The inbound tourism industry in Japan is booming. In 2016, the number of visitors hit a record 24.03 million, roughly 22% more than the year before. Tourism is now considered by the Japanese government to be one of the country’s key pillars of growth, and with the ambitious target of reaching 40 million visitors – spending a total of 8 trillion yen per year – by 2020, the numbers are set to grow even more.

Yet, the growth in tourism has highlighted a problem: a serious shortage of accommodation. According to the Japan Tourism Agency, the occupancy rate for hotels in Tokyo in 2016 was 79.4%, while in Osaka it reached 84.1% – both on par with leading international tourist hubs such as London and Paris.

Rakuten has partnered with housing information service provider LIFULL to establish Rakuten LIFULL STAY, a platform that will link property owners with vacation renters in Japan.

In a move to alleviate the problem, the Japanese government on June 9 passed the Private Lodgings Business Law, which makes it possible for owners of unoccupied homes or rooms to rent them out as accommodation for a total of up to 180 days per year. The law opens the door for the so-called “sharing economy” to potentially transform the Japanese accommodation industry.

Prior to the passing of the new law, owners wishing to rent out homes or rooms short-term had to meet the same strict standards as hotel operators under the existing Inns and Hotels Act. Many observers, including industry advocacy organization the Japan Association of New Economy (JANE), worried that such conditions would throttle development of a room-sharing industry. In a proposal to the Japanese government in May 2016, JANE argued that individual owners could not be expected to adhere to the same zoning restrictions, facility standards and service obligations that were required of hotel operators.

Photo: (L to R) Yoshihisa Yamada, Group Executive Vice President and CFO & CRO of Rakuten, Inc., Takashi Inoue, President and CEO of LIFULL Co., Ltd., and Munekatsu Ota, Representative Director of Rakuten LIFULL STAY

(L to R) Yoshihisa Yamada, Group Executive Vice President and CFO & CRO of Rakuten, Inc., Munekatsu Ota, Representative Director of Rakuten LIFULL STAY, and Takashi Inoue, President and CEO of LIFULL Co., Ltd., at a press event announcing the creation of Rakuten LIFULL STAY.

To a large extent, the new law resolves these issues, creating a less stringent set of guidelines that individual owners need to clear in order to rent out their properties. That said, JANE still feels there is room for improvement in the law. “In future, easing of the 180-day restriction needs to be considered,” JANE stated in May.

Nevertheless, with the new legislation now in place, many players are now expected to enter the sharing economy, and Rakuten is no exception. Today Rakuten announced it has partnered with LIFULL, operator of a real estate and housing information site, to establish Rakuten LIFULL STAY, a platform that will link owners and renters in Japan.

Headquartered in Tokyo, Rakuten LIFULL STAY will let owners, known as “hosts,” register and rent out their vacant homes or rooms to users, called “guests.” Registration on the service is free, and hosts can set the price per night, with the company receiving fees from both the guest and the host.

The company is set to begin operations after the new law comes into effect, which is expected to be in January 2018, and will initially target business users in major cities around the country, but there are plans to gradually expand to more rural areas and provide the service to a wider variety of users.

According to Munekatsu Ota, Representative Director of Rakuten LIFULL STAY, the company is looking to offer something more than just accommodation. “By providing opportunities for our guests to experience the local culture of the area they are staying in, we hope to create a new type of travel experience,” said Ota.