Tax Relief for Hotels in the United Arab Emirates | Push Digits Chartered Accountants

Tax Relief for Hotels in the United Arab Emirates

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Tax Relief for Hotels in the United Arab Emirates

In the United Arab Emirates, due to the pandemic, the best alternative to traveling is staycations. With only a handful of restrictions, one can easily travel through cars to any remote resorts in the beaches or deserts of the UAE.

This form of traveling within the country is acceptable with proper SOPs to being followed and helps in making up for the losses suffered due to a halt in tourism. The IATA, International Air Transport Association, says that tourism and aviation contribute to more than 13% of the country’s overall GDP.

It is important to keep in mind that despite many people choosing staycations in the United Arab Emirates, it cannot match up to the average occupancy levels of hotels when comparing to international tourism each year. Dubai alone has had about 16 million tourists in 2019, this is a lot more than the UAE’s population of 9 to 10 million people.

As the pandemic started to loosen up, it was expected that the rates of hotels would increase and competition would come back. However, it turned out that hotel rates remained the same as they were back in the summer season.

Moreover, resorts with a margin like; private villas, remote locations, and beachfront, had more reasons to keep the rates the same if not more.

First of all, this involves the ratio of demand and supply. Right now, since the supply seems to outweigh the demand, then lower occupancy multiplied by higher rates of rooms will generate good revenues, instead of the rate of rooms being lower and the failure of occupancy rates fails to generate revenue.

Moreover, people are bound to prefer resorts and hotels with the best locations and an exclusive environment than an ordinary room. So destinations that meet these requirements can have higher rates. Being locked up at home due to the lockdowns, people now have the need to expose themselves to places, for example; exotic staycations.

Secondly, there have been no policies that would encourage nicer deals by resorts and hotels from taxes related to tourism. In normal times, these taxes were given to corporates in need, which means that in current times, it is possible for those taxes to be distributed between resorts and hotels who are struggling for survival.

Hotels need funds in order to keep their operations running. Meanwhile, regulators of tourism need to produce revenue to balance out their budgets. With tourism and aviation activities being reduced, the financial situation is very urgent.

However, if taxes on tourism had been put on a halt for a few months, resorts and hotels could have managed better, with more people going for staycations. This is more so because many people are doing their jobs from home and could easily enjoy their vacation as well.

This would have benefited the hotels and the lost revenue from tourism taxes, which could have been marked in the economic stimulus that aimed to ignite back the activities in the United Arab Emirates.

Conclusively, staycations have become a necessity for the UAE. Overall, Hotel rates remained the same as last year as it was anticipated that the occupancy rate would be low and taxes would remain the same.

If, however, taxes had been removed, better results could have been seen.

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