Dubai. Photo: Shutterstock Encouraging Hotel Development: Dubai has announced the launch of a major incentive to establish hotels in developing areas: a full refund of the municipal fee and the Tourism Dirham for 2 years.
The Dubai Department of Economy and Tourism (DET) has introduced a new incentive program for hotel investors, following a decision by the Executive Council approved by Sheikh Hamdan bin Mohammed bin Rashid Al Maktoum.
The program will offer a 100% rebate on the municipality fee from room sales and the Tourism Dirham for two years from hotel opening, targeting new projects in high-growth potential areas: Dubai South, Palm Jebel Ali, Dubai Parks, and Dubai Islands.
According to Issam Kazim, CEO of DCTCM at DET, the initiative “marks an important step in the development of Dubai's hotel ecosystem” and supports the goal of making Dubai “the best city in the world to visit, live, work, and invest”. Khalifa Al Zaffin (Dubai South) and Khalid Al Malik (Dubai Holding) also praised the move, calling it a step that enhances competitiveness and attracts private capital.
The incentive comes amid rising demand: from January to August 2025, Dubai hosted 12.54 million international tourist stays (+5% annually), accounting for 29.03 million hotel occupied nights (+4% annually), and an average occupancy rate of 78.5%, among the highest in major cities worldwide.
- Definition and Scope: The initiative includes refunding 100% of the municipality fee on room sales and the Tourism Dirham for eligible hotels. A “hotel” includes hotels, resorts, hotel apartments, and any other accommodation facility that registers after the decision takes effect and in an approved designated area.
The designated areas that will receive substantial benefits are Dubai South, Palm Jebel Ali, Dubai Parks and Resorts, Dubai Islands, and others to be defined.
- Licensing and Classification: The facility must be licensed and classified per Ordinance 17/2013 at the time of application and throughout the incentive period.
- Timing: Developers must commence operations (welcoming guests) within three years of application; an additional year is permissible with the authorities' approval. The incentive period is up to two years from opening, extendable by a year based on performance and economic contribution.
- Management and Oversight: DET receives and decides on applications, ensures continuous compliance with conditions, and reports biannually on program implementation and outcomes. DET also has the authority to terminate benefits for non-compliance. The incentive applies only to hotels registered after the decision's effective date, and can result in significant cost reductions in the first two years, providing an opportunity to enhance ROI during the start-up phase.
- Geographical focus on areas receiving tourism-urban pushes (Palm Jebel Ali, Dubai South, and more).
- Clear regulatory matrix with rigid timelines and conditions, ensuring certainty for the investor and financier.