In May 2019, Airbnb extended its reach into one of the world’s fastest-growing populations when it launched an Arabic version of its website. Although Airbnb’s main intention was to expand its presence across the Middle East and Northern Africa, the impact may have broader implications for the Arab Muslim World.
To get a better understanding of the vacation rental landscape across the Middle East and Northern Africa, let’s look at Dubai, which is the region’s largest vacation rental market.
Vacation Rental Performance in Dubai
Over the past twelve months, entire home short-term rentals in Dubai have generated an impressive $136.7 million.
Thanks in large part to a formal partnership forged back in 2016 between Airbnb and Dubai Tourism, the vacation rental industry in Dubai has surpassed all other Middle Eastern and North African cities in terms of short term rental supply and earned revenue.
| Dubai | Cairo | Abu Dhabi | Riyadh | ||
|---|---|---|---|---|---|
| Occupancy | 54% | 42% | 47% | 35% | |
| 6.3% | 8.5% | 7.8% | 32.4% | YoY Change | |
| ADR | $229 | $54 | $109 | $145 | |
| -7.1% | 8.8% | -7.7% | -0.7% | YoY Change | |
| RevPAR | $124 | $23 | $51 | $51 | |
| -1.3% | 18% | -0.4% | 31.5% | YoY Change |
According to AirDNA, active entire home listings have grown 69.5% from June 2018 to June 2019, across Dubai. This is exponential growth when compared with the 7% growth in hotel rooms over the same period.
In Dubai—as with most other cities—it matters where you list your vacation rental. Rentals that are listed on HomeAway/Vrbo earned an Average Daily Rate (ADR) of $332.39 and an average occupancy of 57.1%. Those that were listed on Airbnb (and not HomeAway/Vrbo), earned an ADR of $202.22 and an occupancy of 52.3%.
Consequently, rentals in Dubai that were listed on both Airbnb and HomeAway/Vrbo earned the highest occupancy, 61.5% and generated an ADR of $238.69.
Although Dubai is the 5th most expensive city in the world to book a vacation rental, its ADR has actually slipped 7.1% from last year, to $229. The decrease in rates is partially attributed to new hosts who are trying to attract guests and solicit initial ratings by launching their rentals at sub-market prices. Additionally, Dubai is experiencing a slump in overall tourism.
Expo 2020 Dubai’s Impact on Lodging
It’s important to note that Dubai is gearing up for Expo 2020 Dubai, which is similar to a World’s Fair, and happens in a different location every five years. Although honored to host this event, it has Dubai racing to increase its hotel supply. The event is expected to last as long as six months and draw millions of visitors.
Hotel daily rates and occupancy have fallen so far this year amid the boost in supply ahead of the big event. Despite the jump in the number of hotel rooms, vacation rental listings have grown at an even faster pace.
The overall occupancy levels for hotel comparable vacation rentals—studios and 1-bedroom rentals—have still lagged behind those of traditional hotels, at about 59.9% in May 2019, compared with 77% for hotels.
Dubai is betting big that the press and visibility generated from Expo 2020 will be enough to keep its rooms full once the exhibitors have packed their bags and returned home.
Why Dubai?
Dubai’s history dates back to around 3000 BC, when the first cattle herders settled the areas along the glistening Persian Gulf.
Fueled by the discovery of oil in the 1960s, Dubai has invested heavily in diversifying its economy. It’s now considered a premiere business hub throughout the Middle East.
The new wealth and opportunity has attracted expats from around the world, which spurred the development of new state-of-the-art infrastructure.
To further reduce the country’s dependence on oil revenue, The Dubai Corporation for Tourism and Commerce Marketing (DCTCM) was formed to market Dubai as the premiere destination for opulent events and tourism.
It touts Dubai as an oasis in the desert, where wealthy guests can stroll through man made forests, rent designer villas equipped with private chefs, drivers and nannies, and buy gold bars from a vending machine.
Despite the recent lag in tourism, that position as a premiere destination has paid off. In 2018, Dubai welcomed 15.97 million overnight guests, which is considerably more than the number of permanent residents, of 3.3 million.
Dubai is also experiencing a slowdown in its housing market, potentially making it an attractive place to invest in real estate as short-term rentals.
