The growing market for short-term rentals has opened new opportunities for investors looking to achieve high rental yields. Sanjay Chimnani, partner, Raine and Horne Holiday Homes, says the availability of more choices in the market has accordingly allowed tenants to be selective about their leasing options. “In the past 12 months or so, we have seen a rise in clients who prefer short-term rentals, usually tied in for three months. This is because it is hassle-free, the unit is furnished and the utilities are paid for — and it comes with no long-term commitments and post-dated cheques,” says Chimnani. “For investors or landlords, this is attractive as non-occupancy of units up for annual leases is factored into the calculations of short-term rentals. And despite this, the returns are 10-25 per cent higher than long-term leases.”
Chimnani sees the Expo 2020 Dubai as a big boost for the industry. “With more than 25 million visits, many people are likely to be in Dubai for several months and they would prefer fully fitted, furnished and serviced apartments to hotels,” he says. “A shortage of these units will provide fantastic yields to landlords.”
Mark Kennedy, co-founder and CEO of Kennedy Towers, says Dubai offers leasing options that are not available in many global cities where there are restrictions on leasing periods or caps on the nights per year for short-term rentals. “We operate in several European cities and Dubai, and what makes this city very unique is the clear regulatory system that is in place for short-term rentals, with guidelines for operators and no restrictions on availability across the year,” says Kennedy.
He adds that clear regulations in Dubai also improve the quality of the accommodation and the service, creating a better reputation for the short-term rental industry.
The choice of putting a property for short- or long-term rental depends on the investor’s desires and objectives. Kennedy says, “Certain properties perform extremely well in the short-term rental system, whereas others are more suited for the annual rental system. It depends on the location, the nature of the property, the quality of the furnishing, the building amenities and of course, the landlord’s objectives. The rental yield discrepancy is also affected by the supply of short-term versus long-term rental accommodation at any given time. While these residential leasing markets are linked to some extent, short-term rentals are also affected by trends in the hospitality market.”
Short-term rental units in Dubai must be furnished according to standards set by Dubai’s Department of Tourism and Commerce Marketing (DTCM), Kennedy points out. “A well-furnished unit offers competitive advantage and often a higher rental yield for annual rentals, but the furnishing process is not mandatory, and most of our long-term rental units are leased unfurnished,” says Kennedy. “Typically, we find in most cases that the payback for the furniture investment is compensated by the rental yield increase in year one when adopting the short-term leasing strategy.”
There are other options to be competitive in the short-term rental market. “For example, we are currently installing smart technology in our properties to enhance the customer experience. Smart locks and smart doorbells allow for a more convenient check-in procedure, and voice automation technology is creating a virtual concierge service in the properties,” says Kennedy.
The Internet of Things (IoT) plays a crucial role in improving guest experiences and the operational efficiency of a rental unit, notes Sameer Barakat, executive director of Provis. “From smart locks that avoid sharing physical keys which can easily get lost, to smart management software and rental portals, as well as integrating the latest trends of in-home entertainment, these will all support owners to maximise revenue in the long run, reduce operating costs and provide guests with better experiences,” says Barakat.
Short-term rental also appeals to those looking for more immediate income and flexibility. “Owners will have the ability to set fluctuating rates depending on the area’s high and low seasons, and they can set minimum tenancy tenures during peak times of the year to ensure maximum profit,” says Barakat. “However, short-term renting may require a deep understanding of the area’s market trends and how to price the unit during slower seasons to avoid losses.”