RESEARCH

DUBAI HOLIDAY HOMES MARKET REVIEW 2019

AN ANALYSIS ON THE IMPACT OF HOLIDAY HOMES ON ’S HOSPITALITY MARKET RESEARCH DUBAI HOLIDAY HOMES MARKET REVIEW 2019

Almost five years have passed since the introduction of Decree Number Key findings 41 (2013) which regulated the leasing of vacation homes in the Emirate In Dubai’s holiday home market there of Dubai. The Decree aimed to provide a framework within which the are currently 10,766 active* listings out short-term rental sector could operate and was one that was beneficial of a total of 20,395 properties which to both operators and to end users. Easing of regulations in April 2016 have been registered on the Airbnb platform. opened the market further to individual operators, which allowed homeowners to rent residential homes on a short term, straightforward Dubai’s holiday home market accounts and low cost basis. for 2.0% of Dubai’s total households, the highest proportion of all other key Whilst there are many platforms for short Holiday home supply global hub cities. term rentals, Airbnb is viewed by many as an instrumental enabler of the peer-to- In Dubai’s holiday home market there are currently 10,766 active* listings out of Of the 10,766 active listings in 2018, peer short term letting boom particularly in a total of 20,395 properties which have 61% were entire homes or apartments, major tourism hubs such as Paris, London been registered on the Airbnb platform 31% were private rooms and the and New York, to name a few. remaining 8% were shared rooms. since 2010 (Figure 1). The total number In Knight Frank’s 2016 Holiday Homes of listings has increased substantially report we noted that the market size of in recent years, with total active listings From late 2017 we have seen a peer-to-peer short term rentals in Dubai recording a growth rate of 161% since divergence in achievable RevPAR in the was fairly limited, and had considerable 2016. holiday homes and hotel market. ground to cover in terms of user base and geographic coverage when compared As the number of property listings created to more mature markets. This report on the Airbnb platform has increased, we analyses the state of the market to date, have also seen a corresponding increase as well as the underlying impact that the in the proportion of active listings from short term rentals have had on Dubai’s 32% Q2 2016 to 37% Q2 2018. hospitality market.

FIGURE 1 Dubai Airbnb listings and active listings

number of listings

25,000

20,000

15,000

ALI MANZOOR Partner, Hospitality & Leisure 10,000

“As is now generally accepted, holiday homes have had a 5,000 discernible impact on the hospitality market; however these affects are not felt 0 universally within Dubai.” 2015 2016 2017 2018*

*Note: Active properties are those which have an achieved rate in 2018. Year to June 2018 aggregate number of properties on Airbnb Please refer to the important notice Source: Knight Frank Research, Airdna at the end of this report. active listings DUBAI HOLIDAY HOMES 2019

Dubai’s holiday home market accounts are widely marketed through Airbnb on a FIGURE 3 for 2.0% of Dubai’s total households, the global basis, from a legal perspective this Active listings composition by unit type highest proportion of all other key global is not permissible in Dubai, with those hub cities (Figure 2). More so, these active who choose to do so risk facing hefty listings account for 12.5% of the total fines. number of hotel keys in Dubai, and while The majority of supply in the market is the number may appear low in relation composed of one bedroom units, which to other key global cities, it is important account for 61% of total listings. Studios to note that Dubai has a far larger and two bedroom units account for 17% 8% 31% 61% concentration of keys per household in and 13% respectively. Three and four relation to comparable destinations. bedroom units which are traditionally

Of the 10,766 active listings in 2018, 61% more difficult to lease under the short term Entire home were entire homes or apartments, 31% rental model account for just 5% apiece. Private room apartment were private rooms and the remaining Shared room 8% were shared rooms. While individual rooms in an apartment and shared rooms Source: Knight Frank Research

FIGURE 2 FIGURE 4 Dubai Airbnb listings and active listings Composition of supply, active listings 2018

SYDNEY DUBAI 21,628 10,776 186 508 LONDON 66% 46% 61,314 US$ 169.59 US$ 171.32 130 61% 84.10% 1 bedroom 74.04% HONG KONG 78% 1.2% 2.0% US$ 196.68 2,950 28.6% 12.5% 81.97% 902 1.0% 76% 40.9% PARIS US$ 181.72 88.63% 40,639 NEW YORK 13% 0.1% Studio 96 36,926 4.0% 17% 93% 192 2 bedrooms US$ 250.18 89% 5% 5% 77.80% 4 bedrooms 3 bedrooms US$ 239.99 0.8% SINGAPORE 86.43% 34.2% 7,668 1.2% Source: Airdna 195 32.0% 72%

