Tourism boom drives short-term rental conversions as demand skyrockets
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The prospect of higher returns on investment is pushing investors to switch their properties to short-term rentals, industry experts reveal.
Dubai’s tourism sector is driving a surge in demand for short-term rental properties, prompting a wave of conversions by landlords and investors seeking to capitalise on the lucrative market, experts told Arabian Business.
As the city becomes one of the most visited tourism destinations in the world, savvy real estate players are pivoting towards vacation rentals, lured by higher yields and the flexibility to tap into peak seasons.
“In 2024, Dubai has already witnessed a significant growth in volume in short-term rental accommodation available compared to 2023 and this trend is expected to continue,” said Louise Heatley, owner and Managing Director of Exclusive Links Real Estate Brokers.
“The increase in short-term rental accommodation, along with rental increase caps on long-term rentals, has encouraged more homeowners to enter the short-term rental market.”
The demand drivers are multifaceted, according to Heatley, ranging from the emirate’s appeal as a prime destination to flexible visa schemes attracting extended stays. “Government visa initiatives are encouraging more international interest. The quality of living in Dubai has attracted a new stream of predominantly European investors who are looking to utilise their properties on a permanent or temporary basis, a convenience and flexibility only short-term letting will provide,” she added.
This new wave of investors predominantly includes British nationals, who have reportedly snapped up the majority of properties in Dubai during the first quarter, outpacing traditionally more dominant investors from India and Russia – a trend confirmed by several experts in interviews with Arabian Business earlier this month.
István Juhász, CEO and Co-Founder of Shard, a co-ownership platform, said that the city’s real estate market is experiencing a “remarkable year across nearly all market segments.”
“Dubai’s status as one of the most popular tourist destinations significantly boosts the demand for short-term rentals,” he added.
Higher returns push investors to switch properties to short-term rentals
Switching to short-term rentals extends beyond meeting tourist demand, experts said.
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“While short-term leases typically generate 20-25 percent more income over a year compared to long-term rentals, based on a minimum of 80 percent occupancy, we are already seeing the annual income from short-term leases lessen due to the higher rental prices being achieved today,” said Heatley.
Abdullah Alajaji, Founder and CEO of Driven Properties, highlighted the financial incentives driving the trend. “Short-term rentals typically yield more income compared to long-term leases, especially during peak season. Another benefit of these rentals is that they offer owners more control over their properties.”
As the short-term rental market heats up, certain property types and locations are emerging as clear frontrunners.
Properties in prime areas like Downtown Dubai and Palm Jumeirah yield significantly better ROI than long-term rentals, according to Juhász and Alajaji, and have emerged as “top picks for tourists” – especially those visiting Dubai for the first time.
“The enticement of higher returns linked to short-term rentals is alluring for investors, making it a compelling investment strategy in Dubai’s dynamic real estate market,” said Juhász.
Entire villas are also in high demand, particularly among larger groups and families. “Large villas, especially those with private pools and plenty of space, are favorites among families or groups traveling together. Luxurious villa communities in areas like Emirates Hills, Dubai Hills or Jumeirah appeal not only to discerning travellers but also locals seeking a lavish staycation,” Alajaji added.
“We need to acknowledge that guests booking short-term properties are not just on vacation but also business travelers, and therefore properties in areas known for their affordability, amenities, and excellent transport links, as well as those offering a luxury lifestyle, tend to be the most appealing for short-term rental conversions,” said Heatley.