Sharjah enters the fray as UAE holiday home market heats up

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• More than 300 holiday homes in Sharjah so far
• UAE hotels market saturated but scope for home rentals to grow 

The UAE’s fledgling holiday homes market will remain attractive to investors and could fuel consolidation among hotel operators, experts say, as Sharjah becomes the latest emirate to announce regulations to diversify its tourism sector.

Sharjah Commerce and Tourism Development Authority (SCTDA) has launched an official framework – the Holiday Homes Project – which aims to assist residents who wish to rent out properties they own as holiday homes.

• Sharjah unveils holidays homes project to diversify revenue

The project is based on international best practices, according to Khalid Jasim Al Midfa, chairman of SCTDA.

He said: “The emirate’s aspirations to continue advancing this sector has crossed a meaningful milestone, as the initiative not only introduces an innovative new service to the tourism landscape, but it also puts Sharjah’s home owners at the forefront of benefiting from a drive that is poised to [attract] more visitors from around the world.

“We seek to maximise visitor experience by ensuring high-quality classification standards and offering additional staycation options across the emirate of Sharjah.”

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Sharjah is the third-most populous city in the United Arab Emirates, after Dubai and Abu Dhabi. According to estimates, there are currently over 300 holiday homes in Sharjah and the first year of the project is set to see the registration and licensing of 150 holiday homes.

About 15 operating companies will be involved in the process and holiday home owners will be given three months to complete the documentation process.

The Sharjah announcement comes just weeks after a CIA Landlord Insurance report revealed that landlords of Airbnb properties near the Burj Khalifa, Dubai’s tallest building, make the most money globally. 

“When you think of travel to the UAE, images of luxury hotels are the first thing that come to mind,” said Mehrnoush Shafiei, a senior research analyst with Euromonitor International.

“In Dubai in particular, the high-end lodging market is saturated and highly competitive as more and more luxury hotels enter the market each year.

“The market for holiday homes, in contrast, has significant growth potential, especially for visitors who are enjoying an extended stay in the UAE.”

Shafiei added: “The luxury short-term rentals market has been growing since the pandemic, as some high-end travellers felt safer to be outside a hotel. In response, some major hotel brands began to offer villa rentals to expand their portfolio of offerings.

“With that being said, there is still a gap in the market when it comes to affordable holiday homes, and the recently formed partnerships of the UAE government with Airbnb are expected to go a long way to diversifying the tourism sector.”

Faisal Durrani, partner and head of Middle East research at Knight Frank, added: “As a relative newcomer to the global property stage, the UAE is always striving not only to follow best practice, but to define it.

“With one of the world’s most prosperous residential markets in the world in Dubai, it is no surprise that [it] was named as the most profitable Airbnb market globally. 

“What’s more, rents have risen at the same pace as capital values, meaning there has been no yield compression. Yields for apartments are steady at around six percent, while villas stand at about four percent, on average.

“These are higher for more high-end homes, so it’s clear to see why the buy-to-let and holiday homes market is so attractive to investors.”

Alpen Capital, a UAE-based investment banking advisory firm, is also seeing a rise in the popularity of Airbnb-type properties in the GCC region.

“The pandemic has accelerated the adoption of technology and digitisation for operators looking to streamline procedures, as well as improve overall levels of customer experience,” said Sameena Ahmad, managing director of Alpen Capital.

“The demand for mid-scale hotels, service apartments and Airbnbs is also on the rise as it offers flexibility and affordability.”

Alpen Capital’s managing director Sanjay Bhatia added: “Consolidation in the hotel sector is likely to intensify as pressure on companies to drive earnings and gain market share continues to mount in the face of rising competition and increasing threats from online portals and alternative lodging service providers.”

Abu Dhabi accommodation boost

As well as Dubai and Sharjah, Abu Dhabi is building up its holiday homes market, with tourism chiefs signing an agreement with Airbnb earlier this year to boost accommodation options for visitors looking for alternatives to traditional hotels in the UAE capital.

The deal, signed in February, follows Abu Dhabi Department of Culture and Tourism’s request for holiday home owners to register on its new online licensing system.

Those who want to rent out a holiday home through operators like Airbnb or individually, were required to meet an August 1 deadline to register.

In January, Dubai-based holiday homes firm Stella Stays announced plans to launch more than 100 holiday home units in Abu Dhabi by the end of 2022.

The company, which started out with a single penthouse in 2019, currently has more than 300 properties and is present in Dubai, Manama and Montreal.

While the UAE is still in the relatively early stages of building its holiday homes sector, success for Airbnb has been significant elsewhere in the world. 

According to a research paper by Oxford Economics, Airbnb visitor spending is estimated to have directly supported nearly 345,000 jobs in Europe in 2019, with spending by Airbnb guests reaching $20.8 billion. This is equivalent to 3.1 percent of all direct tourism activity in 2019, with that share rising to 3.2 percent in 2020.

Similarly, in Asia-Pacific, the Airbnb community supported more than 920,000 jobs in 2019, with guests spending more than $20.7 billion, a fourfold increase in real terms since 2015.