Short-term rentals in Dubai are growing in popularity among travellers, with close to 4,200 active listings on Airbnb.com, hitting hotel prices across the emirate, a new report has revealed.

According to property consultancy Knight Frank, Airbnb.com - which allows home owners to rent their space for more budget-friendly prices, was severely inmpacting the local hospitality industry, specifically operators with more affordable rooms, or with fewer facilities.

Although hotel operators were initially dismissive of the holiday home market, over time this view has been abandoned, the report said.

Many operators have since acknowledged the impact that platforms such as Airbnb have had on the hospitality sector and in some markets have even lobbied for protective legislative measures.

Holiday homes dilute the ability of hotels to yield during periods of
peak demand. While hotel room supply is fixed and the incremental
cost of developing supply is very high, the holiday home market can
scale appropriately to demand with negligible marginal costs for
additional supply.

For this reason they restrict the ability of hotels to price aggressively during periods of peak demand and have the highest impact in markets that are heavily seasonal, it said.

From a supply perspective, 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. Where potential weaknesses lie are in the ability of hotels to price during peak periods - this will 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.

Ali Manzoor,  Associate Partner,‎ Knight Frank Hospitality Advisory, said: “One of the core appeals of the short term rental market is not only the product offering, but also the provision of an ‘authentic experience’ in secondary districts which are not commonly visited by traditional tourists. This clearly does not apply to Dubai; Holiday homes in the emirate are largely located on Palm Jumeirah, Dubai Marina, Jumeirah Beach Residences, DIFC and Downtown Dubai – all areas that have high concentrations of hotel supply, which may prove to be problematic for the emirate’s hospitality sector in the long-run.”

Of the 4,200 units available in Dubai, one-bedroom apartments account for 44 per cent of the total supply. - TradeArabia News Service