Japan’s aging population is well documented, but a drain of population from provincial and rural areas to the cities has also occurred. ULI Japan’s Spring Conference, held in Tokyo’s Nihonbashi Mitsui Hall, included a panel of exerts examining how real estate, technology, and the sharing economy could boost ailing areas through tourism.
Japan received a record 24 million overseas visitors last year and is targeting 60 million visitors per year by 2030. Tourists are increasingly exploring Japan beyond the largest cities, and this trend is expected to help provincial areas drained by demographic shifts and migration toward Tokyo and other big cities.
The panel, moderated by Hidetoshi Ono, managing director, Japan real estate for Manulife Japan, fielded questions from the audience. One of these questions was what revitalization really means—is it more money for the area, more happiness, or a sense of community?
The panel agreed that restoring civic pride to provincial towns and villages and including the population in the benefits of tourism were the crucial factors in bringing life back to these areas.
Ryuji Sawada, partner, real estate and hospitality, at PwC Consulting, noted that the hospitality market globally was polarizing between the largest global companies and smaller, boutique operators whose success was dependent on new developments in online marketing and booking.
The panel featured two companies involved in the boutique end of the hospitality sector: InSitu Asia Holdings and Kiraku Technologies. Kou Sundberg, cofounder and CEO of Kiraku, is a former Fortress Investments analyst and is well versed in distressed real estate, while Kiraku provides a platform for hospitality listings. His current work combines both disciplines: renovating abandoned homes into luxury guesthouses in regional areas of Japan, such as Miyazaki and Kyoto, and marketing them online.
Such properties can be acquired remarkably cheaply, Sundberg said. “Some of them have been unoccupied for 35 years, so to lease or buy them is cheap and there are also subsidies available from local government to preserve original features.” He said the properties need an occupation rate of only 10 to 15 percent to break even.
Managing and promoting these properties is where technology comes in; Kiraku gives them a web presence and allows credit card payment—something that is surprisingly rare on the ground in rural Japan, where cash and fax machines are relied on. “We try to bundle up various local operators across Japan to give them a platform to promote regional hotels. If you have only one or two properties and try to promote them yourself, you will not be found on search engines unless people know what they are looking for.”
Yuta Oka, a founding partner at InSitu Asia Holdings, a Singapore-based boutique hotel developer and operator, said that online booking applications—particularly Airbnb—were essential for smaller hospitality businesses. “Most online booking systems charge a 10 to 15 percent commission to hotels, but Airbnb charges 3 percent to both host and guest, which helps margins.”
Earlier, the conference heard from Airbnb itself, with Yasuyuki Tanabe, representative director, Airbnb Japan, speaking about the platform and its growth in Japan. He mentioned two particular initiatives where Airbnb was helping provincial rural communities.
In Yoshino, a village near the historic city of Nara, a collaboration among Tokyo-based architect Go Hasegawa, Airbnb, and the community of Yoshino has built a cedar house, using materials and techniques traditional to the area. The house (link) is collectively managed by the community, so it is particularly suited to Airbnb’s sharing model.
Meanwhile, Airbnb has signed a cooperation agreement with Kamaishi City to assist it during the Rugby World Cup, which takes place in Japan in 2019. Kamaishi suffered the loss of almost half its population following the closure of its steelworks in 1988 and was battered again by the 2011 tsunami. To aid in its revitalization, it will be one of 12 cities hosting Rugby World Cup matches, in a new stadium.
Tanabe said: “The city was worried that they did not have enough accommodation to support the Rugby World Cup event, so we will work with them to provide spaces for traveling sports fans.”
The panel noted that significant barriers remain to boosting rural Japan with tourism and technology. PwC’s Sawada said: “There has to be broader cooperation above prefecture level to promote rural Japan. The prefectures don’t mean anything to foreign visitors. Transport is also a problem—people are reluctant to travel to places which are not on the shinkansen [bullet train] line.”
Panelists agreed that staffing new hospitality businesses would be tough, since hospitality jobs were not popular with the younger people whom provincial Japan needs to retain. However, once Japan is receiving 60 million tourists, it will need hotel staff.
Ted Johnson, partner in the M&A, technology, and private equity groups at law firm Orrick, Herrington & Sutcliffe, added that the language barrier was more noticeable in rural areas, where few people spoke foreign languages. In addition, Japan needs better data roaming services, he said.
Johnson also speculated that some future technological developments could be revolutionary for tourism in Japan. “Driverless cars could become your rolling hotel room. You could bed down in Tokyo after work on Friday and arrive in rural Japan on Saturday morning for an easy weekend break!”