Dubai has registered a remarkable increase in Airbnb listings over the last three years, which have doubled in number as the growing global trend starts to take hold in the emirate.
At present, there are slightly fewer than 25,000 active Airbnb listings – up by more than 11,000 from 2021 – with annual average occupancy at 56 per cent, according to Dubai-based real estate consultancy Valustrat, which has tracked and analysed the data it sourced from the California-based company.
Valustrat said almost half the private properties are located in the city's prime tourist areas of Dubai Marina, Jumeirah Beach Residence, Downtown Dubai and Business Bay.
It is a lucrative business if you can get it right. An average profit margin of about Dh3,500 ($1,000) per unit each month is a typical target and most will aim to build a portfolio comprising tens of properties.
In 2022, Dubai was ranked as the most profitable location in the world for Airbnb landlords, according to a survey by UK-based landlord insurance company CIA Landlords.
The survey found that landlords who leased properties in Downtown could command an average of £930 ($1,150) per night.
There are Airbnb operators of all sizes in Dubai. From one of the largest, such as Frank Porter which manages more than 700 Airbnb properties in Dubai, to one of the newest in Redeet Negate, from the Netherlands, who started his holiday home business SmartStay in June and has a current portfolio of 24 listed on Airbnb.
Mr Negate, as is the case with many of his peers who use social media to reach new customers, has a target to reach 100 properties, which would give him a portfolio akin to leasing a medium-sized hotel.
Although relatively new, the holiday homes market is set to experience similar growth trends over the coming years, according to Haider Tuaima, director and head of real estate research at Valustrat.
“We already know it tripled in three to four years, and this is including the Covid period, which is amazing on its own. But we need to remember that we had Expo, [during] which there was a lot of demand for hotels during ’21 and ’22,” Mr Tuaima tells The National.
“Probably the momentum will be slower but the growth will continue in the coming years, especially now that we have the regulation there.”
New trends
Large-scale operators tend to favour subleasing properties – or rental arbitrage – as they give a higher profit but require more cash upfront. Revenue sharing, a second preferred method that involves managing the property for a commission, is also popular because it does not require as much starting capital.
Airbnb is the primary letting channel for most, although Booking.com and Expedia, to a lesser extent, are also used.
Regulations are in place for holiday home rentals in Dubai. Operators looking to build a portfolio must first register their company on the mainland with the Department of Economic Development to get a licence from the Department of Tourism and Commerce Marketing (DCTM).
Each subleased property has to have permission from the owner and a move-in permit is required from each building.
Oriol Plana, founder and chief executive of Mr Alfred, a platform for holiday home operators that manages costs and revenue, estimates that there are as many as 300 operators in Dubai.
His platform has more than 60 companies and manages about 1,000 units.
Despite the high rents, which are narrowing the margins for some, he says subleasing is “booming” in Dubai.
Three quarters of holiday homes are managed by companies, with the remainder managed by individuals, according to Mr Plana.
“Usually there's five months of high season, three months of shoulder season, as it's called, and four months of low season and then Ramadan,” says Mr Plana.
“You need to be very careful and very good at cashflow management because when all the profits of the high season [are realised], you need to keep them for the low season.”
Established Airbnb management company Frank Porter describes the growth of Dubai's short-term rental market as “incredible”.
“When we entered the market in Dubai [in 2017] there were close to 8,000 listings; we are now at 25,000 and growing,” says its founder and chief executive Anna Skigin.
“Last year, [Dubai's listings] growth alone was 40 per cent, year on year.”
She says there are new trends of people renting for a longer time and groups of friends wanting to rent larger units.
“We see the [growth] trend continuing for the next few years as Dubai continues to be on the map as a major tourist destination and attraction,” she says.
“We anticipate the market will stabilise in a few years, with less growth and more similar to other big cities like London and Paris.”
Social media is king
Social media has been a valuable way for Airbnb operators to market their business. Many will openly reveal their revenue and cost figures and tell their audience how they grew their businesses.
Mr Negate revealed earlier this month on social media that the revenue from his 14 apartments in February reached $165,000, with an occupancy rate of 93.7 per cent.
However, Ramadan falling in March has meant lower rates, as has been the case for many operators.
“I use pricing automation software that helps me with low occupancy rates to decrease the prices, but this was not enough because occupancy was still lower than what I was used to,” Mr Negate tells The National.
“I decreased my prices by 30 per cent more than the previous month.”
Managing revenue all year round is an important part of being successful.
“Obviously, in the winter I make money. That's where I need to also get some savings and some buffer because in the summer it's not that lucrative. In the summer, it's all about breaking even to make money in the winter.”
Mr Negate also operates a revenue-sharing model, whereby he manages people’s properties for a commission, which he says can vary between 20 per cent and 25 per cent.
“Although subleasing makes more money if you do it well, it's cash-intensive,” he says.
“You need quite some cash upfront to get an apartment and to operate it – deposit, rent, furnishing and commission for the agents.”
With a current portfolio of 24 properties, his target is 100, which he believes will bring him close to his monthly seven-figure target.
“I want to like have a revenue of $1 million a month for my business but I'm not in a rush. I want to do it the right way,” he says.
“I don’t want to just add units and lose out on quality and stop being a superhost.”
New to market
New to the Dubai Airbnb market in the coming weeks is Syed Lateef from Chicago who has a successful portfolio of 300 subleased apartments in the Mid-West.
With revenue of $11.5 million last year in the US, he has similar ambitions to hit seven figures in Dubai and has set up a new Instagram account (airbnb.in.dubai) for followers to track his journey.
Despite starting at a time when rents in the emirate are at peak levels, Mr Lateef says there is still room to make money.
“Rents are increasing but there's still margin in there. People are still profiting like $1,000 to $2,000 per month on doing this, which is a lot more than what I'm making in my market,” he tells The National.
“If you look at the unit mix, like 90 per cent of the 25,000 are one and two-bedroom type units and that, to me, shows there's a huge saturation of that bedroom type and maybe there's opportunity for a three and four-bedroom.”
While it may seem attractive, he says there is a lot of risk involved in Airbnb subleasing.
“An economic crisis where travel decreases significantly could happen but you’re still obligated to pay the rent and your bills.
“There’s a lot of risk associated with it, just like any business, but it’s easier than buying property.”
