Short-Term Rentals: How Landlords Are Capitalizing on the Demand for Temporary Accommodation

The concept of short-term rentals has been around in the global market for just over 10 years. Initially introduced to offer an alternative to expensive, long-term rental property in prime cities, as well as provide travelers with a cheaper option to booking a hotel room in saturated markets, the concept has changed the face of the hospitality industry. Major hotels have expanded their business models to adapt to this change, and landlords are increasingly jumping on the opportunity to earn more from their assets.

Over recent years, there has been an increase in landlords cashing in on the UAE being one of the most visited countries in the world. According to Dubai Tourism, Dubai alone recorded 4.75 million international overnight visitors in the first three months of 2019, up by 2 percent from the guest numbers recorded a year earlier. Similarly, earlier in (August), the Department of Culture and Tourism — Abu Dhabi reported a year-to-date increase in hotel guest numbers by 3.5% compared to the same period in 2018.

With UAE visitor numbers increasing and expected to continue doing so in the lead up to and during the much-anticipated EXPO 2020, short-term rentals are providing homeowners and investors the opportunity to capitalize on their assets for extra income.

Short-term rentals typically offer higher yields than traditional long-term rentals as the calculation of the rate takes into consideration the non-occupancy of the unit based on the annual lease value. As a result, rental returns are 10-15% higher.

Landlords can also take advantage of peak seasons – for instance, during Eid or the festive season from December into the new year, hotel prices in the UAE tend to hike up due to the high demand. As a homeowner, why not have someone pay you these high rates to stay in your vacant apartment, while you enjoy a few more nights in the Maldives or spend more time with loved ones back home?

There are over 25 million international visitors expected for the EXPO 2020, therefore, the demand for fully fitted, furnished and serviced apartments is bound to increase, giving the short-term market an additional boost. Whether through registered holiday home companies or managing the property themselves, more and more holiday makers’ dirhams are ending up in landlords’ pockets.

Demand for short-term rentals is not just from tourists

The tourist market is great for prime areas, but we also see a huge demand for monthly lets across the UAE on dubizzle, particularly from those who have just moved to the UAE, temporary visiting staff from other markets and people who do not want to commit to long term rentals.

A short-term rental option provides tenants with more flexibility, more options, and less hassle. It doesn’t incur extra charges in the form of furniture or monthly utility charges and eliminates the need to share post-dated cheques with the landlord.

As for the landlord, the absence of a long-term contract gives them more flexibility to utilize the property for guests and makes the asset more liquid so it can be sold with no tenant-strings attached.

This seems to be the case in Ras Al Khaimah – the Emirate is a popular destination among domestic tourists, particularly over weekends and public holidays. There is a high number of luxury hotels at good rates, making the market quite competitive. As a result, the short-term rental market for tourists isn’t as popular as it is in neighboring Emirate, Dubai. With 6,500 additional hotel rooms in the pipeline to be delivered in RAK between May this year and 2021, this dynamic isn’t likely to change anytime soon. However, there has been an increase in small businesses opening due to the RAKEZ free zone, which has led to an increase in demand for short-term staff accommodation for one to two months.

The dynamic in Abu Dhabi seems to be slightly different as Adeel Chughtai, Founder of short-term rental company MAC Living explains: ‘The market has started picking up as people are finding the flexible payment terms, separate utility bills and low hassle of having to furnish an apartment an attractive living option in the capital. With short term rentals, tenants know the full budget in advance and termination clauses are flexible in case of any unexpected situations arising. Previously, we had residents booking for one or two months as a temporary solution while moving to another emirate or perhaps looking for a more permanent place. However, now we are getting inquiries for six months to one year as well, which highlights the increased interest in furnished & serviced residences on a more permanent basis.’

The number of short-term landlords across the UAE is constantly getting bigger, increasing the depth of inventory available. As long as the long-term rental prices continue to soften, this trend is set to continue, making it an ever-increasing piece of the UAE’s real estate Jigsaw. With 2020 on the horizon and thousands of short-term apartments and villas available both business and leisure travelers to the UAE are spoilt for choice.

If fully registered and adhering to the legislation outlined by the regulatory body in the given Emirate where property sits, landlords potentially have a lot to gain from putting their property up for short-term rentals – whether from holiday makers, professionals visiting the UAE, or tenants who simply don’t want to commit to a long-term rental contract. The demand for temporary accommodation is on the rise making the short-term rental market an attractive option for landlords and homeowners across the UAE.