New regulations to boost Dubai's hotel sector

New regulations to boost Dubai's hotel sectorSarah Khalifa

Dubai's vision of welcoming 20 million visitors per year by 2020, coupled with the success of the World Expo bid, has led to a number of measures aimed at modernising hospitality industry regulations in the emirate. As part of the drive to achieve these goals, the Dubai Department of Tourism and Commerce Marketing (DTCM) has introduced a new classification system and joined forces with Dubai Municipality to encourage growth in the sector and incentivise developers.

Classification system

Decree No. 17 from last May introduces a new hotel classification scheme aimed at enhancing transparency and modernising the existing framework in line with international standards. It covers a larger scope of accommodation facilities and outlines new categories and classes to rate them. Youth hostels, budget hotels, floating hotels and university dormitories have all been added within the hotel establishment category, which was previously limited to hotels, hotel apartments and guest houses.

Classifications apply to each category as well Mandatory classifications refer to the quality grades or star rating and range from one to five stars for hotels and three to five star for resorts. These classifications have also been enhanced to include a superior grade within the hotel apartment category to account for facilities between standard and deluxe grades.

The new classification scheme allows for the DTCM to add optional classifications, which would describe location, facilities or style of accommodation. About 19 additional classifications or designators are likely to be introduced - including airport, heritage, island, golf, boutique, business and spa.

The decree came into effect last August and gives hotel establishments licensed before the date of effect a year before needing to be classified according to the new standards. Hotel establishments still under construction on the effective date will need to adjust their status within a year from the date of completion.

The decree provides for resolutions to be issued for new licence and renewal applications. Until these are issued, the existing licensing procedures stay in place.

Holiday homes

December saw the announcement of a decree concerning the regulation of the holiday homes market in Dubai. Short-term lettings furnished apartments (by the day, week or month) will require a DTCM licence, together with the awarding of a standard or deluxe classification. Implementation of the decree and further details for procedure, standards and restrictions are expected by the end of June.

Tax Exemptions

In an effort to boost the development of mid-range accommodation in the emirate, the DTCM and Dubai Municipality have launched a financial incentive for three- and four-star hotel developers. The initiative, announced in October, provides for the waiver of the 10 per cent municipality fee for new hotels in this category for four years from the date of the construction permit. 1bis will increase to five years when the relevant hotel commences operation before June 2017. The waiver applies to hotels with construction permits obtained between October 1, 2013 and December 31, 2017.

Expedited licensing procedure

Instructions by His Highness Shaikh Mohammad Bm Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, in January place a 60-day timetable for applicants to obtain initial approvals for construction of a hotel. In addition, fees for change of use of a plot to a hotel establishment have been annulled to expedite and facilitate all processes.

Tourism Dirham

The most recent decision, issued in February, implements a new charge to hotel invoices, coined the Tourism Dirham. It ranges between Dh7 and Dh20 per night depending on the hotel's classification. Dubai's proactive approach towards encouraging long-term growth of the hospitality sector will take its systems to a world-class level and provide a framework to expand on Dubai's success as a leading global destination. Further regulation and procedural direction is anticipated and will continue to drive this process.

Source: Sarah Khalifa, Special to Property Weekly

Sarah Khalifa is an Associate on the Real Estate & Hospitality team at Clyde & Co. Before Joining Clyde & Co, she held an In-house counsel role for an FTSE-listed International hotel operator. Khalifa regularly advises on a wide range of hotel related matters throughout the region, including management agreements, licensing and regulatory compliance, leases and concessions, day-to-day operational Issues and disputes, and development and corporate strategy.

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