Right time to invest in the UAE hotel business

Traditionally, Dubai is considered to be one of the most luxurious cities in the world boasting its amazing variety of posh hotels.  However, in the current Dubai’shotel business the reorientation from Luxury hotels into middle-class hotels is being observed.

The changes stem from:

- EXPO 2020 preparation;

- Orientation to the customers from the Asian and African countries, as well as tourists from other regions, counting upon a budget holiday;

- Decreasing of the construction costs that leads to faster return on investment

- Attractiveness of preferential conditions for entrepreneurs who invest in the middle segment hotels.

Some numbers

Jones Lang LaSalle (JLL), on the basis of the Dubai hotel market study, informs about the availability of nearly 65 thousand hotel rooms in the Emirates. It is expected that this number will go up to 100 thousand by 2020 due to the growing quantity of tourists, which is stated to increase up to 20 million.

The survey, published by JLL for The Hotel Show Dubai 2015,claimsthat the middle class rooms form 44 percent of 3,600 new rooms, which are going to be ready this year.

Previous JLL report shows that five stars rooms make 44% of 65 thousand hotel rooms, which were put in exploitation in Q1 2015 in Dubai.

At present, luxury segment is replaced by the rooms of middle class, 44% of which are projected to be 3 stars or lower and from total 69 % of the common rooms - 4 stars or below. According to the study, currently budget hotels become strong competitors to premium segment. This process is basically promoted by a new initiative of the officials in The Emirates.

The initiative of the United Arab Emirates Government

As a result of cooperation of the Tourism and Commerce Departmentand the Municipality of Dubai, as part of the development strategy of Dubai in 2020, a special program aimed at attracting the investments in the hotel sector of the Emirates has been developed. As previously mentioned, in 2020 the United Arab Emirates intend to host about 20 million tourists annually, that’s why a plan for the hotel business promotion has been worked out.

In May 2015 the government of the Emirates announced the decision to grant benefits to a standard 10% city tax, which is levied on the cost of accommodation per night. Investors of the new hotels will be able to use exemption from the commission for four years from the date of obtaining a building permit in the period from October 1, 2013 to December 31, 2017. As the officials informed, the scheme is quite simple: the faster the hotel starts functioning - the higher the investors’ financial benefit.

Obviously, the mentioned privilege along with a favorable investment climate in the country, as well as other advantages of the UAE (the absence of corporate tax and income tax, a reliable banking system and guarantees of the protection of investments) have already attracted a great number of entrepreneurs to the country.

Provided that additional information concerning profitable investing in UAE hotel sector is required, please consult professional advisers from the Business Mart, the staff knows all about the development of business in the United Arab Emirates! Use their years of work experience in the UAE for the sake of your company’s successful development!



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