Business

How to Start a Hotel Business in Dubai?

Dubai is a hub for various types of businesses due to its strategic location, robust infrastructure, and favourable business environment, which attract entrepreneurs globally. The hotel industry, known for its creativity and innovation, is a prime investment opportunity. Suppose an individual is considering opening a hotel in Dubai. In that case, this blog will help the individual to get detailed information on how to start a business in Dubai and obtain a hotel license and related steps.

Different Types of Hotel Business Setups in Dubai

Hotels are rated on a scale from 1 to 7 stars, indicating their level of luxury and services. To comply with local regulations and market exceptions, the individual must ensure that their hotel fits into one of these categories. The individual can establish a hotel business in Dubai under various categories:

1. Luxury Resorts

It offers high-end accommodation with top-tier amenities such as spas, dining, and recreational facilities.

2. Hotels

It provides standard accommodation along with essential amenities for guests.

3. Hotel Apartments

It is a fully serviced apartment offering amenities like housekeeping, utilities and furnishings, typically leased for longer durations.

4. Hostels for Youth

It offers budget-friendly for young travellers.

5. Guest Houses

It offers modest lodging options, providing accommodations and meals for travellers. 

6. Holiday Houses

Holiday houses are vacation homes available for short-term rentals, usually for weak or less.

Know the Regulations to Start a Hotel Business in Dubai

To obtain a hotel license in Dubai, the individual must adhere to regulations set by the Department of Economic Development and the Department of Tourism and Commerce Marketing (DTCM) of Dubai. Below are the key requirements to obtain a hotel license in Dubai:

  • A bank guarantee is necessary to obtain a hotel license in Dubai.
  • Each hotel room must be a minimum of 30 square meters in size.
  • Proper storage of guest data is essential.
  • A transparent display of packages and pricing is required.
  • The hotel managers must possess a Certificate of Good Conduct.

Understand the Process to Start a Hotel Business in Dubai

By following the processes of company formation in Dubai meticulously, the individual can successfully establish and operate a hotel business in Dubai; complying with all necessary processes will help to successfully establish a hotel business in Dubai:

1. Select a Location

It is crucial to choose an appropriate location to establish a hotel business in Dubai, whether on the mainland or in a free zone. The individual needs to conduct thorough research on location and demographics.

2.  Appoint a manager

For hotel setups in Dubai, it is mandatory to appoint a manager with relevant qualifications and certifications. The manager will oversee operations and ensure compliance with industry standards, from cleanliness and food safety to service quality.

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3. Obtain Initial Approval from DED

The individual needs to prepare essential documents to obtain initial approval from the Department of Economics Development. The required documents include signed application forms, passport copies of partners and employees, plot maps, building completion certificates and a classification card for hotels.

4. Secure a Hotel License

To acquire a tourism license for the hotel in Dubai, follow these steps such as:

  • Present the receipts of fees of the initial approval.
  • Submit certificates for trade name registration and relevant payment receipts.
  • Obtain a no-objection certificate if part of an international hotel chain.
  • Register on the Ejari Platform and provide the tenancy contract with the Ejari number.
  • Ensure the landlord approves the tenancy contract for at least 90 days.
  • Obtain approvals from Dubai Municipalities and other legal departments for sanitation, waste management and public health compliance.
  • An on-site restaurant must operate continuously and serve foods that adhere to health standards established by the Dubai Health Authority.

5. Business Plan Development

Develop a detailed business plan outlining the concept, target market, financial projection, and marketing strategy, highlighting the hotel’s competitive advantages and unique selling proposition.

6. Hire a Local Sponsor

The foreign investors must have a local sponsor who is a Dubai national or a company owned by Dubai Nationals. The sponsor holds a 51% share in the business, while the foreign investors can own the remaining 49%.

7. Register with Dubai Municipality

All hotels must register with the Dubai municipality and comply with the regulations. They must also obtain necessary permits, such as food and hygiene permits, fire safety certificates, and building permits.

8. Obtain a Bank Account

Once all the registration and approvals are obtained from the relevant authorities, the company must open a corporate bank account to manage financial transactions related to its operations.

Choose the Ideal Location for Starting a Hotel Business

Consider these key factors to find the ideal location for starting a hotel business in Dubai. The individual needs to opt for areas with popular tourist attractions, shopping malls, and restaurants to attract a steady flow of guests seeking convenience and entertainment,

Proximity to transportation hubs like airports and seaports also enhances accessibility for international travellers. Areas like Deira, Bur Dubai, and Al Barsha are prime choices due to their accessibility and appeal to tourists and expatriates alike.

Additionally, freezone areas such as the International Airport Free Zones offer a competitive advantage with lower costs, making them attractive for hotel investments. Mainland locations like Jumeirah Beach Residence, Dubai Marine, and Deira City Center provide vibrant settings with beach shopping and dining options, catering well to tourist preferences.

