With rental rules set to change, can Airbnb succeed in Japan?

In the lead up to the 2020 Tokyo Olympic games, Airbnb says the Japanese government will change its rules to make the country more accommodating to foreigners. But will it really spell success for the start-up in a country where it has failed to catch on? 

In its push to raise the number of foreign tourists to 20 million annually by 2020, Japan’s government may start encouraging its citizens to open their doors to strangers.

On Wednesday, Airbnb announced that, as part of an economic growth plan known as the Japan Revitalization Strategy 2015, the Japanese government has agreed to launch a full review of how it can reform its laws to make the country more accommodating to foreigners, CNBC reported.

For years, the San Francisco-based online listing service that lets users rent out their homes to vacationers has kept a close watch on Japan, where the company has been notably less successful than in many other parts of the world. But while some have blamed Japan’s strict rental regulations for the start-up’s lack of momentum, others have noted that Japanese cultural norms and a  lack of familiarity with foreigners may play a role. Now, Airbnb will have 5 years in the lead up to the 2020 Tokyo Olympic games to take root in the island nation and capitalize on events the way it has in other Olympic cities.

“Relative to other major cities in the world, Tokyo, with its population of 13.4 million, has been slower to embrace Airbnb, with fewer hosts signing on to open their doors to strangers,” noted Sara Corbett for the New York Times magazine, after trailing two Airbnb executives to Japan on their hunt to discover a recipe for success.

“For the company, which is aggressively endeavoring to become a global superbrand and markets itself on the idea that the world is an inherently exuberant and welcoming place, this is a concern.”

Airbnb says it has about 2,500 listings in Tokyo. That is less than half the number of current listings in Madrid, less than one-fifteenth of those found in Paris, and about the same as what’s available in Edinburgh, a city whose population of a half million people is just a fraction of Tokyo's, the Times reported.  

According to at least one former expat who lived in Japan for a decade, Airbnb is doomed to failure in Japan due to cultural causes.

“The vast majority of Japanese people are just not comfortable dealing with foreigners," blogger Peter Van Buren for the website Expat Nation in a post this past February. "Despite its Western gloss, Japan remains a unique place, where daily life is governed by a maze of social rules that even the most culturally-adept foreigners bumble."

“When to bow, what to do with shoes in a home, how to be appropriately polite without sounding like a shopkeeper or waiter, just get things started," he continued. "It is a huge pain for most Japanese to interact with foreigners, and so most avoid it. That does not bode well for the Airbnb model.”

And while this may sound like presumptuous pop-psychology to some, the New York Times author and Airbnb researchers largely came to a similar conclusion.

“We are not familiar living with foreign people,” one Japanese woman told Corbett. “I mean, Japan is an island. It’s like, foreign people. . . . What do you even eat?”

One successful Airbnb host in Tokyo told the researchers that while most of her friends had been forbidden by their husbands from hosting foreigners, they said they would happily join the Airbnb movement after their husbands die.

Moreover, behavioral economists analyzing Airbnb user data in combination with cultural values found that “Airbnb doesn’t do as well in collectivist countries” like Japan.

The country's current tight rental regulations aren't doing Airbnb any favors, either. Japan's laws on lodging hail from the period following World War II, and hosts are required to obtain permission from local regulators before renting their rooms. Last year, a British expat was arrested after renting rooms in Tokyo as a cheap form of accommodation for foreign tourists.

But in a move to spur economic growth, in 2014 the government designated special zones where a number of these regulations are eased, including laws governing short-term accommodation, Reuters reported last year.

It is still unclear whether this latest review will result in a further loosening of the laws. Even if Japan’s rental rules do become more lax in the lead up to the Olympic games, however, there is no guarantee that this will immediately spell success for Airbnb, which is not the only potential player in Japan's short-term rental market. Just this  past year, the Japanese e-commerce giant Rakuten announced it is aiming to get in on the short-term rental game, and the Japanese real estate giant Able Inc. said it too is looking to launch a vacation home rental site.

Currently, around 13.5 percent of Japanese residential properties sit vacant, according to data from the Japanese Ministry of Internal Affairs and Communications, a high percentage for a country twelve times more densely populated than the United States.  

Nevertheless, Airbnb has an excellent track record during the Olympics. In the weeks leading up to the 2012 Olympics in London, the number of rooms booked through the site tripled its average for the city. Furthermore, the company was able to wipe out the competition by buying up its rival, the UK company Crashpadder.

More noteworthy still, Airbnb was named an official sponsored alternative accommodation for the 2016 summer games in Rio de Janiero, the first of its kind.

That potential Olympics juice, combined with the support of Japanese Prime Minister Shinzo Abe, an admitted fan of Silicon Valley’s innovative edge, may mean Airbnb is poised for an upsurge in Japan. And in any case, Tokyo residents will certainly start preparing for the sudden influx of exuberant sports fans.