Being at home with the short-rental market in Saudi Arabia
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Last month, property owners in Saudi Arabia were delighted with the announcement of a new bylaw that allows citizens to operate Airbnb-style rentals. This development is driven by the Kingdom’s ambitious plans to attract 100 million visitors annually by 2030, marking a significant investment into the country’s future.
The setup is simple. Soon, a new portal will be launched where citizens can apply for a permit to rent out their property and once approved, it will be advertised through an official tourism service provider.
But what is the potential of the short-term rental market in the Kingdom, and will it be profitable for landlords?
From a consumer point of view, there are many groups to whom this will appeal directly. For example, in recent years, Saudi Arabia has launched several megaprojects such as the futuristic city NEOM, AlUla and The Red Sea Development, resulting in an influx of consultants, investors and expat workers from overseas, creating a surge in demand for places to stay.
It’s not enough to offer only hotels and long-term rentals in 2023. Accessible accommodation options are paramount to an expat’s needs, whether as a family, a couple or an individual. The short-term rental market will offer them the flexibility and choice they seek. In contrast, their options have been more limited previously, making it an expensive process and a risky commitment if on a short-term visa or contract.
Live like the locals
Then there are the tourists. This is a vast market, given the growth plans of Vision 2030 and one which is a perfect fit for an Airbnb-style model. The short-term rental model worldwide, not just in the region, is about the visitor feeling a deeper connection to the place they are visiting than if they stayed in a hotel. It’s about finding hidden gems that only the locals know about and experiencing “real life” in the destination.
If staying in someone’s home, the visitor immerses themselves in that community and benefits from their host’s local knowledge. However, if staying in an investor’s property, they might enjoy a bigger breadth of options, for example, choosing an offbeat location over staying in a city hotel or resort – again making them feel more connected to the place they are visiting.
Looking to Dubai for inspiration
Saudi Arabia is undoubtedly looking to emulate Dubai’s success in this market.
Since the emirate started to allow short-term rentals in 2016, there has been massive growth in the sector, driven by Expo 2020 and the steady growth of tourism. COVID-19, of course, had a devastating effect on travel and tourism, but during the bounce back, prices of hotels have gone through the roof — as have flight costs — making a short-term rental model a much more attractive and cost-effective option for many visitors.
Vision 2030 at the heart of everything
Vision 2030 will transform and develop almost every area of the Kingdom’s economy and society as it moves away from relying solely on oil to drive its success. This will undoubtedly make it a much more appealing prospect for investors and tourists alike, with plans for more accessibility to jobs, entertainment, accommodation, recreation and everything in between.
The vision looks to maximize the potential of its location as the Land of the Two Holy Mosques, the most sacred sites on earth, and the direction of the Kaaba or Qibla while striving to create a more diverse and sustainable economy and build the country’s role as an integral driver of international trade, connecting three continents: Africa, Asia and Europe.
What is next?
With the news of the short-term rental market opening up, landlords and property owners will no doubt be thinking about what this means for them in the future. They will need to work on their strategy, pricing, and model, which can all be done with the help of a management company. We are already starting to see such properties come into the market along with inquiries, and we are anticipating steady growth over the next couple of years.
There is certainly no doubt that this is a hugely exciting development for Saudi Arabia and will help significantly to hit those tourism targets outlined in Vision 2030.
• Anna Skigin is the founder of Frank Porter.
