RESEARCH DUBAI’S HOLIDAY HOME MARKET SEPTEMBER 2016 HOW THE PEER-TO-PEER SHARING ECONOMY IS SHAPING THE HOSPITALITY SECTOR DUBAI’S HOLIDAY HOME MARKET SEPTEMBER 2016 RESEARCH KEY TAKEAWAYS The peer-to-peer market is disrupting traditional While peer-to-peer markets have been operational in more mature markets for quite business models within the hospitality sector some time, they have a less storied history in Dubai. Well-established platforms such as Uber, Zopa and Craigslist have been replicated in the emirate to some degree (i.e. Careem, Beehive and Dubizzle), however there is still ground to cover in terms of user base and geographical reach before they can be considered to be fully 100% comparable to their global counterparts. Growth in number LONDON of holiday homes in When Decree Number 41 of 2013 was These regulations were relaxed in April passed, which outlined the regulations 2016, when the DTCM began to allow 252 H1 2016 under which holiday homes could be individual home owners to apply for 144 operated in Dubai, the framework within holiday home licenses without having which the sector could operate became to commission a third-party entity. The 1 bedroom units are in Localisation & personalisation are more transparent. This led to the rise of process became relatively straightforward, highest demand from holiday yet another peer-to-peer market in the involving little more than an online key factors in today’s choice of emirate as short-term rentals – and the application with annual registration fees of AMSTERDAM homes guests. accommodation when travelling sites that facilitated their use – started to AED 1,520 plus an additional AED 320 per gain traction. unit. The simplicity of the process has led 191 to a rapid increase in supply of short-term 146 At the time, one key stipulation of the rentals over the past few months, as an legislation was that it was necessary increasing number of home owners test for home owners to engage a licensed the market. DUBAI third-party holiday home operator as a 219 management company in exchange for a 144 Dubai is different to other markets as: fee, which typically ranged from 20 to 25 percent of gross revenues. Figure 1 PARIS Average daily rates for a 1 bedroom and/or equivalent as of end 2015, USD 214 110 Holiday homes are Holiday homes target Holidays homes have many concentrated in hotel districts long stay guests of the facilities seen in hotels CHICAGO LOS NEW YORK 179 ANGELES 245 150 175 164 170 BERLIN 128 29% AED 4,200 65 948 SYDNEY average premium in Holiday homes number of active 185 holiday homes ADR over ADR H1 2016 listings on Airbnb in hotel ADR in H1 2016 Dubai YT July 2016 140 Hotels that are most vulnerable to holiday homes are: hotels with few facilities more affordable hotels unbranded hotels leisure-oriented hotels Source: Various Average hotel price Average Airbnb price Please refer to the important notice at the end of this report. DUBAI’S HOLIDAY HOME MARKET SEPTEMBER 2016 RESEARCH Nevertheless in many ways the push in Holiday home supply Figure 2 Figure 3 recent years from major hotel operators Active Airbnb listings (2010-YTD 2016), Dubai Composition of supply While units are typically marketed through towards ‘lifestyle brands’ has been a multiple platforms such as Dubizzle and means through which this differentiation Booking.com, Airbnb is generally viewed has been addressed. Similar in nature to as the market leader for short-term rentals. the value proposition of holiday homes, A look at ‘active listings’ on Airbnb through such brands, hotel operators aim (i.e. listings which have been live in the last to offer guests authentic experiences and thirty days) indicate that there are currently interactions which reflect the traditions 2 12 92 248 657 2,100 4,200 Studio / 18% 1BR / 44% 2BR / 24% 4,200 units available in Dubai, of which 24 of the local market. This ethos can percent are private rooms, 6 percent are 2010 2011 2012 2013 2014 2015 YTD 2016 extend through to the loyalty programs, 3BR / 9% shared rooms and the remaining are entire which often offer guests ‘experiences’ units (Fig. 2). Although shared hosting has Source: AirDNA units Source: AirDNA 4BR+ / 5% grounded in the local culture rather than long since been a hallmark of the Airbnb points (such as the Global Hotel Alliance). experience, it technically is not permissible Such properties which aim to be more under current legislation and the authorities Figure 4 differentiated and integrated with the local have actively engaged in putting a stop to Active Airbnb listings (2010 – YTD 2016), Dubai community will likely be the front at which this practice. the battle between the hotel and the short- On a Dubai-wide basis, the unit mix term rental markets will take place in the has a large