Abu Dhabi Cuts Tax, Raises Marketing Spend

Main Photo: The Shangri-La, Qaryat Al Beri, Abu Dhabi

Date: April 2019

Location: Abu Dhabi, UAE

Name: Abu Dhabi – The Country

Who and What: Authorities in Abu Dhabi have cut tourist taxes, in a bid to boost visitor numbers and plans to spend AED500m (€120m) promoting the destination.

Hotel nightly room tax will drop by a third, while tourism fees will fall from 6% to 3.5%. Last year, Abu Dhabi attracted 10 million visitors, up almost 4% on the year, against 15.9 million visiting nearby Dubai.

The initiatives were launched as part of the Abu Dhabi government’s accelerator programme, Ghadan 21, which planned to invest AED50bn from 2019 to 2021 across four strategic pillars: “economic, knowledge, livability and social”.

HE Saif Saeed Ghobash, undersecretary at the department of culture and tourism, Abu Dhabi, said: “The initiatives will encourage local, regional and international tourism investment within the Emirate and help enhance Abu Dhabi’s position as a global tourist destination.

These initiatives will support tourism companies in Abu Dhabi, which in turn will help guarantee the continued growth of the sector and contribute significantly to the national economy.”
In addition to the local market, the department identified seven key target markets for its marketing spend: China, UK, US, Saudi Arabia, India, Germany, and Russia.

The municipality said that it expected the cuts to give hotel owners access to more capital to reinvest in their businesses and growth, estimating a figure of AED1bn over the next three years.

In addition to cutting tourist taxes and fees, the government said it would remove all tourism and municipality fees on any tourist attraction tickets sold by the hotels; exempting long-term visitors in hotels from the daily municipality fee to encourage extended stays (of 30 days or more) at hotels;

and change the frequency of fee collection from monthly to semi-annually, giving, it said, hotel owners access to more capital to help with continual improvements and the quality of their offerings.

STR’s Middle East & Africa hotel data for January 2019 reported that Middle East hotels saw occupancy decrease 0.9% to 68.2% in January as ADR dropped 8.9% to US$154.18 and revPAR  declined 9.6%.

Abu Dhabi went against the overall results and showed positive growth with a 1.9% increase in occupancy to 78%, followed by a 5.4% rise in ADR to AED449.72 along with a 7.5% increase in revpar to AED350.88.

The capital of the UAE witnessed a supply growth of 11.2%, but despite this, Abu Dhabi achieved its highest January occupancy since 2008. STR analysts attributed this to a 13.4% spike in demand to the Asian Cup football championship. Abu Dhabi saw a further boost in February with a visit from Pope Francis.

Abi Dhabi led the region in terms of hotel construction, with Ed James, director of content and analysis at MEED Projects, telling AHIC this year: “More than 800 new hotels worth in excess of USD44bn have been built over the past seven years in the Middle East and North Africa, as the region benefits from increased visitor numbers, new world-class tourist attractions and investment in transport infrastructure.

“Leading the way in this tourism drive has been the UAE, with more than USD20bn-worth of hotel construction contracts awarded since 2012. This total is more than double the amount awarded in the second-highest country, Saudi Arabia, which saw just over USD10bn-worth of hotel deals awarded in the same time-frame.

“Just under USD30bn-worth of hotels are due to be awarded in the region over the next five years. The UAE again leads the way with almost USD11bn worth of planned and un-awarded hotel projects, including The Address Harbour Point, MGM Resorts and Warner Bros hotels in Dubai, and Marriott Resort Ras al-Khaimah, to name but a few.”

HA Perspective [by Katherine Doggrell]: Abu Dhabi has not been the only oil-reliant region to look to tourism to swell the coffers as the swell of oil falls back, but it has taken the route of pushing culture over sheer numbers as Dubai has done – witness the opening of the Louvre Abu Dhabi in 2017 – the name is on hire from the Parisian museum – for a reported US$525m – with the property itself costing a snip at an estimated US$108m to build.

But no matter how many art fans and popes you attract, you still need to compete with those destinations around you and, with Dubai also toting a tourism tax, one way to get a quick leg up has been to give up the short-term gain of the tax for, it is hoped, the long-term investment from those no longer collecting it.

How much capital this frees up to invest depends on how much was being being passed onto the consumer. Hotels are not known by their urge to take the hit when it comes to extra costs – there are enough of those already, ta very much. Cheaper stays might attract more guests, time will tell if it means more investment.

THPT Comment: Great analysis from HA…not much to add other than with the Dubai market over-heating with supply and concerns about occupancy and RevPAR post Expo 2020, Abu Dhabi doing the right thing in getting in first!

First Seen: Hotel Analyst

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