The increasing allure of holiday homes, especially in Dubai, was one of the important trends affecting the hotel market this year.
Holiday homes have become popular not just with tourists but with expats unable or unwilling to pay a year’s rent in advance.
Combined with an ever-increasing supply of hotel rooms, holiday homes have increased the pressure on prices, particularly in the mid-market range.
Some of the major beneficiaries are homeowners in areas of Dubai, such as Downtown Dubai and Palm Jumeirah, who cash in by letting out their homes.
“There is a growing trend of inbound tourists looking [to] live like a local, meaning they are now more comfortable booking a private residence in a local community with a reputable holiday-home operator,” said Imran Latif, a business development consultant at Hometown, which operates 100 holiday homes in Dubai.
The holiday-homes boom in Dubai began in 2013, when the emirate regulated the market. The sector remains unregulated in the other emirates.
For hotel operators, this competition from an outside source comes as they continue to step up their intramural competition by continuing to add hotel rooms across the country.
In Dubai, 18 new hotels added 6,733 rooms during the first 11 months of the year, according to consultancy JLL. About 40 per cent of these were in the luxury category, including Westin Dubai, Wyndham Dubai Marina and Jumeirah Al Naseem. Some of the other major hotel openings include Al Habtoor hotel complex on Sheikh Zayed Road that includes the 254-room St Regis Dubai, the region’s largest Westin with about 1,000 rooms and the 356-room W Dubai – Al Habtoor City. The four-star, 320-room Metropolitan Hotel Dubai opened last month. On City Walk Dubai, Marriott opened its La Ville Hotel and Suites with 88 rooms and 68 apartments this month.
In Abu Dhabi, five hotels opened up to November, which added 1,296 rooms. Of these 51 per cent were in the luxury category, including the Four Seasons Al Maryah Island, Jannah Hotel’s Al Seef Resort by Andalus and Marriott Hotel Downtown.
“If the wider market conditions do not change considerably over the next 12 months, it is unlikely that average rates of hotels will rise over the next year,” said Ali Manzoor, an analyst at consultants Knight Frank. “This is particularly true for Abu Dhabi, which has had a historical dependence on oil-related corporate tourism and a significant amount of anticipated supply in the pipeline.”
Room rates in Dubai fell by 10.5 per cent in the first 10 months this year, compared with the same period last year, according to JLL. In Abu Dhabi, the average rate decline was 9.9 per cent for the same period.
Mr Manzoor said the growth in the number of holiday homes will be modest next year.
Dubai Tourism said it had approved 1,805 holiday-home units up to October. This year, it also allowed private homeowners to apply for a holiday-home permit and start leasing their properties directly.
Between May, when the regulations were updated, and October, 109 homeowners submitted applications for a holiday-home permit, of which 39 were approved. They join 78 previously approved holiday-home operators in Dubai.
In Dubai, homeowners can only rent out entire units. Room renting is not allowed.
The stock of holiday home units in Dubai stands below 5 per cent of total hotel room supply, making the effect less severe than global markets, according to consultancy Knight Frank.
“The impact on the hotel sector is more prevalent in the budget sector and local brands, [as] holiday homes cannot compete with the facilities and services delivered by some of the bigger hotels like Jumeirah Beach Hotel or even the exuberance of the Burj Al Arab,” Mr Latif said.
The biggest effect of the holiday-home sector was to restrict the ability of hotels to increase rates during peak demand, according to analysts. The competition with hotels is mostly felt in areas such as Dubai Marina, Palm Jumeirah, Jumeirah Beach and Downtown Dubai that have a large number holiday homes on offer.
About 83 per cent of the approved holiday homes are rated standard and 17 per cent deluxe, according to Dubai Tourism in October.
The holiday-home regulations are a part of the emirate’s strategy to diversify room offerings to house 20 million visitors a year by 2020, the year when the emirate will hold the world expo.
On the economic front, the US Federal Reserve’s decision on December 14 to increase its benchmark rate looks like more bad news for UAE hotel operators. The rate hike has lifted the US dollar. That means that hotel rooms in the UAE, where the currency is pegged to the dollar, are more expensive for visitors whose national currencies are not dollar-pegged.
Most analysts expect the dollar to keep on rising in 2017.
“It is likely that the increased supply will apply downward pressure on rates to a greater degree than any anticipated increase in the value of the dollar against the currencies of the major source markets for the UAE,” said John Podaras, a partner at the hospitality consultancy Hotel Development Resources in Dubai.
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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COMPANY PROFILE
Name: Kumulus Water
Started: 2021
Founders: Iheb Triki and Mohamed Ali Abid
Based: Tunisia
Sector: Water technology
Number of staff: 22
Investment raised: $4 million
UAE currency: the story behind the money in your pockets
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Director: Jared Hess
Starring: Jack Black, Jennifer Coolidge, Jason Momoa
Rating: 3/5
NO OTHER LAND
Director: Basel Adra, Yuval Abraham, Rachel Szor, Hamdan Ballal
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In numbers: PKK’s money network in Europe
Germany: PKK collectors typically bring in $18 million in cash a year – amount has trebled since 2010
Revolutionary tax: Investigators say about $2 million a year raised from ‘tax collection’ around Marseille
Extortion: Gunman convicted in 2023 of demanding $10,000 from Kurdish businessman in Stockholm
Drug trade: PKK income claimed by Turkish anti-drugs force in 2024 to be as high as $500 million a year
Denmark: PKK one of two terrorist groups along with Iranian separatists ASMLA to raise “two-digit million amounts”
Contributions: Hundreds of euros expected from typical Kurdish families and thousands from business owners
TV channel: Kurdish Roj TV accounts frozen and went bankrupt after Denmark fined it more than $1 million over PKK links in 2013
Brief scoreline:
Toss: South Africa, elected to bowl first
England (311-8): Stokes 89, Morgan 57, Roy 54, Root 51; Ngidi 3-66
South Africa (207): De Kock 68, Van der Dussen 50; Archer 3-27, Stokes 2-12
ICC T20 Rankings
1. India - 270 ranking points
2. England - 265 points
3. Pakistan - 261 points
4. South Africa - 253 points
5. Australia - 251 points
6. New Zealand - 250 points
7. West Indies - 240 points
8. Bangladesh - 233 points
9. Sri Lanka - 230 points
10. Afghanistan - 226 points
Results
United States beat UAE by three wickets
United States beat Scotland by 35 runs
UAE v Scotland – no result
United States beat UAE by 98 runs
Scotland beat United States by four wickets
Fixtures
Sunday, 10am, ICC Academy, Dubai - UAE v Scotland
Admission is free
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Power: 218hp (Cooper and Aceman), 313hp (Countryman)
Torque: 330Nm (Cooper and Aceman), 494Nm (Countryman)
On sale: Now
Price: From Dh158,000 (Cooper), Dh168,000 (Aceman), Dh190,000 (Countryman)
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The specs
Engine: 4.0-litre flat-six
Torque: 450Nm at 6,100rpm
Transmission: 7-speed PDK auto or 6-speed manual
Fuel economy, combined: 13.8L/100km
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