Aerial view of the Tokyo skyline.
Tokyo-listed real estate firm Star Mica plans to raise its returns from apartments using Airbnb to house overseas visitors, reported Bloomberg.
The company, which owns around 2,500 apartments mostly in Tokyo, is considering renting some of its apartments to tourists from as early as 2017 using services like Airbnb, said Star Mica President Masashi Mizunaga.
He revealed that Star Mica also purchased a stake in Squeeze Inc, a Tokyo-based startup that provides services to help clean rooms and manage reservations for property owners, to allow it to sublease rooms of other individuals or firms.
This comes as corporate executives like Mizunaga try to profit from a tourist boom in Japan, which saw overseas visitors soar 46 percent in 2015 to a record 20 million people.
Although the influx has limited hotel room availability in Japan, Airbnb hosts there operate in a grey market as the present law does not expressly address home rentals, while the government is looking at introducing new regulations.
“There aren’t enough hotels when we take business trips to Kyoto or Osaka, it’s hard to find rooms,” said Mizunaga.
Commenting on Airbnb, he said: “We’re not going to go ahead with it while we’re still in a grey zone, but it won’t take two or three years, I think something will happen next year.”
Notably, investment yields on apartments, or the ratio of annual rental income to the property’s acquisition price, is usually about six to seven percent, said Mizunaga.
But with Airbnb, that figure could double, he said, noting that returns increase when the space provided is smaller and rentals are on a shorter term.
Squeeze CEO Shinichi Tatebayashi explained that he decided to establish the startup following his experience renting out his apartment in Japan while working in Singapore.
He shared that the income he received from Airbnb “was more than three times what I would have gotten renting the place – that’s when I knew this was going to take off”.
In May, the startup raised around 420 million yen (S$5.4 million) from investors such as venture capital firm Jafco Co and Star Mica to expand its operations, said Tatebayashi.
A report by Mizuho Research Institute revealed that Japan could face a shortage of around 41,000 hotel rooms by 2020, when the Summer Olympics is held in Tokyo, if current accommodation levels are maintained.
“They tried to stop Airbnb in the US in the past too,” said Mizunaga. “But we’ll continue to have demand and suppliers. What the government will be able to do is to decide how to regulate the market.”