How can foreigners start an Airbnb (Minpaku) business in Tokyo, Osaka, and Kyoto?
With the end of the COVID-19 pandemic and the recent depreciation of the yen, the number of foreign tourists visiting Japan has returned to pre-pandemic levels. As a result, the demand for vacation rentals such as Airbnb (Minpaku) in Japan is rising again.
We have discussed in this blog how the sharp decline in the yen has led to increased purchases of Japanese real estate by foreign investors. This trend extends to properties for vacation rentals, with many foreign investors reportedly entering the Minpaku business in Japan.
In this article, we will introduce the procedures required for foreigners to operate Minpaku in Japan.
Starting a Minpaku business without proper knowledge can inadvertently lead to illegal activities. If you are considering starting an Airbnb business in popular cities such as Tokyo, Osaka, and Kyoto, please refer to this article.
Is it easy to succeed with Airbnb in Japan, where the number of foreign tourists is increasing?
In addition to the end of the COVID-19 pandemic, the depreciation of the yen is boosting the number of foreign visitors to Japan. According to data published by the Japan Tourism Agency, the number of foreign guests in 2023 was approximately 114.34 million, returning to pre-pandemic levels.
As shown in the table below, the number of guests has increased sharply compared to the previous year, 2022. In Tokyo and Fukuoka Prefecture, the number of foreign guests is increasing even compared to 2019, indicating a high demand for accommodations such as Airbnb.
As shown in the table below, the top three nationalities of foreign guests are from Asia: Korea, Taiwan, and China, with the United States in fourth place with 10.39 million guests. Additionally, compared to 2019, the number of guests from Australia, Singapore, and Canada has increased. As the number of foreign visitors to Japan continues to rise, investing in Minpaku using Airbnb seems promising.
Source:
Japan Tourism Agency | Accommodation Travel Statistics Survey (2023 Annual Data)
There are three types of Minpaku in Japan
Minpaku, or private lodging businesses, in Japan can be classified into three types. Before starting a Minpaku business in Japan, it is essential to understand these three types and determine which one is suitable for your intended business.
1. Private Lodging Business Act (New Minpaku Law)
The Private Lodging Business Act, also known as the New Minpaku Law, was enacted in June 2018 and offers the lowest barrier to entry for starting a Minpaku business. Unlike traditional hotel or ryokan operations defined under the Hotel Business Act, it regulates the short-term rental of residential properties.
Under the New Minpaku Law, it is possible to start and operate a legal Minpaku business with fewer restrictions and simpler procedures. There are regulations regarding room size and the necessity of hiring a management company, but the most distinctive feature is the limit on the number of operating days, capped at 180 days per year.
Additionally, the New Minpaku Law allows municipalities to set their own rules, so if you have decided on an area for your Minpaku operation, be sure to check with the relevant municipality in advance. For example, in Shinjuku Ward, Tokyo, Minpaku operations are prohibited in residential areas from noon on Monday to noon on Friday. In Kyoto City, operations in residential areas are generally only permitted from noon on January 15 to noon on March 16.
2. Hotel Business Act (Simple Lodging Business)
The Hotel Business Act, enacted in 1948, defines three types of business operations: hotel and ryokan operations, simple lodging operations, and boarding house operations.
Of these, the "simple lodging operation" is suitable for Minpaku. While the Private Lodging Business Act's Minpaku business involves offering residential properties as lodging facilities, the "simple lodging operation" under the Hotel Business Act involves operating inns as commercial facilities.
A simple lodging operation does not require a front desk like hotel operations and does not have the 180-day limit on operating days, making it an advantageous option.
However, the Hotel Business Act mandates the installation of emergency lighting and fire safety equipment for safety, which may require installing equipment not typically found in regular residential properties.
Approval from the governor of the prefecture is required, and obtaining approval involves strict examinations. There are also requirements for the property, and it is recommended to consult with an experienced administrative scrivener before purchasing a property to avoid the worst-case scenario of being unable to obtain approval for a simple lodging operation.
3. National Strategic Special Zone Act (Special Zone Minpaku)
The last type is "Special Zone Minpaku," based on the National Strategic Special Zone, which aims to create the most business-friendly environment in the world as a national policy. Several cities, including Tokyo, Osaka, Fukuoka, and Sendai, have been designated as National Strategic Special Zones, where bold deregulation and tax incentives are implemented.
In municipalities designated for Special Zone Minpaku within these zones, the regulations of the Hotel Business Act are relaxed, allowing for easier operation of a Minpaku business. There are no restrictions on the number of operating days as with the Private Lodging Business Act, and some of the standards required by the Hotel Business Act are also relaxed.
However, some municipalities have stricter standards set by ordinances, and some condominium management rules prohibit the use of properties as Minpaku, so caution is needed.
As of June 2024, the areas designated for Special Zone Minpaku are as follows:
- Ota Ward, Tokyo
- Chiba City
- Niigata City
- Kitakyushu City
- Osaka Prefecture
- Osaka City
- Yao City
- Neyagawa City
Initially, the minimum stay for Special Zone Minpaku was set at six nights and seven days, but this requirement has now been relaxed to a minimum of two nights and three days. If the area where you want to start your Minpaku operation is within a special zone, be sure to take advantage of the system.
