The brand battle for Japan’s holiday rentals market is just beginning

Rakuten this week signed a deal to combine its vacation rental service, Rakuten Lifull Stay, with Expedia Group’s HomeAway platform. Rakuten Lifull Stay is jointly owned by Rakuten and Lifull, a real-estate services company. The collaboration will see Rakuten list Japanese holiday properties on HomeAway, while HomeAway promotes travel to Japan via its platform.

According to a statement from Rakuten, the partnership aims to grow awareness of and increase traffic to tourist destinations outside major cities. The move follows a change in the law passed in June to officially recognise home sharing. The new law states that private properties can provide accommodation to paying guests for up to 180 nights per year.

Japan has a large number of vacant homes and a shortage of hotels. Inbound tourism is growing rapidly: around 24 million people visited the country in 2016, and by 2020 the government hopes to welcome 40 million. Home sharing, or minpaku, is still relatively undeveloped, but a number of rental services are already active in the market, including Stay Japan, which like Rakuten Lifull Stay and HomeAway concentrates on renting out entire properties in lesser-known areas. Airbnb, which understandably has the highest recognition among international travellers, offers a combination of hosted and entire properties, as well as cultural experiences. It also has a head start due to having operated in a grey area while the new law was in development and competitors waited on the sidelines. 

Rakuten and HomeAway reportedly aim to position Rakuten Lifull Stay as catering to a more mature demographic than services like Airbnb, which have found favour among millennials and early adopters. In its international advertising, HomeAway has poked fun at the idea of sharing a property with hosts, suggesting they can be an unwelcome presence on holiday. Rakuten did not provide any information at Campaign's request as to how it intends to promote its service with HomeAway.

The HomeAway brand makes it possible for Rakuten to reach a much wider international audience than it would under its own branding or that of Lifull. But attracting inbound tourists is only part of the equation. Despite Japan’s high number of empty homes, the supply of holiday rentals is limited.

Sosuke Koyama, executive planning director at Beacon Communications, who has experience working with Airbnb, noted that inventory is a challenge for the industry because hosts need to be comfortable dealing with foreigners directly, which many Japanese are not. He said Rakuten and HomeAway’s partnership has good potential if it is able to raise that comfort level, especially among non-English speakers. Kyota Narimatsu, co-president of PR firm Finsbury, added that the Rakuten brand name should inspire some confidence among elderly property owners, who make up the bulk of the potential supply side.

“It would be interesting to see whether this new venture can tap into the domestic travel market as well,” Koyama said. All players are likely to give increased attention to that segment, which for the most part has been hesitant to branch out of standard hotel travel. He pointed out that paying a flat rate for accommodation (as per Airbnb’s and presumably Rakuten/HomeAway’s services) rather than paying per person (which is the norm in Japanese hotels) should be an attractive proposition. The concept is just not yet widely understood.

With Rakuten Travel already a well-known accommodation-booking engine, Rakuten may be well placed to tap into the domestic vacation rental market, Koyama said. But it’s far from guaranteed. Having recently launched its first Japanese TV advertising campaign, Airbnb is already working to extend its proposition to a wider audience. Brand communications and ease of use are set to be key factors for all services in cementing the lead on both the supply and demand sides.