THAT TAX EFFECT

Another topic general managers are concerned about is the implementation of a number of taxes and fees, including the impending VAT. While 42% of our GMs said they will pass it on to the customer, nearly 45% said they will work on a combination of absorbing the cost as well as passing it on. Only 13% said they will absorb the cost.

Fraser Hospitality’s Warsono commented: “We will pass it to the customer as this is a country-new referendum.”

Premier Inn’s Guminski added that his properties will carry out a combination of both. “There will be requirement to approach various market segments (e.g. public, corporate) in a different manner. VAT will be passed onto some of these segments, whilst in case of others, it will be absorbed by the hotels,” he explained.

One GM from the survey said: “VAT is so unclear we still didn’t plan what we will do about it, but whoever witnessed new tax implementation does understand that it cannot be passed onto end user.” In the survey, a couple of respondents said that their biggest challenge in the next year would be VAT.

When asked what their country’s government could do to improve the operating environment of their hotel, one GM said: “waive taxes and fees”, while another concurred. A few other GMs spoke of delays, and one said: “delay the VAT, freeze the 10% municipality fees”. One general manager even called for a “restructure” of the tax.

A question Hotelier Middle East asked to a pool of 30 members of the AHIC advisory board this year was whether the implementation of VAT from 2018 will affect hotel investment decisions — 47% said it would, while 20% were not sure yet. One-third said it would not.

On the topic of fees and taxes, Hamdani told Hotelier: “Currently, Ajman hotels pay a total of 10% for the municipality and tourism fee. The introduction of VAT in January 2018 will increase it to 15%, which will make a direct impact on the business and undoubtedly affect the major segments including the corporate segment and business travellers, online bookings, and walk-ins. At the same time, we have to absorb the cost to retain the businesses with us, specifically the leisure segment. Our three properties —Ramada Hotel & Suites Ajman, Ramada Beach Hotel Ajman, and Wyndham Garden Ajman Corniche — will not pass on the VAT, and absorb the costs for our leisure partners up to the first quarter of 2018.”

Also for the first time since running this survey, when asked which developments GMs consider to be their biggest issues affecting performance in the next 12 months, ‘taxes/additional fees’ was listed in the top three issues that would affect performance, with 56.41% believing that it would. As for the others, 76.92% said increased competition, and 51.28% said falling oil prices were performance affectors.

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