Source: National Strategic Special Zone | Special Zone Minpaku
How can foreigners start an Airbnb (Minpaku) business in Japan?
To start an Airbnb (Minpaku) business in Japan, foreigners may need to obtain a visa in addition to one of the three types of permits required for operating Minpaku.
1. If you are a non-resident of Japan
Foreign investors who are non-residents of Japan can operate Minpaku by outsourcing the management to a Minpaku management company.
Recently, more investors are using Airbnb to operate Minpaku in Japan, so first, contact real estate agents, administrative scriveners, or Minpaku management companies that can assist foreigners. They can provide not only the know-how for starting a Minpaku business in Japan but also recommend suitable Minpaku properties based on your preferred area and budget.
2. If you want to live in Japan and run a Minpaku business
In many countries, there is an "Investor Visa" that can be obtained by investing in local companies, real estate, or national projects. However, Japan does not currently have an equivalent investor visa.
*Tokyo and Osaka are proposing the creation of an "Investor Visa" to the government, so there may be an investor visa in the future.
Therefore, foreigners who want to establish a corporation in Japan and start a business such as Minpaku or real estate investment need to obtain a "Business Manager Visa." To apply for a Business Manager Visa, a business plan must be submitted, so it is recommended to consult with a Minpaku management company that can provide appropriate support for document preparation and administrative procedures.
Investing in real estate and leaving all operations to a management company does not qualify for a Business Manager Visa, as it is considered an investment. Understand that the Business Manager Visa is a license granted for running a business in Japan.
When starting a Minpaku business, consult an administrative scrivener knowledgeable about Minpaku permits and the establishment of foreign corporations.
If foreigners are to start a Minpaku business in Japan, "Simple Lodging" is recommended
One reason why foreign investors are focusing on Airbnb in Japan is the increasing regulation of Minpaku in Western countries. As the conditions for entering the Minpaku market abroad become stricter, foreign investors are flocking to Japan, where regulations are relatively relaxed.
However, generating stable revenue from any real estate investment is not easy. While the regulations for Minpaku in Japan are more relaxed compared to other countries, the limitations on the number of operating days can make management challenging.
Therefore, although the procedures for starting a Minpaku business and obtaining permits are complex, and the threshold for qualifying properties is high, the "Simple Lodging Operation" under the Hotel Business Act might be the best solution. Compared to the New Minpaku Law, which has a 180-day limit, the lack of restrictions on operating days makes it easier to generate stable revenue. While Special Zone Minpaku allows for easier startup, the areas are limited, and competition is high, making it difficult to guarantee profits.
With Simple Lodging, if the necessary conditions are met, it is possible to operate a Minpaku business in popular areas such as Sapporo, Tokyo, Osaka, Kyoto, Fukuoka, and Okinawa, which are popular among foreigners. Therefore, for foreigners starting a Minpaku business in Japan, Simple Lodging offers the lowest hurdle and the most stable revenue potential.
Three popular areas for operating Airbnb in Japan
For those looking to start Airbnb in Japan, here are three areas popular among foreign tourists. These spots are worth considering, as real estate prices have not yet peaked.
1. Kyoto
Kyoto, which ranks third in Japan for the number of foreign guests, had 12.12 million foreign guest nights in 2023. With many historical sites such as Kiyomizu Temple and Nijo Castle, it is loved not only by neighboring countries such as Taiwan, Hong Kong, China, and Korea but also by people from Europe and the United States.
Especially around Kyoto Station, where the Shinkansen passes through, it is an ideal location for starting a Minpaku business using Airbnb. The Gion and Higashiyama areas, where you can enjoy the traditional streets of Kyoto, are also must-see spots. The demand for Minpaku properties, particularly "machiya," two-story wooden townhouses, is high, and stable revenue is expected.
2. Hokkaido
Hokkaido, located in the northernmost part of Japan, ranked fourth in 2023 with 6.77 million foreign guest nights. Niseko, which has the highest land price increase rate in Japan for six consecutive years, is known for its ski resorts and high real estate demand.
Furano, often referred to as the "second Niseko," attracts many foreign tourists seeking powder snow in winter, and in spring to early summer, it is a popular tourist destination for lavender fields represented by Farm Tomita. Compared to Niseko, real estate prices are about one-third to one-fourth, so it may be worth investing now, expecting returns in a few years.
3. Fukuoka
Fukuoka, ranked fifth in Japan with 4.73 million foreign guest nights in 2023, saw an 11.2% increase compared to pre-COVID-19 levels in 2019, making it a hidden gem with increasing foreign tourist numbers.
As a gateway to Asia, Fukuoka has Fukuoka Airport and Hakata Port, attracting many tourists from Korea, who make up 60% of the total. The area around Hakata Station, where the Kyushu Shinkansen passes, and the Tenjin-Nakasu area, the largest downtown area in Fukuoka City, have high lodging demand due to a constant flow of business and tourists.
Moreover, the room occupancy rate of hotels and inns in Fukuoka City was 81.2% as of November 2023. With the nationwide average room occupancy rate in December 2023 being 57.5%, starting a Minpaku business using Airbnb can expect many tourist stays.
Jul 8, 2024