out
in the countryside. Maybe this is one way to reverse the rural
brain-drain? Either way, knowing that the government is paying half (by
virtue of tax deductions) will be a powerful motivator.

We expect the Japanese Minpaku sector, especially in regards to
Agritourism, to follow the Italian experience because the background
situation is/was very similar. Italy has about 1.6m farms, most of which
are small holdings that are heavily subsidized and protected. The
farmers themselves are aging and are unable to recruit young blood.
Traditional crops and dairy products are no longer competitive with
imported products.

But after the law changed, although it has taken 15 years, there are now
about 21,744 (2014) farms that are hosting tourists, mostly from
northern Europe and many of whom are repeat visitors. Compared to
crops, tourist stays are a high value activity and a couple of spare
bedrooms in a converted barn during the high season will easily cover a
family's costs for a year. It's not hard to translate this experience to
Chinese and Korean guests repeat visiting a favorite farm in Saga-ken or
Ishikawa-ken, for example.

Just as important, because many of the farming hosts will be aged, and
the physical exertion involved in serving guests is lower, hosting
foreign guests will become seen as more age-appropriate and may increase
the number of folks who could technically call themselves "farmers".
It's also going to be a lot more fun, since you will get paid for
chatting to guests about something you know about - your local
neighborhood. Indeed, this new format for farming has been so successful
in Italy, now a full 39.5% of registered farm-stay hosts there are women.

Of course none of this will come to pass if the Japanese Tax Office
decides it doesn't like the idea of families leading extravagant
lifestyles at the expense of the state. So to see if Minpaku is really
going to be a national golden goose or not, watch the tax portion of the
new rules. No new tax regulations will mean that the Tax Office is
prepared to let this new sector of the economy prove itself first before
ramping up its take.

*****************

Lastly, Japan Travel KK has been winning an increasing number of
regional travel website development projects and is looking to increase
it's non-English resources base. If you have acquaintances who are
Chinese, Taiwanese, or Korean, who are Influencers on the Internet, we
have paying work and would like to hear from them. They can contact us
in English, Chinese, or Korean, at info@japantravel.com.

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