Tomorrow's Hospitality A-Z – Navigating the future

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The UAE (and Dubai in particular) is replete with hotels. Ranging from budget-friendly accommodation nestled among the souks to world-class and iconic properties propping up the city’s skyline, Dubai does hospitality like nowhere else.

At the start of the second half of 2022, Dubai boasted an enviable occupancy rate of 74 percent across its 773 (and counting) hotels, which places it among the strongest hotel markets in the world (and ahead of markets such as London, New York and Paris), according to some reports.

All of that has led to a significant uptick in hotel transactions across the region. With global investors viewing the UAE as experiencing a post-COVID-19 roaring ‘20s, interest in this important asset class has seen both valuations and demand increase.

A significant number of hotels in the UAE are owned by local family groups and through local arrangements, rather than by domestic or foreign institutional investors. In addition, the UAE has complicated hotel ownership and licensing arrangements, which can require careful consideration to ensure that what a buyer receives is the same as what the seller is selling.

Some owners are unfamiliar with international standards relating to purchaser protection in M&A transactions, such as representations and warranties, indemnity coverage, and so on. It can therefore come as an unwelcome surprise to those sellers (who may be expecting a simple visit to the Land Department and/or the Notary Public to register the transfer) when they receive a draft share purchase agreement with pages and pages of specific warranty cover included. We have heard a number of anecdotal instances where transactions have been aborted in situations like this, and where trust has eroded away, taking the deal with it.

Key takeaways
  • Due diligence is, as ever, fundamental to the successful closing of transactions.
  • Sellers may be unfamiliar with international conventions, so a bespoke approach may be needed.
  • Deal certainty can be improved by getting the right advice early on.
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