Japan’s goal of attracting 60 million foreign visitors annually would not be possible without “minpaku” private lodging facilities.

But now, municipal and local authorities are cracking down on unlicensed operators.

The policy flip-flop could have a major impact on the government’s strategy of revitalizing regional economies to encourage foreign tourists to venture off the beaten track.

The 60 million figure is nearly equivalent to half of Japan’s population.

COMPETETIVE FIELD

The minpaku field is highly competitive. Take, for example, the experience of a Tokyo man in his 50s who has run a real estate business for more than 20 years and always planned to make a foray into the hotel scene.

He finally started operating two minpaku facilities in the capital last year.

With the industry brimming with new entrants, operators must win the hearts of customers to stay competitive, the man said.

To make his facilities stand out, he opened them in locations within five minutes on foot from train stations. They also boast good views and are fitted with luxury mattresses and electric appliances.

To avoid competition with hotels, each facility is 50 square meters or larger to accommodate several guests.

His properties are ranked in the top 1 percent among private lodgings listed on the Airbnb platform.

He has never received a complaint from neighbors because the locations were previously used as shops.

The management of an apartment in the capital’s Sumida Ward that he had renovated is consigned to a third-party company. He receives a roughly 15-percent yield on his investment annually.

The other property in Setagaya Ward is rented out as a minpaku, from which he earns about an 8-percent return.

Both facilities generate higher yields than simple rental properties.

It is rare for minpaku operators to rent out their own homes for private lodging purposes.

Most operators rent houses or apartments and spend about 1 million yen ($6,600) or even more than 10 million yen to renovate and operate them as minpaku facilities.

In this case, they can expect even higher annual yields of around 30 percent.

The man said that many operators aim to recoup their investments over three years.

ILLEGAL MINPAKU OPERATIONS

Minpaku lodgings are approved for operation under: (1) the Hotel Business Law; (2) the Private Lodging Business Law; or (3) the Tokku Minpaku system based on the National Strategic Special Zones Law.

The man decided to operate his minpaku facilities based on the Hotel Business Law, which is the most challenging of the three.

With the number of private lodgings continuing to increase, he was worried that the Private Lodging Business Law would be amended to give it more teeth.

As it turned out, Tokyo’s Toshima Ward office recently began weighing the introduction of curbs on operating hours and areas for minpaku facilities operating under the Private Lodging Business Law, citing growing complaints from residents.

“I think the system that allows minpaku facilities to operate in residential areas is unreasonable in the first place,” the man said.

However, he has doubts about hastily imposing restrictions on existing private lodgings.

Many young people start a minpaku business with loans from government-affiliated financial institutions.

If there is no grace period of around three years to recoup their investments, the man noted that their repayment plans could fall apart.

He is also worried about illegal minpaku operators, known as “yami minpaku.”

Plenty operate without registration or permission, resulting in complaints from neighbors. Instead of using Airbnb and other major platforms, reservations are made through websites outside Japan.

For the authorities, it remains unclear who owns the property and who is renting it.

And it is not easy to crack down in such cases when both parties say they know each other. A similar situation exists with unlicensed taxi services.

The man reckons that illegal operators would benefit if stricter regulations were imposed only on existing ones.

“It seems like authorities are now moving to place restrictions on minpaku businesses just when they have been trying hard to increase the number of operators to attract the targeted number of inbound tourists,” he said.

“This raises a question: how and where would we accept this big increase in visitors from overseas? It seems to me that the powers that be are not consistent in their responses.”