Throughout the Middle East, tourism targets are already ambitious — and getting more so. Countries are spending to build hotels, but nowhere near enough. The question remains: Where are all these visitors going to stay?
First the numbers:
- Saudi Arabia received less than 17 million visitors in 2022, but just recently upped its target for 2030 to 150 million. It has 134,000 rooms and that’s expected to surge to 444,000 by 2030.
- The United Arab Emirates with 14.3 million guests in 2022, is aiming for 40 million hotel guests in 2031. It’s on track for 235,000 rooms by then.
- Meanwhile, Oman with a little less than 3 million tourists in 2022, is planning to attract nearly 11 million by 2040. The projection is for just under 39,000 rooms by 2030.
Many of the rooms added will be well out of the price range of those who visit. As of 2021, 75% of the branded supply in the region was upper-upscale and luxury.
But the average tourist spend per visit in these countries is well below 5-star rates: $2,172 in the United Arab Emirates (UAE); $1,416 in Saudi Arabia; $1,702 in Oman.
There is a clear need for budget alternatives and that’s where short-term rentals come in.
The Tourism Targets
Citing Oman’s example, Abdul Samee Qureshi, managing director of The Adroit Agency, said, “Against the backdrop of its 11 million-tourists aspiration, diversifying accommodation offerings becomes paramount for Oman. Short-term rentals will play a pivotal role in this.”
Visit Oman has partnered with Under the Doormat Group, a short-term rental technology company, to open the market to property developers, hospitality companies, small and medium enterprises and individually owned properties.
In January 2023, Saudi Arabia approved a bylaw to allow its citizens to stay in, host and offer short-term rentals.
That’s important since 58% of Saudis surveyed by real estate consultant Knight Frank opted not to stay in hotels.
In July, GuestReady, a hospitality and property technology company with a focus on short-term rental management, announced its official launch in Saudi Arabia with the opening of its Riyadh office. UAE-based property technology company Silkhaus is also gearing up to make an entry into the kingdom’s short-term rental market.
“We are already seeing how peak periods impact availability of rooms in the region. This not only presents a significant opportunity for short-term rentals, but also has a positive impact on the real estate sector and job creation,” says Aahan Bhojani, Founder & CEO of Silkhaus, a Middle East-based platform for short-term rentals.
The rollout of a unified Gulf tourist visa by the Gulf Cooperation Council (GCC) countries within the next two years, similar to the Schengen visa in Europe, is expected to extend tourist stays, adding to the demand for short-term rentals.
The objective is a yearly uptick of 7% in inbound trips and 128.7 million visitors by 2030.
“The unified visa stands as a gateway to a broader spectrum of tourists, potentially amplifying the influx of visitors and fostering a new wave of mid-term residents in Dubai,” said Bhojani.
UAE’s Pioneering Initiatives
The UAE is at the forefront of this trend, introducing measures, such as the virtual working visa for remote workers — a major draw for the short-term rental market.
The emirates of Ras Al Khaimah, Ajman, and Sharjah are introducing regulatory frameworks that simplify the process of renting out holiday homes, expanding the market beyond the bustling streets of Dubai.
Turab Saleem of Knight Frank says high hotel room prices and occupancies in the UAE underscore the potential of the short-term rental market.
Salem notes the ease of doing business and the quick setup process for short-term rental businesses in the UAE.
Ajman and Abu Dhabi are adapting to operator needs and diversifying their short-term rental offerings, including farmhouses and vacation rentals, to attract a broader tourist base. Ras Al Khaimah, traditionally a weekend destination, is witnessing increased interest in alternative accommodations, symbolized by the announcement of the country’s first casino.
Those Remote Workers
Salem and Bhojani both emphasize the pivotal role of remote working and staycations in the steady growth of short-term rentals. They say the UAE’s appeal to remote workers, stability, safety standards, and cosmopolitan setup has positioned it as an attractive hub. The introduction of the 5- and 10-year residency Golden Visas has further increased the country’s attractiveness to high-spending visitors.
UAE’s decision to align the weekend with Western schedules has also facilitated a smoother experience for digital nomads, easing their work-life balance. The country officially dropped its long-standing Sunday to Thursday work week on January 1, 2022.
Dubai’s Regulatory Success
Dubai, in particular, has created an environment conducive to short-term rental growth. The emirate was also one of the most profitable cities for Airbnb landlords in 2022.
From a landlord’s perspective, Bhojani says Dubai has implemented regulations aimed at fostering trust among potential buyers and overseas investors. “Initiatives like the introduction of the golden residency visa for investors and the reinforced protection of buyers have contributed significantly to instilling confidence in the market. These measures collectively reinforce Dubai’s appeal as an attractive destination for investment and residency,” he adds.
Global Operators and Competition
Salem discusses the dominance of global hotel operators like Marriott, Hilton, IHG, and Accor in the traditional hotel business. However, he notes that Airbnb has carved out a significant share in the short-term rental market, witnessing over 40% year-over-year growth.
The entry of major hotel brands into the short-term rental segment is anticipated to intensify competition, especially in key cities, while smaller players find opportunities in secondary destinations.
Many major developers are embracing the presence of short-term rental operators, says Bhojani. Some developers are establishing in-house property management systems, while others are outsourcing these activities to entities like Silkhaus.
“Traditional hospitality, exemplified by Marriott, is increasingly recognizing short-term rentals as allies. For instance, the Homes and Villas section within Marriott enables guests to book apartments while earning and redeeming points, indicating a growing synergy between traditional hospitality and the burgeoning short-term rental sector,” Bhojani says.