Understanding the regulations for establishing a hotel business in Dubai

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Dubai

Over the past few years, Dubai has emerged as one of the world’s leading travel and tourism destinations. The hospitality industry has been re-defined through innovation and creativity, and now presents numerous investment opportunities for both local and foreign companies wishing to establish themselves in the region. In this article, Greg Hastings, Business Development Manager of Sovereign PPG, explores the regulations for establishing a hotel in Dubai. Sovereign PPG specialises in the formation of companies in the UAE, particularly assisting companies with understanding the regulations and government requirements.

Commercial Entity

The first stage to setting up any business in Dubai is to determine the legal entity within which to establish. The most commonly incorporated commercial entity type is a Limited Liability Company, or LLC. As with many countries in the GCC region, commercial law in the UAE states that a foreign investor cannot own more than 49% of an LLC, and must, as a result, partner with one or more Emirati national (individual or company), who will therefore own a minimum of 51% of the shares. It is often difficult for foreign investors to find a local Emirati who they can partner with.

One option therefore, is to establish an LLC with a local corporate partner instead, such as Sovereign PPG . A corporate partner means you can partner with a company rather than an individual. Sovereign PPG can put agreements in place that enable the foreign investor to fully control and manage the business, as well as retain the intellectual property and assets of the company. Sovereign PPG also provide further assurances to the foreign investor, such as applying a penalty free exit strategy should it be required.

Free Zone vs On-Shore

It is possible to establish a hotel within a Free Zone which would eliminate the requirement of a local partner altogether for a foreign investor. Whilst setting up a business within a Free Zone may seem like a lower cost option, it is important to consider that there are strict regulations around trading, and therefore the hotel must be physically located in that Free Zone.

Hotel Regulations

In order to obtain a trade license as a hotel, it is necessary to comply with a number of regulations as outlined by the Dubai Department of Tourism and Commerce Marketing (DTCM). Some of these regulations include:

• A bank guarantee is required before the trade license can be issued • The minimum size of any hotel room may not be less than 30 square meters • Provision of an effective program to securely store guest’s data • All packages and prices must be correctly displayed

Hotel Classification

Foreign investors wishing to establish a hotel in Dubai must also comply with the regulations related to the classification of tourist establishments, which outlines that establishments must be categorized into one of the following: • Resorts • Hotel apartments • Hotels • Youth hostels • Guest houses • Holiday houses

Hotels can further be classified from one to seven stars, whilst holiday houses are divided into standard or deluxe establishments.

Setting up a hotel or tourism establishment in Dubai can be a complex task, and there are many factors to take into consideration. Seeking professional advice from the team at Sovereign PPG will save you time and money, and allow you to invest more time in your business.

Greg HastingsGreg Hastings is Business Development Manager of Sovereign PPG and specialises in the formation of companies in the UAE, including regulations and government liaison matters. For further information please contact Greg on greg@ppg.ae or call a member of the team on:

+971 (0)4 456 1761 (Dubai) +971 (0)2 448 5120 (Abu Dhabi) www.propartnergroup.com SovPPG@SovereignGroup.com

 

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