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What are the advantages of Entering the Dubai Hotel Market?

Due to its numerous advantages, opening a hotel business in Dubai presents a highly profitable investment opportunity. The advantages of entering the Dubai hotel market are given below:

1. Dubai as a Tourism Hub

Dubai ranks among the world’s top tourist destinations, attracting millions annually. Despite challenges, Dubai saw strong tourism numbers, with important growth anticipated in the coming years.

2. Strong Occupancy Rates

Dubai’s year-round events and attractions contribute to consistently high hotel occupancy rates. Despite recent challenges, hotels in Dubai have historically maintained strong occupancy levels, which are projected to increase substantially moving forward.

3. Government Support

The Dubai government actively supports the hotel industry through initiatives such as tax incentives, infrastructure development and streamlined licensing procedures. These measures stand as a favourable environment for hotel business growth and development. 

4. Profitable Investment Return

Dubai’s hotel sector offers an attractive return on investment opportunities, with hotels historically achieving high average daily rates and revenue per available room.

5. Global Events

Dubai hosts various world-class events and attractions throughout the year, and it draws millions of international visitors annually.

6. Tax Advantage

One major benefit of establishing a hotel business in Dubai is the favourable tax environment. Dubai imposes no corporate or personal income tax, which allows hotel businesses to enjoy higher profits than those countries with high tax areas.

Architectural Guidelines for Starting a Hotel Business in Dubai

The hotel must comply with specific architectural requirements, including:

  • The Kitchen area must be between 300 and 380 square feet in size.
  • All walls, floors and roofs must be washable, non-absorbent and fireproof.
  • Provide separate basins for washing utensils, cleaning vegetables and fruits and handling meat.
  • Maintain a storage facility for various food items
  • Ensure drainage pipes are positioned at least 2 inches from walls to meet hygiene standards.

What is the Cost to Start a Hotel Business in Dubai?

Before starting a hotel business, it is essential to meticulously plan and list all potential expenses to avoid wasting money and time; given the significant financial investment required to launch a hotel, careful budgeting is crucial.

 The hotel business includes various costs, including obtaining necessary permissions, expenses for creating hotels such as equipment, tables and chairs, and costs related to purchasing or renting a property and maintaining working capital. Also, to operate a hotel business in Dubai, this individual must obtain a tourism license, which costs between AED 35,000 and AED 45,000, covering services and local agency fees.

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Guide to Permits & Licenses for Starting a Hotel Business in Dubai

Running a hotel requires obtaining various licenses, which is straightforward yet time-consuming. Begin by confirming if the individual hotel location permits operating licenses. The individual needs a hotel business permit and an operating license if allowed.

The individual can apply for these licenses through the Dubai Municipality website, offering guidance. To get a hotel business permit, the individual needs to submit a:

  • Company registration or trade license copy.
  • Sponsor’s confirmation letter accepting responsibility.
  • Complete the application form for all directors, partners, or shareholders.

For a hotel-related trade license from the Department of Economic Development, reserve the trade name and register under the appropriate business activity category. Depending on the specific hotel activities, the individual also requires a liquor license to serve alcohol. Additional permissions from health, fire safety and electrical authorities are essential to ensure operational safety.

Conclusion

In conclusion, starting a hotel business offers various investment opportunities due to its favourable tax environment, strong government support, and thriving tourism sector. Entrepreneurs can successfully establish and operate a hotel by meticulously planning, adhering to regulations and securing necessary permits. With the right location, financial planning and compliance with local laws, the hotel business in Dubai can achieve significant profitability and growth.

FAQ’s

  1. How profitable is the hotel business in Dubai?

    Starting a hotel business in Dubai is advantageous due to its favourable tax system, which includes corporate or personal income taxes. This enables hotel businesses to achieve higher profitability than jurisdictions with higher tax rates.

  2. What is the cost range for building a hotel in Dubai?

    The expenses can vary based on location, size and amenities, with average costs ranging from AED 15 million to AED 250 million.

  3. How can one start a hotel business in India amidst the current challenges?

    Despite various challenges, starting a hotel business in Dubai remains promising and involves strategic investment, SWOT analysis, property registration, licensing and labour compliance.

  4. What are the main types of hotel businesses one can start in Dubai?

    In Dubai, individuals can establish various types of hotels, including luxury resorts, hotels, hotel apartments, hostels, guest houses, and holiday houses.

  5. What are the architectural guidelines for starting a hotel in Dubai?

    Guidelines include specific requirements for kitchen size, washable and fireproof material for walls, floors, and roofs, separate basins for food handling, storage facilities, and hygiene-compliant drainage systems.

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