<Case Study> Private lodging opening costs approximately 6 million yen. Breakdown: 2 million for renovation, 2 million for furniture and appliances, 100,000 for utilities, 200,000 for labor costs such as Timee

🏡 Breakdown of initial costs for private lodging

Expense Item Amount (Yen) Notes
Initial rental contract costs1,028,520 Includes 138,000 yen security deposit
Rent during preparation period809,600 For April to September 2025
Labor costs214,960 Personnel for setup work, Timee, etc.
Utilities92,465
Communication expenses29,514
Furniture, appliances, and supplies1,847,319
Renovation work2,180,200
Total 6,202,578

😱 The despair of an owner who went into debt to enter the private lodging business and the current state of stricter regulations

📉 Initial costs over 6 million yen, repayment plan on the verge of collapse due to a sharp drop in operating days

Ms. Hashimoto (pseudonym), who operates a private lodging in Toshima Ward, entered the business last year to balance it with child-rearing and opened her second property this September.

• Initial costs: Over 6 million yen for security deposits, renovations, furniture, and appliances (6,202,578 yen is shown in the previous image).6,202,578 yen is shown in the previous image).

• Financing: Could not cover it with personal funds alone, so took out a loan to enter the market.

• Stricter regulations: Toshima Ward has submitted a draft ordinance amendment to the ward assembly, planning to limit operating days to two-thirds of the current 180 days per year (120 days per year), including for facilities already in operation.

• Impact: Once the regulations are enforced, annual profits are expected to fall into the red, and she is in despair, saying, "I'm worried about whether I can make repayments" and "I have no choice but to withdraw."

🚨 Stricter regulations by local governments spreading across the country

In response to the increase in the number of facilities and frequent troubles with local residents, local governments are strengthening regulations.

• Osaka City: Plans to stop accepting new applications starting next May.

• Toshima Ward, Tokyo: Submitted a draft ordinance amendment to the ward assembly to limit operating days to 120 days per year including existing facilities. If passed, it is expected to be enforced from December next year.

• Concerns of local residents: In residential areas near Ikebukuro in Toshima Ward, the number of minpaku (private lodging) facilities without signs is increasing, and complaints such as "people I don't recognize are coming and going" are on the rise. Mr. Sato, the neighborhood association president, is anxious about minpaku facilities with unknown operators.

📈 Becoming a "Red Ocean" and Declining Profitability

It is not just the tightening of regulations; market saturation is also becoming a problem.

• Oversupply: In city centers, the number of minpaku has increased, leading to a sense of saturation, and there are cases where accommodation unit prices have dropped by about 20%.

• Difficulty of entry: Real estate investors point out that it is "tough" to enter the market now by relying solely on minpaku.

• Importance of the Hotel Business Act: To increase profits, it is becoming important to either rent out properties under the Private Lodging Business Act (which has a 180-day limit) as monthly rentals for the remaining period, or obtain a permit under the more strictly regulated Hotel Business Act to operate **year-round (365 days)**.

🌟 Converting to "Hotel Business" to Overcome Regulations

Companies in the accommodation business acknowledge that the tightening of regulations is "unavoidable," but they see opportunities for minpaku that can survive.

• The beginning of a shakeout: While regulations on minpaku may spread to many local governments in the future, this will be a tailwind for high-quality facilities as it will reduce the number of rivals.

• Scarcity value of the hotel business: Properties like those in Toshima Ward that can obtain a permit under the Hotel Business Act and thus be exempt from the regulations are expected to have higher scarcity value as real estate.

🏠 Realistic cost breakdown for opening and operating a minpaku: Initial costs and running costs

Minpaku costs vary significantly depending on the scale of the property and the operating style. Here, we explain them by dividing them into "initial costs" and "operating costs."

💰 I. Initial costs (one-time expenses required before opening)

Initial costs can reach several million yen depending on the scale of the property and whether renovation is required.

• Property acquisition costs: In the case of a rental, this is about 3 to 12 months' worth of rent. The main breakdown includes security deposits, key money, brokerage fees, and advance rent.

• Renovation and interior construction costs: An important investment to make the property one that guests will choose. These are the costs for renovating the interior and plumbing.

• Furniture, appliances, and equipment purchase costs: Costs for a full set of equipment necessary for guests to stay, such as beds, linens, household appliances, cooking utensils, and amenities.

• Permits and notification-related costs: Application fees to government agencies and installation costs for fire safety equipment (fire alarms, fire extinguishers, etc.).

• Other miscellaneous expenses: Wi-Fi installation costs, property photography fees, private lodging insurance premiums (annual contract), etc.

💸 II. Operating Expenses (Running costs/monthly or per-stay expenditures)

The main breakdown of running costs consists of rent, cleaning fees, and management fees.

• Rent or loan repayments: Fixed costs that occur every month without fail.

• Management fees: If using an operation agency, a fee of approximately 15% to 30% of sales will be incurred.

• Cleaning fees: Costs incurred after every checkout. The total amount increases as the occupancy rate rises.

• Utilities and communication costs: Utility costs that fluctuate depending on guest usage and the season, as well as communication costs such as Wi-Fi.

• Consumables expenses: Costs for replenishing amenities, toilet paper, detergent, etc.

• Platform fees: Fees paid to booking sites such as Airbnb.

✅ Tips for cost reduction and stable operation

• Property selection: Choose properties that do not require renovation or already have fire safety equipment installed to keep initial costs down.

• Operations: Reduce management fees by limiting the scope of outsourcing to an agency (e.g., outsourcing only cleaning).

• Stable revenue: Consider diversifying revenue streams, such as operating under the Hotel Business Act or combining private lodging with monthly rentals, to ensure resilience against regulations.

1. Reactions to the plight of private lodging owners due to stricter regulations

There are many reactions to the Rakumachi article ("I have no choice but to withdraw," despite taking on debt to enter the private lodging market...).

• Opinions that the regulatory tightening was too late and that it should be even stricter.

• Mentions of the situation where accommodation costs are falling due to excessive competition.

• Pointing out past examples where many operators withdrew when the Private Lodging Business Act was introduced in 2018.

2. Critical views on Chinese tourists and illegal businesses

In response to reports about the decline in Chinese tourists, many critical views like the following have been posted:

• **"The only ones in trouble are Chinese business owners catering to Chinese people"** is the majority opinion.

  • Specifically, it is pointed out that Chinese-run private lodgings, illegal taxis (white-plate taxis), souvenir shops, hotels, and restaurants will be hit.

• The view that because Chinese tourists use Chinese services (illegal taxis, private lodgings, restaurants) and use Chinese payment apps (Yuan payment), there is almost no benefit to the Japanese economy or tax revenue.

• Opinions that the decline in Chinese tourists is "all good" and that "benefits for public safety and national security can be expected" because it leads to the "eradication" and "purification" of illegal businesses like illegal private lodgings and illegal taxis.

• There is also criticism of Osaka's special private lodging zones and Toru Hashimoto, who once promoted private lodging.

3. Views on the impact on the Japanese economy

• Arguments that even if the number of Chinese tourists visiting Japan decreases, the proportion of the tourism industry in GDP and the consumption amount accounted for by Chinese people is small, and it is "within the margin of error" or "doesn't hurt at all" (there are posts based on statistics that the majority of tourism consumption in Japan is supported by Japanese people).

• The view that as Chinese tourists disappear, "overtourism will be resolved" and "Japanese people will go to quiet and beautiful tourist spots," which will promote domestic travel.

It is characteristic that many posts view the tightening of private lodging regulations and the decline in Chinese tourists as an "opportunity" that will lead to the eradication of illegal businesses and the cleanup of tourist destinations.