Dubai holiday rental revenue falls 46.5%, but returns beat long-term rentals

Dubai’s short-term rental market experienced one of its toughest quarters on record in the second quarter of 2026, with citywide Revenue per Available Room (RevPAR) falling 46.5% year on year following the regional disruption in March.

Despite the sharp decline, professionally managed holiday homes continued to generate stronger returns than traditional long-term rentals, according to the inaugural UAE Short-Term Rental Index by First Class Property Management.

One-bedroom short-term rentals generated an average gross yield of 7.2%, compared with 5.2% for long-term rentals, making them about 1.4 times more profitable on a like-for-like basis.

The findings suggest that while market-wide performance came under pressure, professionally managed holiday homes remained relatively resilient by adapting to changing guest behavior and shifting demand patterns.

“Q2 tested every operator in Dubai’s short-term rental market and demonstrated why greater transparency and reliable benchmarks are needed,” said Luis Santos, co-founder and managing director of First Class Property Management.

“Real estate has benefited from institutional market reports for decades, but short-term rental data has remained fragmented until now. The launch of the First Class UAE STR Index marks a step toward creating greater visibility for investors, operators and stakeholders across the sector.”

The report identified the neighborhoods offering the strongest returns for investors. Dubai Production City recorded the highest gross yield at 10.8%, followed by Jumeirah Village Circle at 8.5%, Jumeirah Lake Towers at 8.2%, DAMAC Hills at 7.6% and Dubai Creek Harbour at 7.5%.

Another defining trend was the growing importance of longer stays. Booking windows across the market compressed to just two days, while nearly 70% of bookings within First Class Property Management’s portfolio were for stays of 29 nights or longer, helping stabilize occupancy during a volatile period.

According to Santos, the trends reflect a maturing market in which performance is increasingly driven by professional management rather than simply adding more properties.

“While the March disruption impacted tourist demand and pushed occupancy lower, demand did not disappear; it shifted,” Santos said. “We are seeing UAE residents and business travelers increasingly turn to flexible monthly rentals, while professionally managed properties have been able to adapt quickly through smarter pricing strategies, longer-stay bookings and stronger operational efficiency.”

“The recovery is already underway, and as Dubai enters its next growth phase, investors will increasingly look beyond supply growth and focus on quality, resilience and experienced operators,” he added.

The report identified infrastructure projects, including the Dubai Metro Blue Line and the expansion of Dubai South, as long-term catalysts that could reshape demand across emerging submarkets and create new opportunities for investors as the market enters its next growth cycle.