Hotel-style residential properties enjoy higher occupancy as transients descend on the World Expo host city
Serviced apartments are experiencing a prolonged spell of demand in Dubai as developers seek to capture a growing transient populace in the emirate.
Hotel apartments enjoyed occupancy rates of more than 83 percent last year, compared with 74.1 percent in 2012, Gulf News reported, citing data from the Dubai Statistics Centre. The city-state offered 25,000 serviced units last year, representing a hefty 25 percent of the hospitality supply, according to Jones Lang LaSalle MENA.
Dubai highly anticipates plenty of tourism in the run-up to the 2020 World Expo, with the United Arab Emirates as host country. Large families from Gulf Cooperation Council (GCC) countries, along with corporate expatriates and tourists, are expected to flock to the city in the next few years.
“Dubai is dominated by an expat population of which many people are here on a short to mid-term basis,” said Marko Vucinic, acting head of hotels and hospitality group for JLL MENA. “A serviced apartment allows new arrivals to the city to find a place to stay prior to having completed any administrative formalities, such as visa arrangements, which would be required to find a residence in the city.”
As an asset class, serviced residences have become quite palatable, offering returns of as much as 8 percent, said Ranju Kapoor, general manager of real estate firm Hamptons International. “Attractive returns partnered with hassle-free ownership, effortless management and Dubai’s status as a global hub for tourism and leisure are driving the demand for serviced residences.”
And not just any serviced apartment — guests and home buyers increasingly prefer the branded ones. A wave of serviced apartments tied to world-renowned brands have penetrated the city-state: Armani Residences, The Kempinski, Anantara Residence, and Bvlgari Residences, among others.
“The confidence associated with buying into a global brand is a key factor for investors, as purchasing a unit within the development not only creates an impression of exclusivity, but also augments the assurance on the delivery of the unit and its management structure,” Filippo Sona, director and head of hotels in Colliers MENA, told Gulf News.
SKAI, one of the first developers in Dubai to allow investors to buy a hotel room, reported that the company earned AED2.4 billion (USD653 million) in sales of residential units and hotel rooms within a few months of launching the Viceroy Palm Jumeirah Dubai in 2013. The project, run by Viceroy Hotel Group, opened in March.
“The hotel rooms are put into a pool and leased back in exchange for 40 percent of the room revenue,” Kabir Mulchandani, group CEO of SKAI. “Resales, particularly on the residential side, have been active since 2013. Residential resales are currently trading at around AED3,200 per square foot depending on the unit type.”
Unlike hotels, hotel-style apartments are known to be less impacted by seasonality, Vucinic said. “Serviced apartments in the purely operating model [non-sales] are highly complementary with the hotel components, as they target a different type of guests, mainly mid-term and long-term contract, and enable developers to differentiate their overall product offering.”