Is Airbnb More Profitable than Renting? Airbnb vs Long Term Rental for Dubai Property Investors
Are you wondering “Is Airbnb more profitable than renting?” When investing in Dubai property market, choosing between Airbnb vs long term rental can significantly impact your return on investment (ROI). While platforms like VRBO and Airbnb offer higher income potential for short term rental, traditional long term leasing provides its own advantages.
Ultimately, it’s a personal choice. In this guide, we’ll look into the pros and cons of Airbnb vs long term rental to help you figure out which investment option is the way to go for your property investment in Dubai.
Key Takeaways:
- Airbnb rentals in Dubai can generate 20-40% higher returns than traditional long term rentals
- Long term rentals offer stable monthly income with lower maintenance requirements
- Property location, characteristics and personal involvement significantly impact profitability
- VRBO and Airbnb platforms provide flexible pricing options for short term rentals
- Dubai vacation rental license costs about AED 1,520 with a permit fee between AED 370 – AED 1,270 annually
Short-Term Rental Platforms in Dubai
- Airbnb
- VRBO
- Booking.com
- Local property management websites
Advantages of Airbnb and Short Term Rentals in Dubai
1. Higher Income Potential with Short Term Rental
Owners can generate more income with Airbnb and short term rental in Dubai thanks to higher variables nightly rates and guests turnover.
So how much more ROI?
Here’s what property management companies report:
- 20-30% higher revenue compared to long-term leases
- Up to 40% increased returns during peak seasons
Yes, short term rental tends to yield a higher return, but it also depends on a number of factors, i.e. location, property type, occupancy, and pricing.
Companies like Airdna.co and local property management companies have analytic tools that can help make better and more calculated predictions.
2. More Pricing Flexibility
Unlike traditional rentals, VRBO and Airbnb hosts can adjust rates for:
- High season vs low season
- Weekends and public holidays
- Major events (Dubai Expo, World Cup)
- Extended stay discounts
- Special promotions
With long term rentals in Dubai, rent increases must follow the RERA (Real Estate Regulatory Agency) Rental Index when it comes to renewals. It’s often recommended to use RERA’s calculator to determine if landlords can increase their rents, so there are restrictions.
3. No Annual Commitment
Unlike long term rental, short term rental do not have a 1-year lease agreement. A 12-month notice period is also not required if they decide to sell the property or use it for personal reasons.
More importantly, you can have access to your own property or keep it available for family or relatives visiting.
To help protect hosts, Airbnb and property management companies have their set of rules and vacation rental agreements. This means that if a guest breaks the rules, you can contact Airbnb and the property management companies instead of having a long-drawn-out legal matter.
Disadvantages of Airbnb and Short Term Rentals in Dubai
1. Damages
Common issues with short term rentals:
- Higher chance for damages than traditional renting
- Frequent turnover wear and tear
- Regular maintenance requirements
- Party-related damages (e.g. bridal showers or bachelor nights)
- Furnishing replacement costs
Contrarily, one may argue that guests typically don’t spend so much time in the property. As tourists, they may be out a lot more exploring the city and have less time inside to wear out the property.
2. Higher Expenses & Upfront Cost
While owners may have the potential to bring in more cash, there is also higher cash outflow.
Initial setup expenses:
- DTCM holiday home license: AED 1,520
- Annual permit: AED 370 – 1,200 (depends on property size)
- Professional furnishing
- Photography services
Ongoing costs:
- Management fees
- Utilities bills
- Cleaning services
- Amenity restocking
- Property insurance
For DTCM rules to operate a short term rental: DTCM Guide to Holiday Homes
3. Irregular Income
Typically, the income will be seasonal. It is very common to be completely booked out during the holiday seasons in Dubai, but have less bookings in the summer.
Seasonal challenges include:
- Low summer occupancy
- Competition from hotels and resorts
- Review-dependent bookings (negative reviews can decrease your booking potential)
- Market volatility
The biggest advantage of long term rentals is consistency which offers you protection from market and seasonal fluctuations. You’ll consistently get paid, and have a reliable income, which makes budgeting easier.
Making Your Decision: Airbnb vs Long Term Rental
Take a moment to think about what you want out of your investment. Are you after flexibility and higher potential income, or do you prefer stability and less hassle? Think about what’s important to you when it comes to income predictability and managing tenants.
Here are a few things to consider to get your preferences right between airbnb vs long term rental:
Things to Consider:
1. Is customer service your strength? Airbnb in Dubai works more like a hotel than a traditional lease. If you’re not interested in hospitality per se, managing short term rental may not be for you. It’s probably best to pay a property management company to handle it all.
2. Where is your property location? Is it located in the middle of action like the Palm, Marina or DIFC? Your property characteristics will draw different types of audience. As tourists, guests may want to stay near the Burj Khalifa, whereas someone looking for a long term lease may want a place they can consider their home.
3. Do you live in Dubai? Long term rental is a better option if you are not in the country. You will still need an agent but it will be less work than managing a short term rental. Airbnb is a good option if you live in Dubai and want to manage your own property directly.
4. What is your expectation on rental yield? Are you happy with just 5% or you want more from your investment property? Airbnb in Dubai may require more work, but it may be able to give you a much higher return.
To get an idea of your rental ROI estimates, download our ROI calculators to customize.
As a property investor in Dubai, looking beyond just “is Airbnb more profitable than renting?” can help you make a better investment decision. Success depends on matching your property’s characteristics and your personal management style to the right rental strategy.
There is no one-size-fits-all answer. If you can’t decide between airbnb vs long term rental, try it out. Do it for a year to test both approaches. See which one is makes more sense for you operationally and financially. If VRBO and Airbnb don’t work out, you can always pivot to a long term rental.
Next: How To Find The Best Property Management Companies in Dubai