Where Guests Go For Luxury
Although Dubai as a whole ranks among the top in terms of average rates, some neighborhoods really stand out.
| ADR | RevPAR | Occupancy | ||
|---|---|---|---|---|
| 1 | Palm Jumeirah | $513 | $253 | 49.3% |
| 2 | Jumeirah Islands | $373 | $200 | 53.6% |
| 3 | The Springs | $364 | $169 | 46.4% |
| 4 | Al Wasl | $333 | $194 | 58.4% |
| 5 | Downtown Dubai | $212 | $127 | 60.0% |
The artificial palm-shaped islands of Palm Jumeirah represent the highest density of Dubai’s most expensive rentals, generating an ADR of $500.
In the past few years, property management companies representing ultra-luxury rentals, such as Luxury Retreats and Frank Porter, have sprung up to help fulfill guests high expectations. Hotel moguls have even dipped their toes into the proverbial vacation rental waters with the promise of bringing five-star experiences to private residences, as Seth Matson has done with Aquila Hospitality.
With 869 active rentals over the past year, Palm Jumeirah is also Dubai’s third largest neighborhood, trailing only behind Dubai Marina (2,437 active rentals) and Downtown Dubai (1,212 active rentals).
Dubai’s Vacation Rental Hosts
Dubai’s resident population is largely made up of expats and is expected to double by 2027.
The concentration of wealth and promise of increasing real estate values—based on aggressive forecasted population growth and strong tourism—make it an ideal place for residents and non-residents to invest in residential real estate.
Sixty four per cent of Dubai’s listings are entire home rentals. Of those 6,879 entire home rentals, just 13% are considered full-time, meaning they are available for booking at least 180 days out of the year.
Dubai’s large expat community could be a factor here, due to many traveling abroad to visit family throughout the year, and pulling investment rental properties off the market for use by visiting friends and family.
There is still plenty of opportunity for people to generate cash flow from home sharing, without needing the funds to invest in a separate residence.
Private room listings earned an average daily rate of $65.03 and an occupancy of 40.4% while shared room listings earned an average daily rate of $22.34 and an occupancy rate of 30.3%. Private and shared room listings also provide a more cost effective way for visitors to stay in and enjoy the city.
Dubai’s Vacation Rental Guests
According to AirDNA’s MarketMinder tool, the largest single source of guests is London, with 3,585 guests booking vacation rentals via Airbnb or Vrbo over the past year.
However, according to Dubai Tourism’s May, 2019 Report, the U.K. is only the third-largest source of total visitors, after India and Saudi Arabia, respectively.
Thanks to a concerted effort to tap into China’s booming economy, Chinese guests represent Dubai’s fastest-growing source of tourism, with annual visitorship increasing 12% between 2017 and 2018, to 857,000.
Despite being two of the top source locations for visitors, relatively few people from India and China seek vacation rentals as accommodations. This could be due to website localisation barriers, the fact that major home-sharing platforms aren’t as popular there, or because of the purpose for their travel.
For example, if they’re traveling for business purposes, the familiarity and amenities of a hotel may be more suitable. Similarly, if visitors are traveling as part of a guided tour, group accommodations are likely already included with the package.
Airbnb’s decision to launch its website in Arabic is expected to boost host participation and increase the number of listings across the region. However, it likely won’t have an immediate impact on guest demand in Dubai, since only 9% of guests currently make a booking with Arabic set as their native language.
Halal Travel
There is one group of niche travelers in particular that we predict will benefit from the launch of Airbnb’s website in Arabic: Halal tourism.
Those who practice Islam often find it difficult to find accommodations around the world that meet their strict dietary and prayer requirements.
As the global population of young Muslims grows, they are seeking adventure, taking their families on holiday, and traveling for business. Some airlines and hotels have taken note and offer fully pork-free menus and separate women-only areas for swimming and sunbathing.
Entire communities have formed around websites like Have Halal Will Travel and HalalTrip, where travelers share advice on everything from best Halal restaurants, places to worship, and travel safety.
While not all Muslims speak Arabic, and not all people who speak Arabic are Muslim, we believe that engaging more people from the Arab Muslim community in home sharing will in turn provide more inclusive, comfortable and accessible options.