US$ 158.36

87.00%

0.4%

12.0%

PARIS Source: Knight Frank Research number of Airbnb ADR Airbnb hotel ADR active listings (LCU) occupancy

hotel listings as % active Airbnb rentals occupancy of households as % of hotel rooms DUBAI HOLIDAY HOMES 2019

Over the last three years we have seen a South districts. In Knight Frank’s Holiday density of holiday home units compared substantial increase in residential supply Homes 2016 report we noted that the to 2016, and we have now started to in Dubai. This has been the case in both vast majority of holiday home supply see short term rental accommodation high density areas such as the Palm was located in , the Palm appearing in new districts east of Sheikh , Marina and Jumeirah, Residence Zayed Road and in the more historic parts and also within newer parts of the city (JBR), DIFC and Downtown Dubai. As of of Dubai north of Za’abeel Park (Figure 5). such as the and Barsha 2018, these submarkets have a far higher

FIGURE 5 Dubai’s Airbnb listings

PALM PALM JUMEIRAH BEACH DEIRA RESIDENCE DUBAI MARINA JUMEIRAH JUMEIRAH DEIRA MEDIA CITY WORLD TRADE MINA JEBEL ALI AL WASL CENTRE JUMEIRAH LAKES AL MANARA AL TOWERS KARAMA DOWNTOWN BUSINESS AL NAHDA JEBEL ALI HILLS BAY VILLAGE JUMEIRAH DUBAI ISLANDS AL QUOZ INTERNATIONAL INDUSTRIAL AL MERKADH AIRPORT (DXB) GARHOUD JEBEL ALI 2 JUMEIRAH VILLAGE CIRCLE 1 MEYDAN DUBAI FESTIVAL CITY CITY AL AL DUBAI KHEERAN INVESTMENT PARK RAS AL KHOR MOTOR CITY NAD AL SHEBA ARABIAN INDUSTRIAL AREA RANCHES AL BARARI

AL WARQA DUBAI SILICON INTERNATIONAL AL MAKTOUM OASIS CITY INTERNATIONAL AIRPORT (DWC) THE VILLA AL YALAYIS ACADEMIC CITY WARSAN

AL SELAL AL ROWAIYAH

Source: Knight Frank Research

“From the perspective of annual seasonality the holiday home market is somewhat in-line with the Dubai-wide hotel market where demand tends to be strong at both the start and end of the year, and dips during the summer months. Where the figures differ however is within the magnitude of change, as monthly holiday home performance tends to TAIMUR KHAN exhibit greater seasonal variance than traditional hotels.” Research Manager DUBAI HOLIDAY HOMES 2019

FIGURE 6 Holiday homes ADR heat map

PALM JEBEL ALI PALM JUMEIRAH DUBAI MARITIME CITY PALM JUMEIRAH BEACH DEIRA RESIDENCE DUBAI MARINA JUMEIRAH JUMEIRAH DEIRA MEDIA CITY UMM SUQEIM WORLD TRADE AL RIGGA ABU HAIL MINA JEBEL ALI AL SUFOUH AL SAFA AL WASL CENTRE JUMEIRAH LAKES AL MANARA AL KARAMA AL MAMZAR TOWERS DOWNTOWN AL BARSHA BUSINESS AL NAHDA JEBEL ALI AL QUOZ BAY VILLAGE BUR DUBAI JUMEIRAH DUBAI ISLANDS AL QUOZ INTERNATIONAL INDUSTRIAL AL MERKADH AIRPORT (DXB) AL QUSAIS GARHOUD JEBEL ALI 2 RAS AL KHOR JUMEIRAH UMM RAMOOL AL TWAR VILLAGE CIRCLE NAD AL SHEBA 1 MEYDAN DUBAI MUHAISNAH DUBAI SPORTS CITY FESTIVAL CITY CITY AL DUBAI KHEERAN INVESTMENT PARK RAS AL KHOR MOTOR CITY NAD AL SHEBA ARABIAN INDUSTRIAL MIRDIF AREA AL MIZHAR RANCHES AL BARARI

AL WARQA REMRAAM CITY OF ARABIA DUBAI SILICON INTERNATIONAL AL MAKTOUM OASIS CITY INTERNATIONAL HIGH AIRPORT (DWC) THE VILLA AL YALAYIS ACADEMIC CITY WARSAN UMM NAHAD LOW

