What To Consider Before Investing In A Hotel In Dubai

Dubai is a glittering city with an embellished skyline, golden beaches and spell bounding infrastructure. This makes it a popular tourist destination. And hence, the hotel business is a flourishing industry in this city of gold. From Burj Al Arab to The Palm, an artificial island, Dubai hotels range over a wide spectrum based on every stratum of society. Additionally, the World Expo 2020 and the FIFA World Cup 2020, which is held in Qatar, have significantly impacted tourism in Dubai. This has led to a major boost in the Middle East hotel sector. 

These are some key issues investors should pay heed to before investing in a  hotel in Dubai-

Acquiring a Hotel

Investors can buy a hotel for the short term (if they want to resell the property) or for a longer-term (to earn from the property). Either way, you need to determine the cash returns that the property can provide. Make sure you check the financial performance and asset value of the property. Since the hotel is in Dubai, you must check if it is Sharia-compliant, among other considerations. Location and the surrounding area determine if you can do business in that area or if it is too competitive. These statistics are vital pointers you need to know before acquiring a hotel. 

Target Identification

Post the acquisition criteria comes finding your target audience. This makes you aware of the market opportunities. Your target audience includes brokers, industry consultants, asset managers, brands, etc. This helps in the marketing and property analysis for the future business plan or a bidding price in case you are selling the property off. 

Bidding Process

A lot of hotels are sold off at auctions. You need to submit an indicative offer, and then the bidding starts. If you win the final bid, the hotel is yours. However, just winning the bidding is not the final step. You need to provide evidence of your financial status and assets, which will further establish the seller’s decision to sell the property to you. 

Hotel valuation methodologies should be discussed with your financial advisor before buying a hotel. Discounted cash flow analysis, comparable hotel sales, and EBITDA multiples are some examples. 

Structure

This is a pivotal point. You can either buy shares of the company that owns the property, or you can buy the hotel from that same company. This entirely depends on you and your liabilities and obligations. Asset purchases are more complex than sale purchases as they need to transfer separate assets to you after getting approval from third parties. Do consider potential tax implications and make sure to run this through with your lawyer, legal advisor and financial advisor. 

Carrying out the dues properly.

This factor is of pivotal importance, and you must consider hiring an experienced team. This team usually includes legal advisors, financial advisors and property surveyors. The advisors investigate the business uncovering the material issues that must be dealt with. Acquiring real estate is much more than just buying it; investors need to be well aware of this. 

Conclusion 

In addition to the above factors, investors must negotiate the right price adjustments. Check the valuation based on the target company’s previous accounts, assets and reference accounts. Moreover, you need to arrange a set of warranties and indemnities with the seller. This ensures that you are aware of all the information regarding the property and there aren’t any blind spots when it comes to the same. 

With flourishing tourism in the Middle East, a lot of people are looking into buying real estate. Dubai is a flourishing destination for this and welcomes over 12 million people every year into its luxurious lifestyle. Areas in Dubai with higher tourist attractions generate more revenue. Thus, you need to do a proper survey before you decide to invest in a hotel or a real estate investment in Dubai.