Dubai owners find Airbnb option paying off

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Dubai: Having trouble renting on 12 month rentals? Then put this property on short term rental as a solution. More and more Dubai owners are starting to do this.

Currently, Dubai’s “vacation home” market accounts for 2% of the city’s total household count, “the highest proportion of any other major global hub city,” according to a new report from Knight Frank .

The ratio of Airbnb listings to the total number of homes in Paris is 0.8% and 1.2% in New York.

These numbers for Dubai will only increase as more homes become ready for occupancy.

In today’s longer-term rental market, landlords find that they have to drastically reduce their rental demands if they are to find a tenant. Failure to do so puts them at risk of leaving the property unoccupied for months… and with no guarantee that they would always get what they ask for.

Short term rentals

So, short term rentals turn out to be an option to get some sort of returns. It shows in the numbers.

On the Airbnb platform, there were 10,766 “active listings” for homes in Dubai last year, of which 61% were entire homes or apartments. (Local laws require that an entire property be listed and not single rooms or shared accommodations, both of which are subject to hefty penalties.)

Of the properties listed, 61% were one-bedroom apartments and 17% were two-bed apartments and 13% were studios.

“The easing of regulations in April 2016 opened up the market even more, allowing landlords to rent short-term homes easily and at low cost,” says the Knight Frank report. (Since 2016, the number of announcements of short stays has increased by 161 percent.)

And it’s not just Airbnb riding the waves – Dubai-based bnbme has created opportunities in the luxury of short-term rentals, with rates set at thousands of dollars per day.

OYO of India recently extended its reach to Dubai with Oyo Home.

The latter currently has a portfolio of 40 homes in Dubai and plans to expand it to other emirates.

Opportunity

According to Vartika Goel, Country Head – UAE, Oyo Hotels: “There are significant market opportunities, especially as people have invested in second homes in major UAE vacation destinations. Gulf and international travelers today are willing to choose the comfort of a fully managed vacation home for short stays.

“Dubai owners have opened their homes to this opportunity. (The average stays in these houses are two to three days.)

So where are these vacation homes in Dubai? Dubai Marina and downtown are obvious choices, given their status as prime locations for investors who buy residential assets and then lease them. Same thing with the Palm, Jumeirah Beach Residence and at DIFC, according to Knight Frank.

“As of 2018, these submarkets have a much higher vacation home density than in 2016, and we have now started to see short-term rental units appear in new neighborhoods east of Shaikh Zayed. Road and in the more historic parts of Dubai north of Za’abeel Park, ”the report notes.

But homeowners take note – the demand and the rates they can generate will depend on the location of their property.

According to Ali Manzoor, Hospitality and Leisure Partner at Knight Frank, “As is now generally accepted, vacation homes have had a noticeable impact on the hospitality market. However, these effects are not felt universally in Dubai. “

But there are some intrinsic advantages of short-stay homes in Dubai, all the more so with recent construction. These accommodations offer features that they would only have found in hotels in cities elsewhere.

“One of the main draws of short-term rentals over specific Dubai hotels is the widespread availability of ancillary amenities such as swimming pools and gymnasiums in residential buildings,” the report adds. “Unlike other cities where such equipment is not common in residential buildings, their widespread availability reduces the product offer gap between the two types of products (hotels and short-term accommodation offer).

How Short Stay Rates Compare to Dubai Hotel Rates

Homeowners are able to generate solid returns by building their homes in the short term / vacation home market.

“When we compare the achievable rates between vacation homes and hotels in Dubai, we continue to see that the vacation home market outperforms the hotel market.

64% since the start of the year in June 2018, ”notes the Knight Frank report. “Part of the variation can be explained by the fact that the vacation home supply is still very much geared towards high-end areas of Dubai such as Dubai Marina, JBR, Palm Jumeirah and Downtown from Dubai.

“In contrast, Dubai hotels are spread across the city, with secondary locations forming the vast majority of the hotel supply in the market as a whole. We will continue to see this premium realized in the vacation home market; However, as we continue to see residential development in secondary locations, we expect this premium to begin to decline on average. “


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