Source: Knight Frank Research

FIGURE 7 Occupancy heat map

PALM JEBEL ALI PALM JUMEIRAH DUBAI MARITIME CITY PALM JUMEIRAH BEACH DEIRA RESIDENCE DUBAI MARINA JUMEIRAH JUMEIRAH DEIRA MEDIA CITY UMM SUQEIM WORLD TRADE AL RIGGA ABU HAIL MINA JEBEL ALI AL SUFOUH AL SAFA AL WASL CENTRE JUMEIRAH LAKES AL MANARA AL KARAMA AL MAMZAR TOWERS DOWNTOWN AL BARSHA BUSINESS AL NAHDA JEBEL ALI EMIRATES HILLS AL QUOZ BAY VILLAGE BUR DUBAI JUMEIRAH DUBAI ISLANDS AL QUOZ INTERNATIONAL INDUSTRIAL AL MERKADH AIRPORT (DXB) AL QUSAIS GARHOUD JEBEL ALI 2 RAS AL KHOR JUMEIRAH UMM RAMOOL AL TWAR VILLAGE CIRCLE NAD AL SHEBA 1 MEYDAN DUBAI MUHAISNAH DUBAI SPORTS CITY FESTIVAL CITY CITY AL AL RASHIDIYA DUBAI KHEERAN INVESTMENT PARK RAS AL KHOR MOTOR CITY NAD AL SHEBA ARABIAN INDUSTRIAL MIRDIF AREA AL MIZHAR RANCHES AL BARARI

AL WARQA REMRAAM CITY OF ARABIA DUBAI SILICON INTERNATIONAL AL MAKTOUM OASIS CITY INTERNATIONAL HIGH AIRPORT (DWC) THE VILLA AL YALAYIS ACADEMIC CITY WARSAN UMM NAHAD LOW

Source: Knight Frank Research DUBAI HOLIDAY HOMES 2019

One of the major appeals of short term particularly important amongst corporate hotel supply in the market in aggregate. rentals in relation to hotels specific to guests and more affluent leisure guests. As a result, we will continue to see this Dubai is the widespread availability of premium achieved in the holiday home Additionally, due to the spate of mergers ancillary amenities such as swimming market, however as we continue to see and acquisitions which have taken place pools and gyms in residential buildings. residential development in secondary within the hospitality sector since 2016, Unlike other cities where such amenities locations we expect that this premium we are likely to see greater consistency in are not commonplace in residential is likely to start to reduce on average. product offering globally and an increasing buildings, their widespread availability Another key point of differentiation is importance of loyalty programs. narrows the gap in product offering the product offering – given that holiday between the two product types. homes can range from one to four bedrooms, many of these unit types Figure 8 below shows that the vast Key Performance are far larger than traditional hotel units majority of buildings in Dubai have Indicators (KPIs) and therefore can accommodate larger features such as Wi-Fi, kitchen, washing From the perspective of annual families or multiple households. machines, pools and gyms which aligns seasonality the holiday home market is the value proposition between the two somewhat in-line with the Dubai-wide From late 2017 to early 2018 we have options to some degree. hotel market where demand tends to seen a divergence in achievable RevPAR be strong at both the start and end of in the holiday homes and hotel market on However, the data also shows that there the year, and dips during the summer average where hotel RevPAR continued to are some areas where hotels in Dubai months. Where the figures differ however increase over this period whereas holiday still maintain a clear advantage over the is within the magnitude of change, as home RevPAR trended down. Over holiday home market. monthly holiday home performance tends this time period, only the 4 bedrooms+ First, the data indicates that there to exhibit greater seasonal variance than segment in the holiday home market has currently are very few holiday homes traditional hotels. outperformed the hotel, although it seems which classed as ‘Business ready’, only to now be falling in-line with the hotel When comparing achievable rates 55% offer instant booking(Figure 8) and RevPAR. between Dubai’s holiday homes and not one property offers 24 hour check-in. hotels we continue to witness the holiday In general hotels outperform the holiday This, combined with the relatively rigid home market outperform the hotel market homes market with the exception cancellation policies, average response by 64% year-to-date June 2018. Some of being summer months during which time of six hours, deposits requirements, the variation can be explained by the fact they are either on par or holiday homes cleaning fees and Airbnb booking fees that the holiday home supply is still very outperform. (Figure 9) mean that holiday homes much skewed towards Dubai’s upmarket often have drawbacks not seen in the areas such as Dubai Marina, JBR, the hotel sector. These limiting factors help Palm Jumeirah and Downtown Dubai to create differentiation factors from a (Figure 5). In contrast, Dubai’s hotels are service perspective even if there is less spread across the city, with secondary of an amenity gap in Dubai in relation locations forming the vast majority of to other markets. These factors are

