Rates of these properties would depend on quality of product and demand
Holiday homes are still more expensive than hotel rooms in Dubai because majority of them are available in the high-end segment and are located in areas like Dubai Marina, Jumeirah Beach Residence, Palm Jumeirah and Downtown, according to industry analysts and executives.
Though holiday homes can be cheaper on a like-to-like basis than serviced apartments, a one-night stay in holiday homes can be costlier due to a high one-time cleaning fee.
Ali Manzoor, partner for hospitality and leisure at Knight Frank, said looking only at rates, holiday homes tend to achieve higher average daily rates (ADRs) than hotels in Dubai.
"This is not only because holiday home supply tends to be concentrated in upmarket areas [unlike hotels which are more evenly distributed across the city], but also because 87 per cent are one-bedroom units or larger as opposed to single rooms. However, in terms of occupancy levels,? hotels have consistently stronger performance than holiday homes," said Manzoor.
"When comparing achievable rates between Dubai's holiday homes and hotels, we continue to witness the holiday home market outperform the hotel market by 64 per cent by June 2018. Some of the variation can be explained by the fact that the holiday home supply is still very much skewed towards Dubai's upmarket areas such as Dubai Marina, JBR, the Palm Jumeirah and Downtown Dubai," Knight Frank said in its latest report.
Christopher Lund, head of hotels at Colliers International, said on a like-for-like basis, holiday homes tend to be around 5 to 15 per cent cheaper than serviced apartments in the same location with the same number of bedrooms.
"However, staying in a holiday home for only one night can be more expensive, as a one-time cleaning fee is charged to the guest for the entire duration of the stay," Lund said.
According to Knight Frank, there are currently 10,766 active holiday homes listings out of a total of 20,395 properties registered on the Airbnb platform. However, Dubai's holiday home market accounts for 2 per cent of Dubai's total households, the highest proportion of all other key global hub cities. Of the 10,766 active listings in 2018, 61 per cent were entire homes or apartments, 31 per cent private rooms and the remaining 8 per cent were shares rooms.
Laurent A. Voivenel, senior vice-president for operations and development for the Middle East, Africa and India at Swiss-Belhotel International, said the rates of holiday homes depend on the quality of product and the demand.
"The impact of holiday homes is more on lower priced hotels with limited facilities. Costs can vary according to the size, location and length of the stay. Hotels are generally located in close proximity to the city's key attractions," he added.
Compete or complement?
From a supply perspective according to Manzoor, hotels in Dubai are insulated to some degree from the effects of the holiday home market as supply is largely "top-heavy" and internationally branded.
"Potential weaknesses lie are in the ability of hotels to price during peak periods and this has become an issue in submarkets such as the Palm and Dubai Marina, which not only have volatile demand patterns but also high volumes of holiday home supply," he added.
Lund noted that holiday homes in Dubai are complementing the hospitality sector, and not directly competing with it as the two provide a different experience and different type of accommodation offerings.
"While hotels, resorts and serviced apartments provide a full range of services, holiday homes generally come with very limited services. The unit types tend to be different as well; since holiday homes are residential apartments and villas, they tend to be much larger units than hotel rooms or serviced apartments which are designed in a more efficient manner," Lund added.
Voivenel believes that holiday homes and hotels complement each other and help to grow and diversify tourism in the destination giving more choice to travellers.
"An advantage we hoteliers have is we see the clients and have a direct relation with them which holiday homes don't since their business is virtual and they don't have people on the ground."
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