HOLIDAY HOMES – A SUSTAINABLE BUSINESS MODEL FOR QATAR?

Alexander Hartmann
Managing Partner
The Loft Bureau Real Estate

The past few years have seen an enormous growth in demand for holiday homes. Covid-19 and its related consequences such as nationwide lockdowns and travel restrictions have motivated many of my clients to acquire a holiday home inside Qatar. While for a long time The Pearl Island was the preferred location for holiday homes, investors are increasingly looking at other areas especially in the upcoming new districts of Lusail.

But holiday homes are not only in demand from self-users. More and more traditional real estate investors who, considering a large oversupply in the residential market during the years 2020 and 2021, suffered from decreasing cash-flows, are acquiring holiday homes to benefit from an anticipated increase in demand in this sector.

Despite the official real estate stock for the World Cup™ which was arranged by the Supreme Committee for Delivery and Legacy, the stock of these holiday homes is the much-needed additional supply of accommodation for the country’s upcoming mega-event. According to publicly available sources Qatar is expecting more than 1.2 million of international visitors for the one-month tournament. For various reasons many of them will prefer to rent a holiday home rather than to stay at a hotel.

It is obvious that the local government had to implement new regulations for the holiday homes market to protect customers and provide a sort of homogenous cluster of holiday homes. In short, the Qatar Tourism Circular no. 1 of 2021, dated 29 August 2021, provides:

• Standalone villas in any area in Qatar may qualify to operate as holiday homes

• Apartments/flats located in “tourist areas” (as defined in the Decision of the Minister of Economy and no. (106) of 2017) may qualify to operate as holiday homes. • Natural or legal persons wishing to engage in holiday home rental activities must first obtain a licence from Qatar Tourism.

• The licence may be obtained by property owners, operators and persons with legal status to use the unit.

• Applications shall be submitted online. • Once the licence is granted, it will be valid for five years and renewable for another five years subject to ongoing compliance.

• Every licensee has to adhere to the list of service and quality requirements as set out in the holiday home Circular, e.g. (i) offering 24/7 emergency contact services for guests; (ii) maintaining and observing a guest complaint policy; (iii) a detailed list of amenities, depending on the classification of the relevant holiday homes unit; (iv) promptly handing keys over to guests on the agreed date and time; and (v) honouring all terms in the relevant holiday homes rental contract.

• The maximum lease term for a holiday home is 30 days.

There are a few more minor aspects which one would have to consider before operating a holiday home such as the right for the Qatar Tourism Agency to send either their own employees or appoint third parties to inspect the property.

It appears that the professional management of a holiday home can be very time consuming and requires a lot of effort from the property owner. Therefore, we from The Loft Bureau recently established a professional holiday home department which does not only provide property management services but also professional advice on a cost-sensitive interior design and professional marketing services through various channels. Investors who previously acquired properties for the sole purpose of renting the unit as a holiday home especially during the tournament will find a one-stop-shop solution with the agency.

Hence a question remains, how is Qatar going to change after the tournament? Well, from my conversations with many landlords and business owners in the recent past, I know that people look at this topic controversially. In my opinion, the future for Qatar shines bright. Yes, there will be an exodus of white-collar workers in the first two years after the tournament. Yes, there will be a sharp increase in the stock of available properties and yes, rents for long-term contracts will decrease again. However, we should see the first football World Cup™ to be held in the Middle East as a “marketing springboard” that hopefully will help to attract foreign investors, international companies, and drive tourism.

Qatar has always been a preferred destination for global travellers. The upcoming tournament is a great chance to show football fans what Qatar has to offer, and I am convinced that we will see many fans returning to Qatar in the future. With regards to tourism infrastructure development the government’s plan is to position Qatar as a major destination for sporting events and meetings, incentives, conferences, and exhibition. That comes in addition to the efforts to market the destination for family vacation, adventurous holidays, romantic getaways, and stopover breaks.

I expect that many of Qatar’s tourists will follow the international trend and prefer staying in a holiday home rented via AirBnB or Booking.com rather than staying in a hotel room. Global trends suggest that the combined revenue from vacation rentals this year will amount to 75.85 Bil. USD with a projected growth rate of 9.16 percent per annum until 2026 (source: statista.com). The same source is projecting 891 mil users of holiday homes by 2026 and in the same year 74 percent of total revenue will be generated through online sales. Consequently, a huge number of business and leisure travellers coming to Qatar will book a holiday home for their stay if they can find a suitable option.

As the international holiday homes market develops at an ever-increasing rate, more operators are entering into this market including luxury hotel operators and companies that offer their specialised services to landlords. For instance, in 2018 the famous hotel operator Marriott International introduced the business line “Homes & Villas” to cater to this specific sector. Travellers today can find a large variety of holiday homes when looking into a potential location to spend their holiday, this is especially the case in the big international hubs. A look at the situation in Dubai’s holiday home market can be useful to understand customer’s expectations.

In Dubai travellers can find all kinds of holiday homes, from the average studio to an ultra-luxury mansion. There are offers in the market with private chefs, butler services and high-end toiletries. Prices vary between 150 USD and 20,000 USD per night. According to market finding published by the international real estate agency Knight Frank, in 2019 in Dubai’s holiday home market there were 10,766 active listings out of a total of 20,395 properties which have been registered on the Airbnb platform. Of the 10,766 active listings in 2018, 61 percent were entire homes or apartments, 31 percent were private rooms and the remaining 8 percent were shared rooms. At that time Dubai’s holiday home market accounted for 2 percent of Dubai’s total households, the highest proportion of all other key global hub cities. The current market situation in Dubai doesn’t suggest that the numbers decreased over the past two years. Rather they must have improved further due to the restrictive COVID-19 measures in many of the world’s main cities and the current war in Eastern Europe. For many Dubai has become a safe halfway house for businesses to operate. From our own research I know that a lot of high-net-worth individuals are moving their business and bringing staff members to operate out of a villa in Dubai, besides the influx of Russian businessmen holidaying in Dubai and investing there. With Qatar’s ambitious plans to become a global city soon, landlords in Qatar must understand that they have to offer an international standard to an international clientele. Therefore, they should consider appointing a professional management company to operate the unit on their behalf and will have to frequently upgrade their holiday home. That way they will be able to operate successfully in this segment in the long run. From my personal experience I know that an upgrade of the bathrooms and attractive furniture (not necessarily branded furniture) can do wonders!

We at The Loft Bureau Real Estate are prepared to support our clients all the way if they opt to rent their property in this promising high-yield market. A team of a dedicated property manager, interior designer, accountant, and marketing executive is available to help every landlord to maximise the return from his or her property.

This article was published as part of the eighth edition of Property Finder Qatar’s Trends Report.