Holiday homes create segmented impact

The first of two Nakheel hotels at Ibn Battuta Mall in Dubai is now open, marking another major milestone in the developer’s Dh3-billion hospitality expansion programme.Image Credit: Courtesy of Nakheel

Decree Number 41 of 2013, which outlined the regulations under which holiday homes could be operated in Dubai, could deliver a more pronounced impact on affordable hotels, leisure-oriented hotels, hotels with fewer facilities and hotels without international operators, according to a Knight Frank report.

When the law was introduced, it provided a framework within which the sector could operate in a more transparent manner. However, one key stipulation of the legislation was that it was necessary for homeowners to engage a licensed thirdparty holiday home operator as a management company in exchange for a fee, which typically ranged from 20-25 per cent of gross revenues.

These regulations were relaxed in April, when the government allowed individual homeowners to apply for holiday home licenses without having to commission a third-party entity.

“One of the core appeals of the short-term rental market is not only the product offering, but also the provision of an authentic experience in secondary districts, which are not commonly visited by traditional tourists,” said Ali Manzoor, Associate Partner at Knight Frank Hospitality Advisory. “This clearly does not apply to Dubai. Holiday homes in the emirate are largely located on Palm Jumeirah, Dubai Marina, Jumeirah Beach Residences, DIFC and Downtown Dubai — all areas that have high concentrations of hotel supply, which may prove to be problematic for the emirate’s hospitality sector in the long run.”

Although hotel operators were initially dismissive of the short-term rental market when it was at its nascent stages, over time this view has been abandoned. Many operators have since acknowledged the impact that platforms such as Airbnb have had on the hospitality sector and in some markets have even lobbied for protective legislative measures.

“Ultimately it is important to realise that not all hotels are affected equally,” said Harmen de Jong, Head of Knight Frank’s Development Consultancy and Research team.

Source: Property Weekly


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