Boon for Dubai's booming Airbnb business as listings double

Post by : Dr. Amrinder Pal Singh

Image : Antonie Robertson / The National

Dubai's Airbnb sector has witnessed a significant surge in the past three years, with listings doubling in number as the global trend gains momentum within the emirate. Presently, there are just under 25,000 active Airbnb listings, reflecting an increase of over 11,000 since 2021. These insights were revealed by Dubai-based real estate consultancy Valustrat, which meticulously tracks and analyzes data sourced from the California-based company.

Valustrat's findings indicate that nearly half of the private properties available for Airbnb rental are concentrated in Dubai's prime tourist areas, including Dubai Marina, Jumeirah Beach Residence, Downtown Dubai, and Business Bay. The lucrative nature of this business is evident, with an average profit margin of approximately Dh3,500 ($1,000) per unit per month being a typical target for operators, many of whom aspire to build portfolios comprising tens of properties.

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In 2022, Dubai was crowned as the most profitable location globally for Airbnb landlords, as per a survey conducted by UK-based landlord insurance company CIA Landlords. According to the survey, property owners leasing units in Downtown Dubai could command an average of £930 ($1,150) per night.

The spectrum of Airbnb operators in Dubai varies, ranging from large-scale entities like Frank Porter, which manages over 700 Airbnb properties, to newcomers like Redeet Negate from the Netherlands. Negate, who launched his holiday home business, SmartStay, in June, has swiftly built a portfolio of 24 properties listed on Airbnb and aims to expand to 100, akin to managing a medium-sized hotel.

Despite being a relatively nascent market, the holiday homes segment is poised for robust growth in the years ahead, according to Haider Tuaima, director and head of real estate research at Valustrat. He emphasizes that the market tripled in size within three to four years, even amidst the challenges posed by the COVID-19 pandemic and the bustling activity surrounding Expo 2020.

Various operational models exist within the Airbnb ecosystem in Dubai, with subleasing or rental arbitrage being favored by larger operators due to its higher profit potential albeit requiring substantial upfront investment. Revenue sharing, another prevalent approach, involves managing properties for a commission and appeals to operators with limited starting capital. While Airbnb remains the primary letting channel, platforms like Booking.com and Expedia also witness usage, albeit to a lesser extent.

Regulations governing holiday home rentals in Dubai necessitate operators to register their companies on the mainland with the Department of Economic Development and obtain a license from the Department of Tourism and Commerce Marketing (DCTM). Each subleased property requires permission from the owner, and a move-in permit is mandatory from the respective building management.

Oriol Plana, founder and CEO of Mr. Alfred, a platform aiding holiday home operators in managing costs and revenue, estimates the presence of around 300 operators in Dubai. His platform caters to over 60 companies managing approximately 1,000 units. Despite soaring rents that shrink margins, Plana observes a thriving subleasing market in Dubai, with three-quarters of holiday homes managed by companies and the rest by individuals.

Social media emerges as a pivotal marketing tool for Airbnb operators, facilitating transparency regarding revenue and cost figures and serving as a platform for sharing success stories and growth strategies. Operators like Redeet Negate leverage social media to showcase their achievements, with Negate disclosing February revenues of $165,000 from his 14 apartments, albeit acknowledging the impact of seasonal fluctuations on rates, especially during Ramadan.

While Dubai's Airbnb market continues to allure newcomers like Syed Lateef from Chicago, who eyes replicating his success with a portfolio of 300 subleased apartments in the US, seasoned operators advise caution. Lateef, despite recognizing the profitability of Dubai's market, underscores the associated risks, particularly amidst economic downturns or significant declines in travel.

In essence, Dubai's Airbnb landscape reflects a dynamic and evolving industry, driven by a blend of local regulations, global trends, and entrepreneurial zeal, with operators navigating challenges and capitalizing on opportunities to carve their niche in this burgeoning sector.

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