• Dubai takes levy route to tourism growth

Dubai will start collecting a room occupation levy from hotels, to spend on further promotion of the Middle Eastern destination.

A declaration from the Dubai government said the "minimal" charge will fund the newly established Dubai Corporation for Tourism and Commerce Marketing in its efforts. The move comes just after the ruler of the emirate, Shiekh Mohammed Bin Rashid Al Maktoum, moved to ease the construction of new hotels by shortening approval times.

The occupancy levy comes in from the beginning of April, and has been branded the Tourism Dirham. It will be charged across all types of holiday accommodation including hotels, guesthouses and holiday homes, at rates between AED7 and AED20 per night, depending on the accommodation's ranking.

"The introduction of the Tourism Dirham will support DCTCM, helping to ensure our continued competitiveness on the global stage which will be reflected positively on the growth of our two economic pillars – trade and tourism," said Helal Saeed Almarri, director general of DCTCM. The announcement said the level of the fee had been benchmarked against similar levies charged by other international destinations.

Dubai has set itself a target of growing annual visitor numbers to 20 million by 2020, when the destination will host Expo 2020 from October of that year. In mid 2013, the emirate launched its Vision 2020 plan, taking numbers from 10 million in 2012, a figure that itself had doubled in eight years. As well as tourism, the country aims to make itself a key MICE and entertainment destination.

The first nine months of 2013 saw the emirate record 7.9 million visitors, a 9.8% year on year increase, giving hotels an average occupancy of 78.6%. The average length of stay is also edging up, growing 3.5% year on year to 3.9 days. Hotel and hotel apartment total revenues were up 17.1%. Said Almarri of the figures: "Dubai continues to represent a major opportunity for hotel developers and we must continue to work to ensure that supply is meeting demand."

As well as the luxury hotels for which Dubai is known, the destination is now seeing budget hotel brands entering the market, something that is actively being encouraged. Last year, Emaar and Meraas launched their Dubai Inn brand, conscious that not all the visitors can afford five star prices, while UK budget leader Premier Inn has established a Dubai office to review opportunities.

Air capacity is being expanded to deliver the expected growth, with Dubai airport now regularly handling 5 million passengers a month, making it the world's second busiest airport for international passenger traffic, just behind Heathrow. Active marketing includes linking with key feeder country markets, and an alliance between Qantas and Emirates helped increase Australian visitors by 50,000 year on year. Saudi Arabia, India and the UK remain the three strongest source markets for Dubai currently.

Meanwhile, a group of major French businesses has assembled itself to devise a range of promotional activities that will encourage more tourist visitors to the country, amid concerns France is slipping in its efforts to maintain a decent share of the international visitor market. UNWTO figures suggest France saw its share of international tourism expenditure fall by more than 5% in 2012, while it grew by a similar figure in 2013.

The group, called Alliance 46.2, includes Accor, Club Med and Euro Disney among 19 initial members who have each pledged EUR30,000 a year to the cause; the aim is to grow the support to potentially 30 participants.

The group has convened four working groups looking at visas, promotion, employment and training, and investment, which will come up with a business plan for French tourism. A statement in French newspaper Le Figaro stated the group wanted to help support government initiatives, rather than replace them.

Also in Europe, the promotion of Greece as a tourism destination is stepping up a gear for 2014 with the launch of a new Discover Greece website. The site, developed by a public-private umbrella organisation, Marketing Greece that was established in 2013, hopes to build on a positive year for the country which saw double digit increases in visitor numbers. Spurred on by a McKinsey report proposing a tourism policy for growth to 2021, the organisation is now presenting a united front as a way of helping the country's beleaguered economy make the most of its natural assets.

 

HA Perspective [by Katherine Doggrell]: The implementation of a bed tax in Dubai raises again the issue of a similar move in this country, in the same month [February] where the UK government has knocked back the efforts of the BHA to push for a cut in VAT for the sector, with treasury minister David Gauke commenting that to date there were no causal links between a VAT reduction and a boost in the sector. Gauke added that the majority of tourism attractions don’t have to pay VAT, with the current registration threshold standing at GBP79,000 per year.

A VAT cut is not the best route for this sector. As Otus & Co has previously commented in these pages, over the period of economic trauma from 2007, the net addition of hotel rooms in the UK was 45,000, an average annual growth rate of 1.5%. Hotel chains added 71,900 rooms, a net average annual growth rate of 3.9%, while unaffiliated hotel room stock declined by a further 26,900.

The demand picture was similar. During 2012, 110 million hotel room nights were sold in the UK, unchanged from 2006 and never falling below 108 million during the period.

Despite this and the reality that tourism now has a workforce of 2.7 million, 10% of the British workforce, government support remains scant and, despite the apparent robustness, support is required to attract more visitors.

In the US, the government is actively working towards the target of 100 million international visitors by the end of 2021, representing growth at a 5% compound rate for 10 years. So far the country is ahead of its target, having seen 8.1% growth in 2012.

In 2012 Britain saw a 4% rise in international visitors, despite having a significant number of global events, including the Olympics, to lure visitors. The WTO’s Tourism 2020 Vision forecasts an annual growth rate of 4.1% for international travellers globally, with 3.1% for Europe.

To catch up, investment must be made, rather than taxes cut. A bed tax could be used to fund VisitBritain, rather see its funding cut further, and the extra money used to attract business travellers in addition to the leisure market. The government must also take further steps to ease visa restrictions, following the positive effort for Chinese visitors.

The sector should also look at putting some of its money where its mouth is. Business is currently rollicking along and, instead of complaining to government that it needs a crutch, it should be helping to fund VisitBritain, either by subscription and/or bed tax. However, the chances of the myriad small hospitality organisations working together for the greater good is, judging by past experience, limited.

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