Why Airbnb is pricey, yet popular in Dubai

dubai - Average daily rate for short-term Airbnb rentals is less than hotels, serviced apartments

Dubai figured among the top five most expensive global cities for Airbnb accommodation in a recent Bloomberg index. However, Airbnb rates in Dubai are still more competitive compared to those charged by hotels and serviced apartments.

The Bloomberg index puts Dubai's short-term rentals at an average of $185 a night. However, Airbnb disputes this and claims the index overstates the cost of an Airbnb listing.

"First, this data considers advertised listings, not listings that are booked. Second, this data considers almost every available listing - from a one-bedroom apartment to a 10-bedroom house and beyond. Even with these flaws, the data shows that Airbnb offers a better value for travellers, particularly when compared to the typical hotel room," Hadi Moussa, general manager, Middle East and Africa, Airbnb, told Khaleej Times.

According to JLL, the average hotel room cost in Dubai was $181 in 2017 whereas the average daily rate for an Airbnb in the city was $112.

There are currently more than 6,000 listed properties on Airbnb in Dubai, according to data provided by AirDNA. The typical annual earnings for an Airbnb host in Dubai is $2,400 and a typical listing is booked for 22 nights per year in the city. The majority of Airbnb listings are located within more upmarket areas such as Downtown, Dubai Marina and Palm Jumeirah.

"Airbnb hosts set their own price and generally keep 97 per cent of what they charge for their listing. There are over 3,500 hosts across the UAE, and last year welcomed almost 90,000 guest arrivals from around the world into their homes," explained Airbnb's Moussa.

The Airbnb rates are a function of high hotel rates in Dubai, where five-star hotels make up 43.6 per cent of the total stock, estimates Chestertons Mena. Dubai's increasing popularity as a tourist destination also drives up the price point of Airbnb listings.

"Hotel rates are directly related to demand and supply - and the higher rates reflect Dubai's status as one of the world's leading tourist destinations. As the world's fourth most-visited, the city has significant demand to meet the accommodation needs of travellers, especially millennials and young generation, who thrive on shared services," said Olivier Harnisch, CEO of Emaar Hospitality Group.

"The typical Dubai Airbnb offering is generally of a higher quality than many other global locations, with amenities on offer including pools and gyms, access to shopping, transport links, restaurants and beaches. These are all major selling points for visitors and factors which would allow owners to demand a rental premium from travellers," said Ivana Gazivoda Vucinic, head of consulting, valuations and advisory operations, Chestertons Mena.

Also, in Dubai, only units in their entirety can be legally leased on Airbnb platforms (though some shared accommodation units still appear). This differs from the rest of the world where a room within a property, or even a bedspace can be rented. This would impact the price and position Dubai as a more expensive option.

"As Dubai continues to attract high tourism demand, which has resulted in the city's hotels and serviced apartments generating a YTD occupancy of 82 per cent and 84 per cent respectively, this high demand has flowed into the Airbnb market, which has allowed owners with an opportunity to charge higher rates. With the majority of Airbnb listings being located within more upmarket areas such as Downtown, Dubai Marina and Palm Jumeirah, this results in higher overall rates than seen in other international cities which have a wider range of listings," observed Christopher Hewett, director, TRI Consulting, management consultants specialising in hospitality.

With Dubai's tourism department targeting 20 million visitors by 2020 and many real estate investors increasingly realising that holiday lets yield higher rental returns, the number of properties listed on Airbnb is likely to significantly increase in the coming years.

Airbnb offers a price proposition that is gentler on the wallets of budget-conscious travellers. It also offers guests flexibility, a greater sense of independence and a chance to be more intertwined with the local community and area.

"Rather than focusing purely on price, Airbnb provides independent travellers, with a 'home-from-home' experience by providing a better connection to locals and the opportunity to see the destination through the eyes of a resident as opposed to a tourist," added Vucinic.

"We see enormous growth of Airbnb in new areas of Dubai such as Sports City, Jumeirah Village Circle, Production City, Greens, Tecom and Business Bay, where pricing is lower and can accommodate the budget-conscious traveller. It is no longer just about Downtown Dubai and the Marina. With the growth of Airbnb all over Dubai, we will see a big correction in pricing to include everyone," Anna Skigin, founder and CEO of Frank Porter, an Airbnb management company in Dubai, pointed out.

- deepthi@khaleejtimes.com