Hotel reforms in Dubai: Setting the stage for 2020

Known globally as both a business and tourist destination, Dubai is home to over 80,000 usable hotel rooms and has an average occupancy rate of 76%, the highest occupancy rate of any city in the Middle East. Dubai’s successful bid for the world expo trade convention in 2020 (Dubai Expo 2020) is expected to generate significant economic benefits and attract more than 25 million visitors.

While Dubai is already home to numerous hotels, the Dubai Department of Tourism and Commerce Marketing (DTCM) estimates approximately 45,000 new hotel rooms will need to be constructed by 2020. With foreign hotel project investors and operators seeking to capitalize on the numerous opportunities, an overview of the legal aspects concerning hotels within the emirate of Dubai is provided below.

Recent legislative changes

In January 2014, the Ruler of Dubai implemented two major reforms to expedite the construction of hotel projects.

Firstly, the period for preliminary consent was reduced from six months to two months and a streamlined hotel approval office was established.

Secondly, with hotel room rates among the highest in the world, the Dubai government implemented reforms aimed at providing incentives for the construction of three and four-star hotels ahead of Dubai Expo 2020. Government land for developers of three and four-star hotels will be granted on “favourable” terms, and fees will be waived if landowners rezone hotel development plans to build more affordable accommodation.

The DTCM announced that developers of hotels fitting within these categories may be exempt from the 10% municipality tax for up to four years, which may be extended for a fifth year, if the qualifying hotel is completed by 2017.

The reforms are intended to encourage private developers to invest in the mid-range hotel sector and develop affordable, quality accommodation ahead of Expo 2020 and into the future.

Shahram Safai is a partner in the Dubai office of Afridi & Angell, a UAE-based law firm with offices in Abu Dhabi, Dubai, the Dubai International Financial Centre and Sharjah. He can be reached at ssafai@afridi-angell.com. Thomas Gallagher is an associate at the firm.