FIGURE 8 FIGURE 9 Common facilities in Dubai’s holiday The Drawback of Dubai’s holiday homes homes

AED WiFi 95% 50% 359.3 400 45% 41% 43% 42% 350 Kitchen 95% 40% 300 35% Washer 90% 30% 250 25% 167 200 20% Pool 82% 15% 150 15% 100 Gym 73% 10% 5% 50 Free parking 72% 0% 0 Flexible Moderate Strict

Instant booking 55% DUBAI HOLIDAY HOMES % OF HOLIDAY HOMES AVERAGE RESPONSE TIME AVERAGE CANCELLATION POLICY WHICH REQUIRE A (MINUTES) CLEANING FEE (AED) DEPOSIT Dryer 51%

Business ready <1% Source: Knight Frank Research

24-hour check-in <1%

Source: Knight Frank Research DUBAI HOLIDAY HOMES 2019

The impact of the holiday FIGURE 10 home market on Dubai’s Average occupancy rates hotel market 100%

As is now generally accepted, holiday 90% homes have had a discernible impact 80% on the hospitality market; however these 70% affects are not felt universally within Dubai. As noted in our 2016 Holiday home 60% report, unlike many other markets in which 50% short term rentals are traditionally outside 40% major hospitality nodes, in Dubai, short 30% term rentals are concentrated within hotel 20% districts. As such, from a geographical 10% perspective, hotels in the Marina, JBR, Media City, Downtown Dubai and Sheikh 0% Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Zayed Road tend to be the most severely 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2018 2018 impacted. Even if not directly competitive, holiday homes hotels holiday homes hotels holiday homes peak hotels peak season holiday home supply in these locations average average season average average has handicapped the ability of properties Source: Knight Frank Research, STR Global to yield during peak periods which is attributable to the fluid nature of short- term rental supply which can be taken on FIGURE 11 and off the market almost instantaneously Average Daily Rate (ADR), in AED at low marginal cost. 1,000 200% Finally, from a product perspective, 900 180% locally branded hotels that have no clear 800 160% points of differentiation face more direct 700 140% competition from holiday home supply 600 120% as these tend to be commoditised in the 500 100% eyes of guests. By contrast, properties 400 80% with well recognised operators, unique 300 60% attributes, extensive amenities, MICE 200 40% facilities, and strong loyalty programs 100 20% tend to be less impacted by the holiday 0 0% Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun homes market. However, with experience- 2017 2017 2017 2017 2017 2017 2018 2018 2018 2018 2018 2018 based stays being introduced and loyalty programs likely to follow, it is becoming Source: Knight Frank Research, STR Global holiday homes hotels holiday homes premium percentage (RHS) increasingly more important for hotel owners to view the short term rental market as directly competitive to hotels FIGURE 12 rather than a business model that targets Hospitality market RevPAR performance a different demand demographic. By doing this, owners and operators can 1,600 formulate effective revenue management strategies and give consideration to the 1,400 entire market, which in turn will protect the 1,200 value of their asset. 1,000

800

600

400

200

0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2017 2018 2018 2018 2018 2018 2018

studio 1 bedroom 2 bedrooms 3 bedrooms 4+ bedrooms hotel holiday homes average

Source: Knight Frank Research, STR Global RESEARCH Taimur Khan Research Manager +971 56 4202 312 [email protected]

HOSPITALITY & LEISURE Ali Manzoor Partner +971 56 4202 314 [email protected]

VALUATION & ADVISORY SERVICES Stephen Flanagan, MRICS Partner +971 50 8133 402 [email protected]

CAPITAL MARKETS / INVESTMENT Joseph Morris, MRICS Partner +971 50 5036 351 [email protected] RECENT MARKET-LEADING RESEARCH PUBLICATIONS OCCUPIER SERVICES & COMMERCIAL AGENCY Matthew Dadd, MRICS Partner +971 56 6146 087 [email protected]

MIDDLE EAST RESIDENTIAL Maria Morris Partner +971 56 4542 983 Abu Dhabi Office Dubai Office UAE Hospitality Market [email protected] Market Review Q3 2018 Market Review Q3 2018 2018 Review & Forecast 2018 MEDIA & MARKETING Nicola Milton Head of Middle East Marketing +971 56 6116 368 [email protected]

Makkah Hospitality UAE Residential Market Dubai Education Report The Hub Report Review Q1 2018 2018 2018

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