Airbnb booming as Dubai hotel rates continue to fall

Revenues for Dubai properties listed on online platform Airbnb have increased more than four times over the last two years, according to an analysis by Chestertons, as regular hotels have seen rates decline.

The firm said Airbnb revenues increased 421 per cent between August 2015 and August 2017 to reach $3.3m following a relaxation of home rental rules two years ago.

Listings were also up 161 per cent from 1,241 in August 2015 to 3,249 in August this year, according to Chestertons.

Airbnb average occupancy levels stood at 57 per cent during Dubai’s peak season, some way below those of hotels in the emirate. The same was also true in the low season months of June, July and August where occupancy averaged 40 per cent.

However, the average daily rate (ADR) remained consistent year-on-year at $153 in August 2015, $154 in the same month last year and $154 this year. In the peak first three months of the year, ADR stood at $226, $201 and $204 respectively.

Dubai Tourism signed an agreement with Airbnb in 2016 to promote responsible hosting and prevent breaches of holiday home regulation.

Read: Dubai Tourism signs agreement with Airbnb

Prior to this, there were concerns users of the platform in Dubai were not operating legally.

“Many real estate investors are diversifying into the holiday home rental market because of the ease in regulations, combined with higher returns when compared to the traditional rental market. On average, investors can expect an additional 5 per cent return when compared to long-term leasing rental yields,” said Chestertons MENA head of advisory and research Ivana Gazivoda Vucinic.

Chestertons said its analysis showed the Airbnb offering was complementing and not competing with the Dubai hotel market.

However, hotels have not fared as well during the same two-year period.

Preliminary data from research firm STR for September 2017 showed occupancy dropping 4.7 per cent year-on-year to 76.6 per cent.

The ADR in the emirate declined 10.6 per cent to Dhs497.67 ($135.49) and revenue per available room was down 14.8 per cent to Dhs381.20 ($103.78).

STR noted supply had increased 5.6 per cent year-on-year but demand was only up 0.6 per cent, hitting hotel performance.

It said a decline in the events market compared to last year and the shorter Eid Al Adha break could also have weighed on the market