It will likely not be a surprise to anyone to find that navigating through 2020 was very difficult for holiday home companies in Dubai. And whichever company did not have access to external financing, did not have strong financial reserves, or did not believe in a fast recovery of the market had to be creative to survive.
If in 2019 there were over 7,000 holiday homes in Dubai, the number likely dropped by well over double-digits during 2020. Many companies were forced to terminate tenancy contracts for apartments that they had rented to operate as holiday homes. Also, many landlords lost faith in the holiday home business and switched back to long-term leasing.
What can now be concluded is that those who believed in a return to form for holiday home demand and was able to sustain the immediate financial loss during 2020 are now on the quickest path to recovery. So far during the year, we are seeing a gradual improvement in occupancy levels and in the daily rates. Hopefully, we can reach back to 2019 levels in the next quarter.
On the mend
We still have strong domestic demand, which before the pandemic was for us less than 10 per cent and during the disruption was more than 90 per cent. This, interestingly, resulted in above average rates for April and May this year. My explanation for this is that the residents and nationals of the UAE still had limited options to travel, but because vaccination rate is the highest in the world on a per capita bases, they feel safe within the country and wanted to enjoy fun time out of their homes.
Furthermore, what I saw in June was that the share of revenues coming from international tourists is increasing, driven by the increasing share of vaccinations within the global population and re-establishing of quarantine-free flight routes. This increases demand for the accommodation in Dubai and thus drives daily rates and occupancy levels.
Still, it remains complicated to predict the likely performance for the coming weeks or for the entire year as the booking window - although getting wider - remains relatively short. This is due to the risk posed by positive PCR test results, which prohibits tourists from travel. As a result, tourists tend to mitigate this risk by making reservations at the last minute, making it difficult for the holiday home industry to estimate what their financial performance will likely be for the year.
What can be concluded is that the performance until October should be heading back to pre-COVID-19 levels, and then from October until end March 2022, the Expo should provide some much needed kick. These could, hopefully, help offset the losses from 2020. This is all subject to the situation related to COVID-19. However, I believe we are past the worst and set to experience a great recovery in the holiday home market.