Dubai Holiday Homes — Killing Two Birds With One Stone

“Strategy is about making choices, trade-offs; it’s about deliberately choosing to be different.”
— Michael Porter

In 2015, 2,000 holiday homes were registered at the Dubai Tourism and Commerce Marketing (DTCM). This number more than doubled with 4,200 holiday homes registered as operational holiday homes with the DTCM as of 2016.

Dubai’s tourism numbers are growing, especially with the expected hospitality boost that the Expo 2020 will generate. The DTCM is anticipating tourist numbers to grow from more than 14 million tourists a year in 2016 to at least 20 million tourists in 2020 (around 25 million estimated in some publications).

In essence: Holiday homes in Dubai are on the rise.

Holiday homes allow you to maximize your cash-flow while at the same time provide you with more control over your property.

• You can earn much better rental revenue investing in a holiday home rather than a long-term rental.
• For instance, you could easily charge up to 250 dollars or 920 dirhams a night for a two bedroom apartment in Palm Jumeirah which translates into an annual rent of 335,800 AED/year. This is 82% larger than the average long-term rental income for a two bed in Palm Jumeirah which is around 185,000 AED/year.
• Moreover, airbnb rents are not regulated while long-term rentals are regulated. The maximum long-term rent for a two bedroom apartment in Palm Jumeirah is set at 220,000 AED per year by the Dubai Land Department (check the rental increase calculator to know the rent regulations in your community of interest).
• In case you want to sell your property, you have the flexibility to quickly vacate your holiday home and sell.
• In the case of long-term tenants, you will have to send a 12-month notification notice via notary public by registered mail, sent upon expiry of your present tenancy contract. Also you can only evict long-term tenants if:
• You wish to sell the property
• Need to take it back for your own use or use of your immediate next of kin.
• You wish to demolish the property or perform comprehensive maintenance

PS: If your reason is to take back the property for your own use or use of your immediate next of kin, you won’t be allowed to re-lease the property for the following two years. In the case you did, the evicted tenant can request for fair compensation.

Operating a rental property as a holiday home is a great investment strategy if executed properly. With the proper amount of time, effort and capital, you will be able to structure your asset successfully as a holiday home.

Here are the four things you need to get right to set up a great holiday home:

Location

Location is key when looking at purchasing your holiday home investment. You want to find a central location in a prime neighborhood. Think of locations like Downtown Dubai, Dubai Marina, DIFC, and Palm Jumeirah.

You want a well-connected location where tourists would want to spend their valuable vacation time in.

However prime locations will cost money. You will have to put up 3 to 4 times the capital that you would place to purchase a property in an affordable location.

For instance, a two bedroom apartment in the Palm Jumeirah will cost you around 2,460,000 AED when you could easily get a two bedroom apartment in International City for around 680,000 AED only.

You will need the upfront capital to be part of the holiday home game. But if you find the right property and you are willing to carry that cost, then the investment is by all means worth it.

Amenities and Furniture

On top of the hefty price tag, you will need to make sure your property is unique. This means investing in luxury furniture and high quality amenities.

Having your home set up with quality furnishing is necessary. Upgrades such as marble floors, a private jacuzzi, a smart security system will go a long way.

If purchasing an apartment, make sure to inspect the amenities available in your building as well. You will need to do your due diligence to insure that building quality is up to par along with any retail or restaurant outlets that are available.

These sunk costs might seem pricey but on the long run they will help you steer clear through competition. Offer your guests a luxury stay that they will enjoy and they will come back again and tell their friends and family about it.

Pricing

Unlike long-term rentals, pricing of holiday homes is a much more tricky area.

Holiday home prices are highly seasonal and event-driven. You will need to be aware of price patterns to maximize the returns from your holiday homes.

You should also consider offering price incentives for potential tenants who want to say for a longer duration. Remember you are trying as much as possible to limit your vacancy rate when playing the holiday home game.

Make sure to research the prices for similar properties in your area on booking sites (airbnb.com, booking.com .. ) to get a good idea of prices. Airbnb also provides you with free insights into the market and offers you the option of dynamic/smart pricing.

The good news however is that competition in the holiday home market in Dubai is still not fierce, leaving you with a good leeway to raise prices and not compromise your occupancy rate much.

Management

There are so many things that need to go into the management of your vacation rental. It is a much more intensive task to manage a holiday home than to operate a long term rental.

Think of operating a holiday home as operating a mini hotel. You will need to set up a systematic way to manage your holiday home.

When a booking is made, the new occupant will have to be given the key, the building access cards, and a number to call in case things go wrong.

You will have to provide your tenants with great attention, provide them of a nice tour of the building amenities, show them around your property and provide them with anything they might need.

You will need to make sure they have access to essentials and supplies. The home needs to be consistently cleaned, laundry done on a regular basis especially before any new occupant checks in. Also, when the occupant leaves, the place must be cleaned and prepared for the next tenant.

You will need to double check the condition of the property when an occupant leaves, and you will need to handle any other issues on check out.

If you believe you won’t be able to handle all of the above tasks perfectly then I strongly advise you to hire a holiday home operator.

Holiday homes take a percentage of your rental income (around 20%) to handle the following: advertising, booking, accounting, inventories, housekeeping, maintenance, check-ins, checkouts, addressing customer complaints, linen and towel change, catering to additional customer requirements, maintenance issues, registering every guest passport with DTCM, providing welcome packs to the guests, and much more.

Some holiday home operators also offer to furnish the property at competitive prices. This price is at cost to the owner, which can be paid upfront or taken monthly over the course of the year. This allows owners to start receiving an income straight away.

Final Word

Operating a holiday home in Dubai comes with a steep price tag and a steeper learning curve, but on the long run you can easily double your returns and gain much more control over your asset.

You will need to make sure you have the right location, amenities & furniture, management and proper pricing in place to guarantee success.