Supported by a steady growth in the tourism sector, the demand for short-term rentals has increased significantly among travelers to the UAE and this is largely linked to post-Covid travel preferences associated with remote working options.
And then, of course, there is the Fédération Internationale de Football Association (FIFA) World Cup in Qatar in November which will further increase the number of visitors to the region.
The growth of the UAE’s tourism sector in the first quarter of this year exceeded that of 2019, making it one of the best quarters for the local tourism industry. Dubai alone welcomed more than 7.12 million international overnight visitors in the first six months of this year, a year-on-year increase of 183%.
This has sparked growing interest from some household names in short-term rentals like Airbnb and Sonder.
Ease of accessibility, prominent locations, lack of brand name fees and competitive rates are key drivers behind the popularity of short-term rentals, noted Mohamed Tahir, brand consultant at The Adroit Agency, based in Dubai.
Skift in his previous function The Definitive Oral History of Short-Term Rentals traced the transition of short-term rentals from newspaper classifieds to a full-fledged industry that disrupted traditional hospitality models.
In August, Sharjah – one of the country’s emirates – launched its “Holiday Home Project”, allowing residents to rent out places they own to tourists and visitors. It is estimated that there are over 300 holiday homes in the emirate, according to the Sharjah Trade and Tourism Development Authority.
Dubai has also introduced various reforms aimed at attracting more people to the emirate, including the remote work visa and the multiple entry tourist visa, which could help this segment in the coming years.
Dubai reported 10,000 active vacation rental listings. Occupancy rates in these accommodations would have increased by 32% from December 2020 to December 2021, with an increase of 15 to 28% in the average daily rate and average monthly occupancy increasing to 94%.
Even though the proportion of short-term rental units to hotel supply in the country is estimated to be relatively low compared to other key tourism markets, the supply is now quite diverse.
In addition to Airbnb units, operators such as probe are also present in the United Arab Emirates market. Emaar PropertiesDubai’s largest developer, as well as Accor with the SLS Dubai Hotel and Residences in Business Bay are also entering the short-term rental market in the country.
Who stays in these short-term rentals?
Although there are reservations that the short-term rental business is not well regulated in most parts of the world, demand for these units has exploded in certain segments – mid-level professionals, consultants and families visiting for recreation.
These units offer travelers the convenience of a fully equipped home while giving them more freedom than hotels.
Short-term rentals typically offer higher returns than traditional long-term rentals because the calculation takes into account the unit being unoccupied based on the annual value of the lease, noted Turab Saleem, partner – Head of Hospitality, Tourism and Leisure Consulting Services, Middle East and North Africa for Frankish Knightreal estate consultant.
“As a result, rental yields are 10-15% higher,” he noted, adding that demand for short-term rentals is expected to increase in 2023, supported by continued tenant interest in longer leases. flexible, as well as by professionals enjoying Dubai. new remote work visa.
Bridging the accommodation gap during the World Cup in Qatar
Reports suggest Dubai property owners are switching from annual leases to short-term rentals to prepare for the influx of football fans during the World Cup.
As the World Cup will straddle what is already a peak tourist season in Dubai, the country expects a short-term influx of tourists coming to Doha keen to explore the region as a whole, according to Amr El Nady, head of hotels and hospitality. for the Middle East and Africa and Executive Vice President of the Global Hotel Office for JLL.
“It may not show directly on occupancy metrics, as these traditionally top the 80% mark in November, but it should have a bigger impact on room and rental rates,” said El Nady said.
The Qatar event being presented as the most geographically compact world cupDoha hotels would be busy and the schedule loaded with shuttle flights being operated by Dubai and Abu Dhabi-based carriers to Qatar would allow fans to fly between the two countries, which would also make the UAE busy.
With hotels already charging high rates during this season, short-term rentals present options for the middle market and visitors with families and groups traveling together, Saleem noted, adding, “Short- and medium-term rentals will help fill the global gap in the accommodation market that will help promoters and owners maximize their performance during the World Cup.
Will hotels feel the heat?
The lack of a broader service offering allows short-term rentals to offer more competitive rates than hotels, making them attractive to travelers who do not require ancillary hotel facilities.
With hotels and short-term rentals vying for the same target audience, it is inevitable to explore the competitive nature of the two businesses. “Longer term, we expect short-term rentals to offer a higher proportion of competitiveness compared to traditional hotel operating models,” El Nady said.
While this doesn’t directly affect hotels, it does provide options for visitors, Saleem noted. “It is inevitable to separate these two hosting services — the two units will exist side by side and will serve a different clientele. Short term rentals are here to stay.
Tahir however believes that short-term rentals still lag behind when it comes to defining their brand personality and this is where hotels have the upper hand.
Consumer preferences have changed as travelers now seek meaningful experiences rather than discounts on cookie-cutter hospitality experiences. This shift in consumer behavior is a big sign for hotel brands to evolve and align with the needs of the modern traveler, Tahir said. “The segment that meets this demand is bound to win the race.”
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