How to Start Holiday Home Business in Dubai - Case Study

Welcome to the world of holiday home rentals business! Have you ever dreamed about owning your own slice of heaven in the vibrant city of Dubai and turning it into a profitable business? According to an article published by Gulfnews, Dubai has over 25000 registered holiday homes with 80% occupancy rate. In this blog, we will guide you on a journey through the practicalities of setting up a vacation home rental business or Airbnb business in Dubai.

I believe it will be useful to walk you through our previous success story. This account revolves around the process of setting up a lucrative holiday home business in Dubai for one of our esteemed clients, Mr. Ahmed. Before delving into the journey, let's familiarize ourselves with a couple of important points.

Understanding Holiday Homes

Holiday homes, often known as vacation rentals, are fully furnished properties, such as apartments, cottages, or villas, rented to tourists and travelers on a short-term basis. These homes offer a "home-away-from-home" experience that many travelers prefer over traditional hotels due to the added privacy, more space, and personal touch.

Profitability in Holiday Homes 

Let's talk numbers. Suppose Mr. Ahmed's property which is located in Dubai Marina can accommodate four guests and he charges AED 800 per night. Assuming an average occupancy rate of 75% (which is quite feasible considering the touristic appeal of Dubai), he would earn about AED 18,000 per month. After accounting for expenses like cleaning, maintenance, and utilities, let's say AED 3,500, he'd still be left with a substantial profit of around AED 14,350 per month. That's AED 172,200 per year from one property!

Now, let's delve into the actual process we undertook for Mr. Ahmed's property registration as a holiday home in Dubai.

1. Understanding the Market Landscape

Our client, Mr. Ahmed wanted to turn his beautiful property in the heart of Dubai Marina into a vacation rental. The first thing we did was conduct a thorough market analysis. We researched property values, tourist trends, and competition within the area. The data confirmed our initial assumption: his centrally located property would indeed be a desirable destination for visitors to the city.

2. Securing the Necessary Legal Framework

Understanding that Dubai has strict regulations around vacation rentals business, our immediate next step was to ensure compliance with all legal requirements. The process involved two key steps:

• Obtaining a trade License from the DED (Department of Economic Development): We compiled all the necessary documents required by the DED and submitted a comprehensive application on Mr. Ahmed's behalf. This license ensured his business was recognized by the state and allowed to operate legally.
• Acquiring DTCM (Dubai Tourism and Commerce Marketing) Certification: The next step was to certify the property as a vacation home. We ensured that Mr. Ahmed's property adhered to all standards set by the DTCM, then submitted the application. Upon successful verification, the property was approved as a certified holiday home.

We have drafted one separate article on how to get DTCM permit for holiday homes in Dubai. 

3. Understanding Taxes in Holiday Homes Business

A key component in planning a profitable holiday home business lies in understanding the taxation structure in Dubai. Here's a breakdown of the various fees and taxes related to holiday homes in the region:

Restaurants, hotels, hotel apartments, resorts etc. in the UAE might charge one or more of the following taxes:

• Destination Fees: This is a fixed charge of AED 15 per night, which goes directly towards promoting tourism in the city.
• Tourism Fees: These are levied at a rate of 6% of the rental value. This fee contributes to the services and infrastructure that make Dubai a global tourist hub. In Dubai, a 'Tourism Dirham Fee' is levied on hotel rooms. This fee is charged per room, per night of stay, up to a maximum of 30 consecutive nights. Depending on the classification or rating of the hotel, the fee can range from AED 7 to AED 20.
• Municipality Fees: These are charged at 4% of the rental value. This fee funds the local government's services that keep the city clean, safe, and functioning efficiently.
• Service Charges: These can be set according to the level of services provided, typically around 10% of the rental value. Service charges cover the costs of additional amenities or services you provide, such as cleaning, maintenance, or concierge services.
• VAT (Value Added Tax): VAT is charged at 5% of the combined rental and service charges. It's a consumption tax that guests pay on their use of goods and services.

All these fees and taxes are important considerations when setting rental rates. It's crucial to ensure that all costs are covered, and a profitable margin is maintained.

4. Listing the Property

After securing the DED license and DTCM certification, we moved onto marketing the property. We created a comprehensive listing on Airbnb, ensuring that the property's descriptions, photographs, and amenities were attractive and accurately represented. Remember, without a valid DED license and DTCM certification, this step would have been illegal, potentially leading to significant fines and legal complications.

5. Implementing Best Practices

To ensure the long-term success of Mr. Ahmed's holiday home rental, we shared with him some best practices we've discovered from our extensive experience:

• Maintaining the Property: We stressed the importance of keeping the home clean, comfortable, and in top condition to ensure positive reviews and repeat bookings.
• Being Responsive: Quick responses to inquiries and problems can significantly improve guest satisfaction.
• Staying Competitive: We provided tools and strategies for keeping an eye on market trends and adjusting prices as needed.
• Offering Extra Amenities: We suggested that Mr. Ahmed offer amenities such as fast Wi-Fi, a fully equipped kitchen, and a guide to local attractions, all of which can significantly improve guest experience and set the property apart from the competition.

Now, Mr. Ahmed is running a successful holiday home rental business in Dubai, and his property is booked solid for months to come. I hope this step-by-step guide provides a clearer picture of how we can help our next client achieve the same success whether with own property or subletting airbnb.

Remember, our role as consultants is not just about obtaining a license or listing the property; it's about setting up our clients for long-term success in their holiday home rental business. I look forward to working with you on our next project.

Contributed by: RAS Corporate Advisors

This enlightening article has been contributed by RAS Corporate Advisors, a seasoned firm with over 12 years of hands-on experience in guiding entrepreneurs to start, maintain, and grow their businesses in Dubai, UAE. RAS Corporate Advisors' deep understanding of the local business environment, combined with their extensive expertise in various sectors, provides valuable insights for anyone aiming to navigate the dynamic landscape of business in Dubai. Their practical advice has proved instrumental in many business success stories like Ahmed's.