Airbnb begins Japanese “charm offensive” against regulatory roadblocks

Airbnb has sent "master of disaster", lawyer and political strategist Chris Lehane to Japan to smooth ruffled feathers as regulators debate whether to "clamp down" on the start-up. The move follows a recent visit by co-founder Joe Gebbia, who praised Tokyo's "contributions to entrepreneurship". Airbnb generated JPY 236.3bn ($2.2bn) in revenue in 2015 as listings grew four-fold, with 1.38m guests accommodated. Japanese law does not currently target rentals, called minpaku, and the authorities have several options, including loosening regulation and creating a two-tiered system.

(Bloomberg) -- Airbnb Inc. has gone on a charm offensive in Japan, hoping to drum up support as regulators there debate whether to clamp down on the startup’s rapidly expanding operations.

The world’s third-most valuable private startup dispatched high-powered lawyer and political strategist Chris Lehane to lay out how it can buoy a stagnant economy and support the 2020 Olympics. Just last month, co-founder Joe Gebbia was in Tokyo extolling its contributions to entrepreneurship.

The company is hoping to win over hearts and minds in what was its fastest-growing market in 2015, a country experiencing a tourism boom that’s in turn constricting hotel room availability. Lehane, the ex-White House crisis manager known as the “master of disaster,” recently helped Airbnb defeat a ballot measure seeking to curb its operations in San Francisco. One of his tasks now is to side-step the sort of controversy that has dogged Airbnb in other markets -- and anticipate problems unique to Japan.

“We have certainly been warned by our experiences elsewhere in the world,” Lehane said at a briefing in Tokyo on Wednesday. “Airbnb offers a significant social value proposition in Japan.”

Boost to Economy

The company’s hosts and guests in Japan generated 236.3 billion yen ($2.2 billion) in economic activity last year, said Lehane, a former strategist for Bill Clinton and Airbnb’s head of global policy. Airbnb listings help increase available accommodation during major events, he said.

Airbnb has argued that its services support tourism and benefit the communities in which they operate. Because most of the rental fee goes to the host, the revenue directly benefits individuals and their neighborhoods, Lehane argued. Gebbia, who was in Tokyo to announce a partnership with a local bookstore chain, said hosts are in effect micro-entrepreneurs.

Listings in Japan quadrupled last year to more than 35,000, hosting 1.38 million guests. A weakened yen and the relaxing of visa requirements pushed inbound tourists to a record 19.7 million last year from 8.4 million in 2012 -- and made Tokyo hotel occupancy rates tighter than Paris, Hong Kong or New York. The number of visitors will hit 35 million by 2020, Goldman Sachs Group Inc. estimates.

Trouble Sharing

But Airbnb’s rapidly growing service has drawn its share of controversy, pitting landlords against tenants and prompting regulators to take a closer look at a service that’s up-ending traditional commercial rental and hotel models.

New York City has scrutinized Airbnb and taken steps to push back against commercial renters. San Francisco, the startup’s hometown, voted down a divisive ballot initiative that would have restricted home-sharing in the city. Neighbors to Airbnb-listers the world over have complained of “party houses” that attract rowdy renters during major sporting events.

In Japan, Airbnb hosts have operated in a gray market in past years because current legislation doesn’t explicitly address house rentals, called minpaku in Japanese. The government is weighing several options, including the loosening of hotel laws and the creation of new laws to deal with the peer-to-peer or sharing economy, which includes car services like Uber Technologies Inc.’s.

The country is also considering a two-tiered approach to minpaku, including looser regulations for hosts who share their actual homes and others doing business on a commercial scale, Lehane said. The government may set an annual 180-day cap on stays that applies to hosts without a hotel license, the Nikkei reported in May.

Airbnb is erecting a number of measures to assuage regulators. It has said it plans to collect taxes from local hosts, similar to deals struck with Paris, Chicago, San Francisco, and Portland, Oregon. It will introduce a Japanese-language service to communicate with the police. And it plans to create a system for rapidly relaying information about disasters or disease outbreaks.

Airbnb has also rolled out a feature letting neighbors enter comments in an online form. Feedback is reviewed by a customer-support team that can take action as necessary. Airbnb didn’t say whether the information will be made public or if the identities of neighbors will be disclosed.

“We are very encouraged and excited by the approach the Japanese government is looking to take thus far,” said Lehane, a Harvard-trained lawyer who tried to contain the Monica Lewinsky scandal and later defended Goldman Sachs during the 2008 financial crisis. “It can be a model not just for Asia, but potentially a global model.”

To contact the reporters on this story: Pavel Alpeyev in Tokyo at palpeyev@bloomberg.net, Yuji Nakamura in Tokyo at ynakamura56@bloomberg.net, Takashi Amano in Tokyo at tamano6@bloomberg.net. To contact the editors responsible for this story: Robert Fenner at rfenner@bloomberg.net, Edwin Chan, Peter Elstrom

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