Dubai: Airbnb - you are getting competition.
Hostmaker, the UK-based short-term rental operator, has gone live in Dubai, for its second major international push outside of Europe. Bangkok was the first point of entry.
And it’s no coincidence the company - named by Forbes among the UK’s Top 5 startups - homed in on Dubai.
Dubai’s short-term rental market had one of the fastest growth rates among global cities in the year-to-date, with market sources saying that out of every 10 new homes delivered, three or four of them get listed as holiday homes or for short stays. And with 2020 round the corner, thousands more will be added to the staying options a visitor to the city can pick from.
More than an ‘Airbnb effect’
But Nakul Sharma, founder and CEO of Hostmaker, says linking holiday stay demand to Airbnb is too much of a stretch. “The homestay rentals market is not something that was created by Airbnb… or us,” said Sharma. “This has existed previously as well. However, the opportunity of professionalizing the category for homeowners and guests is the strength we see in our business.”
It won’t only be Airbnb Hostmaker needs to reckon with. A handful of Dubai-based businesses have become quite active in the space, owning or managing properties for such stays. “There are more properties coming to the market… every day,” said Vinayak Mahtani, CEO of bnbme. “We have grown by four times over the last year and expect to continue the growth.
“I see new overseas operators entering the market as a positive - it means the Dubai market has a demand. It will also force businesses in Dubai to operate more efficiently. Those operators who don’t have USP will fade away. Overall, that’s a good thing.”
Pressure on rates
Not just that, the rise in short-term stay options in Dubai have forced a complete reset of room rates within the wider hospitality industry. Rates are down by 10-20 per cent from their peaks, and by a wider margin in the four-star category.
While some of it could be down to a general slowdown in the market, hotels also find themselves in direct competition with short-stay operators. When two-bedroom apartments on the Palm are listing for just over Dh300 plus a night, and a three-bed there at under Dh600, hotels anywhere in the city will have some reworking to do with their own tariffs.
The price pressures will not go away any time soon - each new unit listed for holiday stays will pile on the pressure. Not just with hotels, the competition will also extend to among short-stay operators as well.
“I think the ecosystem must collaborate,” said Sharma. “I think it goes beyond short-term rental - I would frame it as “flexible rentals”.
“As the economy goes through ups and downs, it allows property owners to evaluate whether they want to commit to three-year contracts as before or they want to take it six months or a year at a time and see how the market evolves.
“From a tenant’s perspective, if there is uncertainty in the job market, it allows them to have flexible rental contracts rather than be committed to year-long contracts.
“I would phrase it as part of the flexible rental models we are seeing in general across categories… and this is also now applying to homes.”
As for Hostmaker, Sharma’s priority in Dubai is to build up alliances with developers to take on their properties for short stays. This is where he hopes to gain some competitive advantage as well - by being something more than a faceless digital platform to book stays.
“Our expertise in yield management and hospitality technology is something we have built over the past five years,” said Sharma. “This has been adapted to the different markets we are in; it gathers a lot of market insight and data and that allows us to adapt to every market rapidly.
“We can partner with developers in Dubai where they are bringing the inventory. So, we bring the operational expertise, they can bring the supply.”
Should short-term stay operators be responsible for how guests behave? It’s a question that crops up frequently, but is yet to deliver on an answer that pleases all parties.
Nakul Sharma of Hostmaker has his version on what an ideal situation should be. “A lot of the third-party platforms have their own vetting solutions. We will make sure that we are compliant with local laws in terms of registration and passing information to the government where it is required, and collecting tourist taxes where they apply.
“These are things we take very seriously. We have a guest app which has ID verifications built in when a guest arrives into the home. We make sure that we get ID verified before we share key access details. Those are ways that we make sure who is in our homes and that we can also share that information where regulations require us to do so.”