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Up to Dh100,000 per night? UAE short-term rental demand surges; here's why

Rise of new platforms made it easier for property owners to list their homes for short-term rentals, further aiding growth in this segment

Demand for short-term rentals is growing in the UAE due to competitive rates and more options for visitors. Many landlords are also switching from long-term to short-term rentals due to higher returns, provided their properties are located in prime areas such as Downtown and Burj Khalifa.

Industry executives suggest that demand primarily comes from digital nomads and visitors from European and Asian countries.

“Demand for short-term rentals is definitely growing. You can see how many new companies are coming into the business. Listings are growing across the UAE as more and more guests come to experience the region,” said Anna Skigin, CEO of Frank Porter.

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In an interview with Khaleej Times, she said short-term rental rates have been stable in 2024 with a slight increase due to more listings coming into the market and competitive rates from hotels. However, rates in Dubai are still significantly higher than in the rest of the world, averaging around Dh500 per night.

According to Frank Porter's data, short-term rentals start from as low as Dh200 per night and can cost a maximum of Dh100,000 and more. And there are 30,000 to 50,000 listings in the UAE.

Ramjee Iyer, chairman and managing director of Acube Developments, said short-term rental demand is seeing significant growth due to the country's position as a global travel hub, which has led to an influx of international visitors in recent years.

"Additionally, the government's initiatives to promote tourism, such as visa reforms and new attractions, have further stimulated interest in short-term accommodations. The rise of 'digital nomads', where professionals seek flexible living arrangements while working remotely, has also contributed to the demand. Also, the increasing popularity of staycations among residents looking for local getaways has been great for the short-term rental market," he said.

Yogesh Bulchandani, founder of Sunrise Capital, said the rise of new platforms has made it easier for property owners to list their homes for short-term rentals, further aiding this growing market segment.

Vinayak Mahtani, CEO of bnbme holiday homes, said in the UAE, Indian, Bangladeshi, Pakistani, and GCC residents make up about 70 per cent of visitors and business owners, driving a significant portion of the demand for holiday homes.

“These nationalities are particularly drawn to Dubai for its business opportunities, luxury lifestyle, and proximity to their home countries… Villas and luxury apartments are the most sought-after property types, with large family-sized villas and luxury penthouses in gated communities being most popular,” said Mahtani.

Higher ROIs

Studies show that property owners opting for short-term rentals in prime locations enjoy strong occupancy and returns.

Quoting a survey conducted by UK-based landlord insurance company CIA Landlords, Anna Skigin said the study found that Dubai was the most profitable Airbnb city in the world in 2022, provided owners purchased properties near Burj Khalifa. Owners can earn an average of £930 per night (Dh4,480) and break even on their investment in four months.

According to Frank Porter, the most popular areas for short-term rentals in UAE are Dubai Marina, Jumeirah Beach Residence (JBR), Downtown, Jumeirah Village Circle (JVC), Palm Jumeirah and Saadiyat.

The areas that provide the highest rate per night for short-term rentals are Dubai Marina, Jumeirah Beach Residence (JBR), Palm Jumeirah, and Downtown Dubai. But because the property values are so high, they don’t always offer the biggest returns. Some of the best returns on investments (ROIs) come from areas such as Jumeirah Lake Towers (JLT) and Jumeirah Village Circle (JVC), but the accommodation options here attract different types of clients. “In Dubai, we are lucky to have a real cross-section of visitors from all over the world with different budgets and reasons for being here."

Higher returns than long-term rentals

According to Frank Porter’s chief executive, on average, the short-term rental market provides a 20 per cent higher return than long-term rentals over a 2 to 5-year period. "Long-term lets, and other types of investment such as bonds and stocks tend to be more rigid and have a lower level of flexibility."

Bulchandani said short-term rentals in the UAE often offer higher returns mainly because property owners can charge higher nightly rates, particularly in high-demand areas in Dubai and Abu Dhabi.

“Short-term rentals can achieve higher occupancy rates during peak tourist seasons and major events, which further enhance potential income. However, it's essential to factor in management costs, maintenance, and local regulations, as these can affect overall profitability.”

In the UAE, Ramjee Iyer said short-term rentals can provide higher returns than long-term rentals for several reasons. For instance, properties in prime locations often attract tourists willing to pay a premium for short stays.

Iyer added that short-term rentals can yield up to 30 per cent more income than traditional leases, especially during major events like the Dubai Shopping Festival.

“The flexibility of short-term rentals allows owners to adjust pricing dynamically based on demand, further optimising revenue. However, it's crucial to consider the potential for fluctuating occupancy rates and the impact of seasonal variations on income.”

Outlook

Ramjee Iyer said as travel continues to rebound post-pandemic, demand for unique and flexible lodging options is expected to grow. "The rise of remote work and digital nomadism will likely sustain interest in short-term rentals as more people seek temporary accommodations while travelling for work or leisure. Additionally, ongoing developments in tourism infrastructure will further boost the market, plus the increasing popularity of platforms like Airbnb and Vrbo will continue to facilitate access for both hosts and guests, enhancing the overall rental experience,” he said.

Skigin expects the short-term rental market to continue to grow and develop, and there will also be some consolidation. “Many players have entered over the last few years, but few have lasted. We will see more stability with listings and quality," she added.

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