Why Dubai's short-term rental market is set for long-term growth
As Dubai’s hotel industry continues its recovery course from the ill-effects of the coronavirus pandemic, experts have warned it faces a fresh challenge from the increasing popularity of short-term rentals.
The current trend of work-from-home, staycations and regional travel has increased the demand for short-term rentals, with some companies reporting 90 percent average occupancy in the most popular areas of the emirate, including Palm Jumeirah, Downtown, JBR, Dubai Marina and City Walk.
The UAE recorded a 54.7 percent hotel occupancy rate in 2020 – beaten only by China – while the global rate dropped to 37 percent under the weight of the ongoing pandemic and hotels in the Middle East region recorded just 43 percent occupancy on average.
Mahwussh Alam, co-founder, One Perfect Stay, told Arabian Business: “Even as international travel picks up, the hotel industry needs to adapt as more travellers are also looking to vacation rentals because of benefits such as privacy, space, and value. As such, many hotel chains are on an acquisition drive to include unclustered urban and resort living assets, promoted as holiday homes and managed through the unified hotel platform.
“This will increase business and provide a more dependable source of income from multiple asset types. All the indicators point towards holiday homes and short term rentals remaining the most popular choice and taking over the market in various forms.”
Despite the economic hardships caused by the Covid pandemic, Dubai’s popularity has soared during the ongoing crisis, thanks to the way the emirate has dealt with matters, from initial, strict lockdowns and curfews to the gradual reopening and the current vaccination drive, which has seen over 10 million doses administered across the entire UAE to date.
The emirate has also introduced various reforms aimed at attracting more people to Dubai, including the remote working visa and multi-entry tourist visas for all nationalities.
Chris Hobden, head of Strategic Consultancy, Chestertons MENA, told Arabian Business: “The emirate’s overall quality of life, international transport links and ever-more affordable accommodation options make Dubai well placed to attract the growing number of professionals seeking to explore relocation options internationally.
“We expect demand for short-term rentals to increase over 2021, underpinned by continued tenant interest in more flexible leases, along with professionals taking advantage of Dubai’s new remote working visa to relocate.”
Anna Skigin, CEO and founder of Frank Porter said that renting a property short-term over two-three years “gives a return of 20-40 percent higher than long-term”.
She added that they are noticing “more and more investors buying multiple properties and putting them on the short-term market”.
While Vinayak Mahtani, CEO of BnBme, revealed that more luxury homes are coming onto the market, with sizes and values increasing.
He told Arabian Business: “For luxury stays you simply do not want to stay in a hotel any more. Hotels cannot offer the bespoke luxury service holiday homes can.”
Dubai has previously set itself the lofty target of becoming the world’s most visited city by 2025. Alam said it was important investors or landowners adjusted their mindset to take advantage.
He said: “There isn’t a lack of supply right now, but there is a need for more landlords to embrace short-term rental, as well as recognising long-term rental in its new shape and form. The focus should be on catering to the largest target market, whether that’s tourists, staycationers, or residents looking for flexible payment terms.
“That can be addressed in two ways – short-term rental management or the build-to-rent model with a full community ecosystem in place taking care of the physical and emotional needs of the tenant.”