His Highness Shaikh Mohammad Bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, once said, “Opportunities are made. They do not just lie around waiting for someone to grab them.”
For 31-year-old Mark Kennedy, cofounder and CEO of Kennedy Towers, Dubai’s largest short-term rental management company, the opportunity to seize the day came in 2015 when the Dubai government started giving out licences to short-term and holiday home operators. It didn’t matter that he was 27 then, in the middle of pursuing an executive MBA and had limited real estate experience. What he did have was a sound knowledge of marketing and technology and family members with extensive real estate expertise, whom he could partner with. Together, they had the determination to make the most of the opportunity they saw in Dubai’s rental market. Today, Kennedy Towers is valued at Dh70 million and manages assets of more than a billion dirhams.
Most intense years of my life
It was in 2014 that the 27-year-old Mark Kennedy decided to leave the corporate world in London and head to Dubai armed with a degree from Nottingham University in the UK and a fair deal of marketing experience with companies such as L’Oreal and Nestle. Inspired by his older brother, Simon Kennedy, who was already in Dubai and a partner with their uncle, Mark Towers, in his real estate firm Edwards and Towers, Mark decided to start off with an MBA at Cass Business School in the Dubai International Financial Centre.
But 2014 was a rather significant year in terms of business for Dubai. The year before in November, the emirate had just won the right to host the World Expo 2020 and the possibilities in trade and commerce, real estate, job generation and infrastructure development were enormous. The year 2013 also saw the Dubai government announce two decrees relevant to the licensing and regulation of holiday homes. They were Decree No. 17 of 2013: licensing and classification of hotel establishments, and Decree No. 41 of 2013: regulating the activity of leasing out holiday homes. This meant that homeowners who wished to rent out their property for short-term rental or as a holiday home would be required to use the services of a licensed operator, with their property becoming part of the operator’s portfolio.
As a business student, Mark saw the potential that was there for operators in the short-term rental and holiday home market and decided that he would take the road to entrepreneurship. “I was quite clear I wanted to partner with my brother and my uncle, so we put together the initial investment of Dh500,000 and started operations for Kennedy Towers in early 2015 when we finally got our license.”
Was it hard setting up the business, while juggling an executive MBA programme? “Absolutely,” says Mark. “It was stressful setting up the company and I had to make a lot of sacrifices with my personal life. There was constant pressure managing academic deadlines while bringing our business plan to life. But every module I studied — be it corporate finance, strategy or human resources — I looked at how these academic theories could benefit our business. They were the most intense years of my life, but the sacrifice was worthwhile.”
Advantages of self-funding
One of the biggest advantages of self-funding the business was that the company was not under any pressure from venture capitalists to grow too quickly. “We expanded at a sustainable pace. We also received a huge support from my uncle’s real estate company,” says Mark.
It is for this reason that Mark is a strong advocate for family businesses and recommends new entrepreneurs to form partnerships with family members if that option is available. “Families have a level of loyalty which cannot be established elsewhere. There is almost an unwritten rule that you will always support each other no matter what. My uncle founded Edwards and Towers Real Estate at the start of Dubai’s freehold market and first identified the short-term rental opportunity in 2013. We were lucky that he brought this to our attention, and we have formed a very successful partnership.”
Today, valued at Dh70 million, Kennedy Towers has grown into Dubai’s largest short-term rental management company. “We had a very sustainable growth rate. There was never a period where we onboarded more than 10 units in a month. This meant that we could maintain occupancy as we expanded our inventory and we never put too much pressure on the existing operational structure, which could have damaged our brand. We were the first Dubai start-up in this industry to expand internationally, entering Spain in 2017 and the UK earlier this year. Most often it is the other way around, with European companies expanding into Dubai.”
A unique leasing model
The company’s unique leasing model lets it operate a blend of medium- and short-term leases — from three days to three months — while juggling local supply-demand dynamics, seasonality, unit type and regulations in the city. “We tailor our strategy to each specific unit type — whether it is a studio apartment in DIFC or six-bedroom luxury villa on the Palm — to maximise the returns for property owners,” explains Mark. Catering mostly to the premium market, Kennedy Towers’ portfolio primarily includes the areas of Downtown Dubai, Palm Jumeirah, DIFC and Dubai Marina.
Today, the day-by-day operations are led by both Mark and Simon Kennedy. “While Simon has the real estate expertise to champion the business development process and demonstrate value to property owners across the different markets, I have the marketing expertise to maximise rental yields for landlords through an integrated branding and revenue management strategy.”
First-mover advantage in a short-term rental market
While they seized the business opportunity to enter the short-term rental market at the right time, and thereby had the first-mover advantage to a degree, they also attribute a large part of their success to the support of the local government. The UAE consistently ranks high as a business-friendly country. “The low tax environment and efficient business registration system certainly stand out among the other markets we operate in and there are many promising initiatives on the agenda such as the foreign ownership decree, which will certainly help to encourage future investment. Also, in the UAE, we’ve always had a good working relationship with the Department of Tourism and Commerce Marketing [DTCM]. There has always been the shared objective of making Dubai the world’s leading tourist destination and the government works together with local businesses in this sector to ensure they have the support they need.”
Nonetheless, it’s never easy for a start-up, says Mark. “The first couple of years come with a lot of stress and anxiety because while you are trying to understand the market there are a lot of pressures such as cash flow and lack of employment resources. Now the business is well established and operating efficiently across several countries, these pressures have been reduced significantly. What we are most concerned with strategically today is how the industry will change with advancements in technology. We always invest in the latest technologies to enhance the customer experience in our properties and to optimise our internal operations. We spend a lot of time analysing and predicting how the industry will evolve in the next decade and always put steps in place to ensure we are not missing out on these opportunities.”
Lessons as a start-up
One of his biggest learnings, Mark admits, has been in the area of customer service. “In this era of instant online reviews, we have to be very careful about our service quality. This was our main learning area as we were growing. We hired a strong team that contributed significantly. Since the industry was still new and evolving when we started, we could not initially find employees with vacation rental management experience, so we had to look to the related industries (real estate and hospitality) to find the right team. Today, we employ some very talented individuals across all markets who implement our strong operations manual, which is built into our CRM system. We have adapted our operations manual to meet the nuances of the local markets.”
Expanding into other markets in Europe will continue, Mark explains, while sustaining growth in the domestic market focusing on acquiring new inventory in premium residential communities in Dubai. “We attribute a lot of our success in the European markets to the high standards set for Dubai’s local operators by DTCM. In Dubai, guests are guaranteed a certain level of service. By taking those standards to the European markets, we not only help our properties to stand out online, but it helps to build customer loyalty and repeat business. Also, since DTCM requires one operator to take full responsibility and accountability for one property, our exclusive management service model has stood out in both the UK and Spain. Short-term rental management is a complicated operation and we believe the only way to succeed is to have one party taking full responsibility for how a property is managed.”