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While Dubai has moved to tightly regulate the holiday home sector, authorities have now licensed more than 40 different operators in the emirate. The licensing system was decreed in 2013 and came into play in March.
It stipulates that anyone renting out a holiday home without a licence would be subjected to fines ranging from Dh200-Dh20,000, and up to Dh100,000 for repeat offenders, according to Khalid Bin Touq, Executive Director of Licensing and Classification at the Dubai Department of Tourism and Commerce Marketing (DTCM). “Dubai Tourism is tasked with implementing these fees, and the department is able to take all necessary action against violators, including issuing warnings and fines, shutting down all rental activity and revoking holiday home licences,” said Bin Touq.
To qualify for a licence, operators must have a minimum of 20 short-term rental units and obtain a trade licence with DTCM. It also requires tourism taxes to be paid, in line with the rest of the industry. Bin Touq says the holiday home sector includes furnished units leased for short-term rental. It does not require tenants to sign an Ejari contract and a utilities contract. According to DTCM, there are currently more than 560 approved units on the rental market.
“To date, we have issued licences for more than 40 operators, conducted a workshop for all and visited their premises to make sure the system is integrated seamlessly,” says Bin Touq. “We have also signed a memorandum of understanding with holiday rental website HomeAway, which allows operators to take advantage of its wide reach and market share, particularly in the US.”
Bin Touq says the industry is growing steadily, with many properties currently located in the Palm Jumeirah and Dubai Marina.
“Prior to the introduction of the regulation, a number of properties in Dubai were already used as holiday homes. The regulation provides visitors with the confidence that the property they are booking is of a certain quality, has the appropriate insurances and is managed by a qualified party.”
The new regulations also classify holiday homes as standard or deluxe. DTCM conducts frequent inspections and maintains a database of all licensed homes. “Property owners, meanwhile, benefit from the expertise and marketing capabilities of the operator through which they rent out their home,” says Bin Touq. “And by being part of Dubai’s wider hotel classification scheme, they can also expect to profit from the targeted growth in visitor numbers over the coming years.”
Imran Latif, Director of My Stay Group, says the industry operated in a grey area during the early days of Dubai’s property boom. “If you wanted to operate in the holiday rentals industry there wasn’t a licence available,” says Latif, a member of the international Vacation Rental Managers Association who operates one of the longest-standing holiday home operators in the UAE. “It wasn’t something that had been considered by Dubai in the early days of the property boom because there were so many other things to do before they got there.”
Latif worked closely with the DTCM over six years to get the rules in place. The Real Estate Regulatory Agency (Rera), which governs long-term rentals, was only established in 2007, and it was only then that Dubai turned its attention to the holiday home rental market.
“It was a long time coming. The industry was operating in a grey area for a number of years,” says Latif. “We started in 2005 and in the early days nobody was regulating the industry. You had a few specialist short-term rental companies like us, there were some real estate companies and you had both local and offshore owners doing it directly. This was problematic as no one was on the ground to oversee things directly, Latif says. “You’d get people putting it together from their house in Australia or wherever, so security became a problem.”
In worst-case scenarios, fraudsters would take photos from another website and set up a fake listing. “These scammers are very convincing on the telephone [but] instead of paying by credit card, they’ll ask for a bank transfer,” says Latif.
“When the guests arrive they would realise the booking never existed. In these circumstances the local authorities were powerless to help and it is very unlikely the guests would get their money back, as they are forced to pay twice for their accommodation.”
Another issue with the burgeoning holiday home industry, which has recently been popularised by websites like AirBnB but has already thrived in the US for decades, is that customers themselves do not hold the bookings to the same standards as a hotel. So red flags that suggest a scam, like the service provider failing to send a confirmation email or a staff calling through a mobile phone, were often overlooked by the victims.
While things have settled down since those days, there are still many unlicensed properties being operated in the emirate, with around 20-30 operators according to Latif. “There’s a bit of a clean-up going on. You have local advertisers — they’re all starting to take out people who don’t conform to the law.
“But you’ve got close to 1,000 Dubai listings on AirBnB, out of that 300 or 400 are advertising shared rooms. We expect the numbers to decrease over the next few months as owners understand the new rules. Everyone has to follow the rules so there is a level playing field in the industry.”
Latif says he understands the draw for independent owners or unlicensed operators to make short-term listings: “When nothing goes wrong it’s brilliant, it’s quick, easy money for everyone.”
But unfortunately, he says, things can go wrong. “I don’t want to sound like a scaremonger, but in Dubai over the past 10 years we’ve had our fair share of things going wrong. We’ve served over 30,000 guests, so there’s not much we haven’t covered by now.”
It also becomes difficult in situations where guests don’t read the terms of their stay properly and turn up at an apartment expecting a hotel and make a scene at the security desk. “The police get called in sometimes,” says Latif. “There is no recourse if the owner isn’t local or licensed. From a guest point of view, it’s much better [if the operator is licensed].”
Latif says the key to legitimising the industry is consistency. “There’s a set of basic standards everyone has to adhere to: security, checkin, minimum expectations during a guest’s stay.”
HomeAway, which has just launched in the UAE, says it will be working alongside DTCM to help use its experience to lift standards. HomeAway is a monolith in the world of holiday homes, with more than a million vacation listings in 190 countries around the world. The firm started its Dubai operations just last year and Marcello Mastioni, Vice-President and Managing Director of Europe, the Middle East and Africa, says the time was ripe to launch the local site.
“Dubai was pinpointed as the natural entry point for HomeAway’s expansion into the Middle East,” says Mastioni. “Despite the vibrant multicultural demographic and increasing number of tourists, there was still a gap in the market for families looking for flexible holiday options that a vacation rental can offer.”
He says there are thousands of potential properties across the emirate that are suitable as vacation rental homes, in addition to another 100,000 currently under construction.
“Dubai is the fourth most popular destination in the world for international visitors and is increasingly recognised
as an ideal destination for families, which is the primary audience for HomeAway. Families are attracted to the city because of the beautiful beaches, numerous family-friendly attractions and the safety of the city.”
Mastioni says the firm is working closely with the DTCM to strengthen the vacation homes sector in Dubai by raising awareness and providing support to licensed vacation homes operators.
“Additionally, the two organisations are planning joint traveller-focused campaigns, leveraging Dubai’s world-class marketing team and HomeAway’s global strength in the vacation homes sector.”
Meanwhile, My Stay’s Latif is hoping the new regulations will be enough to drive the cowboys away. “What we are worried about is that somebody at the bottom of the scale will tarnish the whole industry.”
As Dubai tries to come up with solutions for accommodation in the lead up to the World Expo, Latif says it is important that holiday home operators are as above board and accountable as top hotels.
“I’m sure we’ll get there and it won’t take long,” says Latif. “Dubai will probably become a leader because it’s innovative and everything happens very fast.”
Source: Amanda Fisher, Special to Property Weekly