Airbnb demand grows in the UAE

The service competes with hotel apartments in Dubai: analysts

Image Credit: Agency
Gulf News

Dubai: On a recent trip to Kiev, Ukraine, Leena Alwedai decided to stay in an apartment that she found on Airbnb for four nights, with price being the main motivator.

Why pay for a hotel room, she said, when she wasn’t going to use the hotel’s facilities?

The 25-year-old Dubai resident said that she paid $45 (Dh165) per night for the Kiev apartment, adding that it was “twice as cheap” compared to what she would’ve paid for a hotel room.

The location of the apartment was also desirable. “I wanted a convenient place that was close to the metro,” she said.

Airbnb, a San Francisco-based home-sharing firm, helps tourists find cheap accommodation in sought-after locations. It is popular with value-seeking families and millennials, tourism analysts say.

The company is growing rapidly, with a presence in more than 34,000 cities worldwide. It is expected to double its nightly bookings this year to about 80 million, according to a Reuters report last month.

The growth of the company is threatening many hotels globally since it is undercutting their prices. In Dubai, rates of homes on Airbnb range from $20 to over $2,000 per night, while hotel room rates can be anything from $100 to over $10,000 a night — that’s 40-50 per cent cheaper, said Yousef Wahbah, head of transaction real estate for the Middle East and North Africa at global consultancy EY.

If Airbnb continues to grow at its current rate, the dent in budget hotels’ takings is expected to be 10 per cent by 2016, according to an article in The Economist last year, citing a study by Boston University.

Listings in the UAE

The company has 2,000 properties listed in the UAE, mainly in Dubai. It has seen a 93 per cent increase in the number of listings in the UAE over the last year, an Airbnb spokesperson told Gulf News by email.

“Dubai is our largest city in the region,” the spokesperson added.

Analysts vary on just how much Airbnb is impacting the hospitality industry in the country, which most saying hotel apartments in Dubai are receiving the most competition from Airbnb’s listings.

“Airbnb does not compete with hotels but it competes to a certain extent with hotel apartments,” Chiheb Ben Mahmoud, executive vice-president — head of hotels and hospitality group for the Middle East and Africa at real estate consultancy JLL, said by phone.

John Podaras, partner at consultancy Hotel Development Resources, said that hotels here do not compete with Airbnb because “the products and consequently the markets tend to be different.”

“Typical hotel guests are looking for full serviced concepts that hotels offer whereas the Airbnb market tends more towards the self-catering product,” he added.

Meanwhile, Wahbah said that the home and room renting site competes with affordable hotels and hotel apartments in the city.

“Airbnb is not a direct competitor to the luxury hospitality offerings that the city has to offer but can be considered as a competitor in the affordable market segments,” he said.

Mona Faraj, managing partner at consultancy Insights Management Consultants, pointed out that the company is “not a significant threat to the industry at this point”.

She noted that in March, Dubai had 1,008 listings on Airbnb — that represents less than 2 per cent of the emirate’s hotel inventory, citing the Middle East Online Travel Overview report by Phocuswright.

Airbnb’s rapid growth comes even as the firm battles globally with regulators over who can rent out their properties.

Regulations

In Dubai, subletting properties for a short term without the landlord’s consent and a license to operate a holiday home is illegal, says Geoff Smith, senior associate at law firm Afridi & Angell.

“Under the landlord/tenant legislation in Dubai, subletting of property is permitted with the landlord’s consent. Anyone who is seeking to lease or sublease property as a holiday home or short term let must also be licensed by the Department of Tourism and Commerce Marketing (DTCM),” he said by email.

The law to regulate the holiday home market in Dubai was introduced two years ago, with the aim to help the emirate achieve its target of welcoming 20 million visitors per year by 2020.

“Holiday homes form an integral part of the Dubai hospitality offering, contributing to the growth of Dubai’s tourism industry by broadening the range of accommodations available to visitors and complementing the emirate’s world-class hotel offering,” Khaled Bin Touq, executive director, licensing & classification sector at DTCM, said by email.

Future growth

Analysts expect demand for homes on Airbnb in Dubai to grow in the coming years, as the number of tourists in the city increase, which is currently growing at around 10 per cent annually, according to DTCM. The emirate attracted 13.2 million visitors in 2014, up 8.2 per cent over the previous year, DTCM said in a statement.

“The city has seen a healthy demand for these services in the recent years, which is only expected to grow on account of the increase in tourists and the developments around Expo 2020 [a six-month trade fair],” Wahbah said.

Loading...