A Breakdown of Short Term Rental Management Fees in Dubai
Shosty's performance-based approach will Earn You More Too!
The benefits of hiring a Short Term Rental Management Company in Dubai
Handing over an asset that's worth several millions Dirhams is an important decision.
So why hire a short term rental company? How do you get a handle on the various fees associated with short term rental management. Well you're in luck - we've highlighted below the many fees and considerations of running a short term rental property in Dubai.
But first, let's raise the topic of 'passive income'. That's likely why you purchased your property in the first place, right?
Many property investors make the choice to manage their short term property themself, only to discover after a few late night check-ins and untimely maintenance issues, that they're in over their heads. The hum drum of daily operational realities like - guest communication, cleaning and laundry, maintaining online profiles and dealing with maintenance issues - can quickly feel like a full time job.
For this reasons, hiring a short term property management company often becomes a logical decision.
You did say the goal was ' passive income, right?
Shosty's short term management services
Once you've decided that a management company is required, it's important to develop an understanding of the various fees that are involved. The first, and arguably most important, is the commission your management company charges.
Below is a list of the services Shosty provides, all of which are included in our performance-based fee structure.
Interior Design & Outfitting
Styling and Set-up*
Tech, Apps & Admin
Online Profile Set-up
Owner App & Dashboard
Guest Servicing & Communication
24/7 Guest Communication
High Quality Guest Reviews
Turnover Ops & Maintenance
Repairs and Maintenance
Managment of Subcontractors
*Shosty reserves the right to charge fees against some properties types / sizes
Shosty's short term rental management fees: a performance-based structure
All the 'Services' listed in the previous section are included within our short term rental management fee. But by now, you might be wondering what exactly we mean by a 'performance-based fee structure'. So here goes.
The very first step in any Property Management / Owner relationship, is the projection of earnings (i.e. rental income) the Owner will receive. Effectively, the property management company provides a 'rental income estimate' or 'target'.
Below is an example of one we've provided:
Here's the problem.
Most management companies charge a fixed percentage fee, regardless of whether they fall short, meet, or beat their 'target'.
Doesn't seem ideal, right?
That's why we've developed a performance-based fee structure that ties the commission percentage we charge, to the amount of revenue we earn on your behalf. Shosty's fees begin at 15% and cap-out at 20%.
The mechanics can seem a little tricky at first glance, which is why we created a 'white paper' that details the process.
You can download the Shosty Short Term Rental Management Fee 'White Paper' here:
Shosty's Short Term Rental Property Management Agreement
Reading through copious amounts of legal jargon may not be your idea of entertaining weekend reading. We joke!
But there are some interesting points about the mechanics of a short term rental arrangement in our Management Agreement, so similarly, we've made it available for download here:
Airbnb Management Agreement and Fees Dubai
Airbnb host fees in Dubai are typically 15%, which is charged on the Nightly Rate and the Cleaning Fee. Without making any legal declarations, you may find conflicting information via Google search because of the way they frame it in their Terms and Conditions.
But the fact remains that Airbnb pockets about 15% of every booking.
Other platforms like booking.com, VRBO (formerly HomeAway), and Expedia have similar commission schemes.
Pro Tip: Some Short Term Rental Management Companies will calculate their commission including the Airbnb fees. By virtue of doing so, they can quote a smaller "management fee percentage", while collecting far more in fees.
Be mindful of this, and ensure you have a deep understanding vis-a-vis how your Management Company calculates its management fee!
Management Fees for Holiday Rentals - 'Pass-through' Fees
There are a number of costs that a short term management company collects and pays on your behalf. Shosty refers to these fees as 'Pass-through fees", as they are collected and paid out on your behalf with no impact to management fees or rental income.
Below is a list of these fees, along with a brief description of each:
Cleaning Fees: Cleaning fees include the cost to clean and inspect your property after each and every turnover. These fees also include the cost to launder linens.
DTCM Tourism Fee: Dubai Tourism & Commerce Marketing (DTCM) charges a per night, per bedroom fee. The schedule of fees can be found in our Management Agreement, if your interested. Again, these fees are paid for by the guest, and 'passed-through' to DTCM in the form of a monthly payment.
VAT: VAT is also levied on every reservation and is paid for by each guest. VAT is also 'passed-through' to the UAE Federal Tax Authority (FTA) on your behalf. In most cases, you'll have no obligation to register with the FTA. However, we do recommend you consult a certified VAT expert if you have any questions or concerns.
Annual DTCM Unit Permit Fees
In order to register your property with DTCM, there is an Annual Unit Permit fee. This fee is paid for by the owner / investor once / year. The fee is minimal, equating to the following annually, per bedroom: Studio / 1 Bedroom: 370 AED, 2 Bedroom 670 AED, 3 Bedroom 970 AED, 4 Bedroom 1,270 AED etc.
While the Fee is paid for by the owner / investor, the admin will be completed by your Holiday Home operator.
Repairs & Maintenance, Pool and Gardening Fees
Shosty has an in-house team that is able to fix minor issues around the property. You won't every get charged for changing lightbulbs, fixing minor plumbing issues, or changing the ever-leaking bidet hose in you property.
However, for bigger jobs like replacing a busted water heater, Shosty has a partnership with a professional maintenance contractor. In instances where larger maintenance issues arise, we'll do everything in our power to notify you of any job that exceed 1,000AED. In an emergency, we may be forced to take action, but we'll always try and contact you first. Additional details can be found in our Management Agreement, which is available above for download.
Gardening fees mostly aren't required, given most short term rentals are in one of Dubai's many skyscraper. However, if you own a Villa and have gardening requirements, we're happy to coordinate, pay for and deduct these fees from your monthly statement (Villas tend to perform extremely well, by the way),
Utility Fees / Bills
Unlike long term tenancy agreements, the Owner is responsible for paying DEWA, Cooling (if applicable) and Du / Etisalat. The owner would be responsible for 'connecting' these services, but we're happy to help facilitate as we're very familiar with the process. Shosty is also happy to pay for these bills on your behalf and deduct it from your monthly payout. All Bill Payments will be concisely detailed in your monthly statement.
Building Services Fees
Because these fees are the owners responsibility in both long term and short term rental arrangements, Shosty is unable to pay these fees on your behalf. Since the Service Fees will be in the property owners name, there's limited opportunity for us to pay for them even if we wanted to.
When choosing a short term rental company, it is definitely advisable to take the time to 'dig into' the management company you're partnering with.
Like most things, the details really matter. If you take the time to ask the right questions, you could save (or make) yourself a lot of money.
A few things to watch-out for:
1. Bigger, isn't always better
One of the most common calls we get from prospects, goes something like this:
"We've been doing short term rental for 3 or 4 years. It started out great, but over the last year or two, things have really gotten bad."
Here's the reality. Short term rental is big business in Dubai, with it being one of the most visited cities in the world. Several Management Companies have received outside investment, and quite frankly have grown too fast.
At the end of the day, running a short term rental business can be extremely challenging operationally. We like to say its 'like running a hotel that has rooms in every building in Dubai".
The point being, just because an operator has a large portfolio of properties, doesn't mean they're run well!
2. Review, Reviews, Reviews: If you can do nothing else, be sure to check the reviews!
Check the management company's reviews on Airbnb and Google. It is by far the best indicator of what to expect from your management company. Lucky for you, reviews are hard to fake and / or manipulate.
You can check out ours here:
Please note, Quintessential Quarters is our "Guest-facing" sister brand: