There will be a boom in short-term rentals in the Middle East

Across the Middle East, tourism targets are already ambitious – and growing. Countries spend on building hotels, but nowhere near enough. The question remains: where will all these visitors stay?

First the numbers:

  • Saudi Arabia received fewer than 17 million visitors in 2022, but just recently raised its 2030 target to 150 million. It has 134,000 rooms and is expected to grow to 444,000 by 2030.
  • The UAE, with 14.3 million guests in 2022, is aiming for 40 million hotel guests in 2031. It is on track to have 235,000 rooms by then.
  • Meanwhile, Oman, with just under 3 million tourists in 2022, plans to attract nearly 11 million by 2040. The forecast is for just under 39,000 rooms by 2030.

Many of the added rooms will be well out of the price range of those visiting. As of 2021, 75% of branded supply in the region is high-end and luxury.

But average spending by tourists visiting these countries is well below 5-star prices: $2,172 in the United Arab Emirates (UAE); $1,416 in Saudi Arabia; 1702 dollars in Oman.

There is a clear need for budget alternatives, and this is where short-term rentals come into play.

The goals of tourism

Citing the example of Oman, Abdul Sameh Qureshi, Managing Director of The Adroit Agency, said: “Amidst its pursuit of 11 million tourists, diversifying accommodation offerings becomes paramount for Oman. Short-term rentals will play a key role in this.”

Visit Oman has partnered with Under the Doormat Group, a short-term rental technology company, to open up the market to property developers, hospitality companies, SMEs and individually owned properties.

In January 2023, Saudi Arabia approved a bylaw that allows its citizens to stay, host and offer short-term rentals.

This is significant as 58% of Saudis surveyed by real estate consultant Knight Frank chose 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 office in Riyadh. UAE-based property technology company Silkhaus is also preparing to enter the kingdom’s short-term rental market.

“We are already seeing how peak periods affect room availability in the region. This not only represents a significant opportunity for short-term rentals, but also has a positive impact on the real estate sector and job creation,” said Aahan Bhojani, founder and CEO of Silkhaus, a Middle East-based short-term rental platform.

The introduction of a unified Gulf tourist visa by the Gulf Cooperation Council (GCC) countries over the next two years, similar to the Schengen visa in Europe, is expected to extend tourist stays, adding to demand for short-term rentals.

The target is 7% annual growth in inbound travel and 128.7 million visitors by 2030.

“The unified visa is a gateway to a wider range of tourists, potentially increasing the flow of visitors and encouraging a new wave of medium-term residents in Dubai,” Bhojani said.

Pioneering initiatives of the UAE

The UAE is at the forefront of this trend, introducing measures such as the virtual work visa for remote workers – a major attraction for the short-term rental market.

The emirates of Ras Al Khaimah, Ajman and Sharjah are introducing regulatory frameworks that simplify the vacation rental process, expanding the market beyond the busy streets of Dubai.

Knight Frank’s Turab Salem says high hotel room rates and occupancy in the UAE highlight the potential of the short-term rental market.

Salem notes the ease of doing business and the quick setup process for short-term rental companies in the UAE.

Ajman and Abu Dhabi are adapting to the needs of operators and diversifying their short-term rental offerings, including country houses and vacation rentals, to attract a wider tourist base. Ras Al Khaimah, traditionally a weekend destination, is witnessing increased interest in alternative accommodation, symbolized by the announcement of the country’s first casino.

These remote workers

Both Salem and Bhojani highlight the key role of telecommuting and staycations in the continued growth of short-term rentals. They say the UAE’s appeal to remote workers, stability, safety standards and cosmopolitan setting have positioned it as an attractive hub. The introduction of the 5- and 10-year golden residency visas further increased the country’s appeal to high-spending visitors.

The UAE’s decision to align the weekend with Western schedules has also facilitated a smoother experience for digital nomads, facilitating their work-life balance. The country officially abolished 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 the growth of short-term rentals. The emirate was also one of the top-grossing cities for Airbnb hosts in 2022.

From a landlord’s perspective, Bhojani says Dubai has introduced regulations aimed at promoting confidence among potential buyers and foreign investors. “Initiatives such as the introduction of the Golden Investor Residency Visa and enhanced buyer protection have contributed significantly to instilling confidence in the market. These measures together enhance Dubai’s attractiveness as an attractive destination for investment and permanent residence,” he adds.

Global operators and competition

Salem discusses the dominance of global hotel operators such as Marriott, Hilton, IHG and Accor in the traditional hotel business. However, he notes that Airbnb has gained a significant share of the short-term rental market, witnessing more than 40% year-over-year growth.

The entry of major hotel brands into the short-term rental segment is expected to increase competition, especially in key cities, while smaller players find opportunities in secondary destinations.

Many large developers accept the presence of short-term rental operators, says Bhojani. Some developers create in-house property management systems, while others outsource these activities to organizations like Silkhaus.

“Traditional hospitality, exemplified by Marriott, is increasingly recognizing short-term rentals as allies. For example, Marriott’s Homes and Villas section allows guests to book apartments while earning and redeeming points, which shows a growing synergy between traditional hospitality and the booming short-term rental sector,” says Bhojani.

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