The UAE's robust hospitality and travel sector has remained unfazed by the impact of the value-added tax (VAT) during the first few months of its implementation. The number of visitors rose 2 per cent to 4.7 million in the first quarter, while occupancy rate up 0.7 per cent to 87 per cent witnessing a sustainable growth.

Experts in the hospitality and travel sectors have described the impact of the tax as being modest or negligible.

"The value-added tax, like any other tax regimes, is part of a government's fiscal reforms and is expected to accelerate economic growth and development of societies in the long run," said Sameer Bagul, EVP and MD at Cleartrip Middle East. "While it is true that initial adjustments following the introduction of tax in the UAE had sent shockwaves across various industries and businesses, which have long been accustomed to minimal taxation, the travel sector has seen a modest impact as airlines remain subject to zero tax rates, thus leaving no impact on airfares."

However, Bagul noted that travel agents and travel management companies who earn commissions and service fees have to bear five per cent of revenue as cost. He further described this as an investment in the economy.

"On the other hand, hotels in the country are subjected to five per cent VAT, in addition to the existing 20 per cent municipality fee and service charges combined, making the average room rates costlier. Additionally, various leisure activities have seen pricing adjustments to include the five per cent VAT from January 2018. Nonetheless, we have not witnessed any impact on our business despite these changes as we continue to grow very strongly in selling both hotels and hyper-local leisure experiences in the UAE," he added.

The implementation of the VAT is likely to generate Dh12 billion in income in its first year of introduction, and may collect up to Dh20 billion in 2019. Experts have predicted that hospitality revenue in the UAE is set to increase by 10.8 per cent annually to hit $9.8 billion by 2020. The government's spending on the sector's development is expected to grow by 4.3 per cent over the next decade. Furthermore, with the opening of new attractions such as theme parks and the development of specialty entertainment areas, the UAE will continue to be a preferred destination for tourists from around the world; leaving experts optimistic about the hospitality industry's growth in the coming years.

Laurent A. Voivenel, senior vice president of Operations & Development for the Middle East, Africa & India at Swiss-Belhotel International, noted that many global hospitality brands are familiar with the tax, and haven't faced any major challenges in terms of execution. "Typically in a hotel be it the room revenue, food & beverage revenue, telecommunications such as telephone, TV/movies and Internet revenue, conference or banquet revenue, or any other rentals, each needs to be itemised separately for accounting purposes and must be consolidated to determine the operation's VAT liability."

Samir Hamadeh, general manager of Alpha Destination Management, further noted that the VAT in the UAE is at one of the lowest rates in the world, so its overall impact has been quite negligible.

"Moreover, the government is pumping back tax funds into the development projects, which in turn will boost a number of industries including tourism in the country," he sated. "Broadly speaking VAT can be a tricky subject in many respects, given the complexities inherent across the wider global tourism industry. The reason for this complexity is that VAT is, in many aspects, both a tax on transactions as well as a tax that applies within a geographical area."

Like Voivenel, he said that the company has had a smooth run in terms of execution and does not anticipate any major challenges in the future. "We have had a fantastic first quarter, and we expect the trend to continue with a 14 per cent increase in revenue this year."

In addition, many hotel experts have pointed to strong results in the first quarter of the year, that are further proof of the fact that the tax is not putting much of a strain on residents and tourists alike.

"A big focus for many right now will be the summer period and building on occupancy levels," said Timothy Kelly, GM and senior vice president of Operations, Atlantis The Palm, Dubai. "We were off to a great start with a 96 per cent occupancy year to date, up 12 points from last year. We expect to see a really strong second quarter; May is looking good for us as well as June. Historically, these have been some of the slower months, along with July and August. We are very optimistic that overall this will be a strong year for us."

Copyright © 2018 Khaleej Times. All Rights Reserved. Provided by SyndiGate Media Inc. (Syndigate.info).