proportion of one-bedroom PALM JUMEIRAH foreseeable future. units, accounting for 44 percent of total Looking at the product offering, it is worth supply (Fig. 3). Primary interviews with noting that a large proportion of holiday operators indicate that such units see JUMEIRAH BEACH homes in Dubai has many of the ancillary strong levels of demand as they are the RESIDENCE facilities that are often associated with most versatile, on the basis that they are DUBAI MARINA JUMEIRAH DEIRA hotels (Fig. 5). For example, unlike more able to accommodate between one and mature markets, it is commonplace for MEDIA CITY four individuals, if a sofa bed is provided. WORLD TRADE CENTRE residential apartment buildings in the Two and three-bedroom units are relatively AL SUFOUH JUMEIRAH LAKES TOWERS AL KARAMA emirate to have communal gyms and difficult to lease, not only because they are pools, which result in a narrowing of the more expensive, but also because demand perceived gap between the two value for these types of unit is highly seasonal, propositions. Additionally, conveniences JEBEL ALI AL BARSHA peaking during public holidays. EMIRATES HILLS AL QUOZ such as washer/dryers and kitchens, VILLAGE BUR DUBAI JUMEIRAH DUBAI which are not typically seen in hotel One of the core appeals of the short- ISLANDS INTERNATIONAL accommodation, serve to narrow the gap term rental market is not only the product AL QUOZ AIRPORT offering, but also the provision of an INDUSTRIAL further. GARHOUD ‘authentic experience’ in secondary Figure 5 districts which are not commonly visited JUMEIRAH UMM RAMOOL AL TWAR Common facilities in Dubai’s holiday homes by traditional tourists. This clearly does VILLAGE CIRCLE NAD AL SHEBA 1 DUBAI FESTIVAL not apply to Dubai; Holiday homes in CITY the emirate are largely located on Palm DUBAI SPORTS Kitchen 92% CITY RAS AL KHOR Jumeirah, Dubai Marina, Jumeirah Beach AL RASHIDIYA WiFi 90% Residences, DIFC and Downtown Dubai- DUBAI all areas that have high concentrations INVESTMENT Washer / Dryer 83% PARK of hotel supply, which may prove to be RAS AL KHOR MOTOR CITY Pool 83% problematic for the emirate’s hospitality NAD AL SHEBA INDUSTRIAL ARABIAN RANCHES MIRDIF AREA sector in the long-run (Fig. 4). Gym 74% AL BARARI AL WARQA 1 Free parking P 71% REMRAAM CITY OF ARABIA Cable TV 61% DUBAI SILICON INTERNATIONAL OASIS CITY Hot tub 30% Smoking 17% THE VILLA Pets 8% ACADEMIC Breakfast CITY 8% UMM NAHAD Source: AirDNA Source: AirDNA Entire unit Shared unit Shared room DUBAI’S HOLIDAY HOME MARKET SEPTEMBER 2016 RESEARCH the residential sector. This is sometimes higher according to primary research (Fig. the year. As awareness of the short term Holiday home demand Figure 8 because individuals may be on probation 6). One interesting note is that amongst rental business model and the available Holiday home RevPAR performance (January 2015 to June 2016), AED In terms of segmentation, areas such and are uncertain about whether they will units specifically managed by licensed supply continues to increase, two and as Palm Jumeirah and Dubai Marina are stay in the emirate on an annual basis, or holiday home operators, occupancy levels three-bedroom units began to consistently 1000 Large differential between hotel and dominated by short stay visitation, whereas because they simply do not have enough are generally higher, falling between 70 and outperform the hotel market. However the holiday Home RevPAR 900 submarkets such as Downtown Dubai and liquidity to be able to pay annual rents in 80 percent on average. This suggests that hotel RevPAR premium seen across unit Large differential 822 Larger holiday between hotel RevPAR and Studios DIFC have a much higher proportion of advance. Other than these two examples, such entities can still drive value despite types in the first months of 2015 continued 800 homes starting to outperform and 1BR Unit RevPAR long stay demand. The short stay market individuals involved in project work that the fact that they are no longer required to to be seen across only studio and one- hotel market 700 performance 760 is primarily driven by guests from GCC and take them out of the emirate for months be instructed by law. bedroom units. 648 Europe, within which a significant share at a time are also often attracted to the 600 Another trend worth noting occured during 625 551 of visitors come from Saudi Arabia and holiday home rental structure. the summer months of 2015 and 2016, the United Kingdom. Short stay demand Key Performance Indicators 500 458 466 From the perspective of annual seasonality, when demand for hotel accommodation 437 typically peaks during public holidays and When examining the achievable rates of 437 400 401 school vacations, and during these times, the holiday homes market is in line with was weak.