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How to Setup Hotel & Tourism Business in Bangladesh

The hospitality industry has been at the heart of economic growth of Bangladesh in recent years, contributing to 9.3% of the total GDP of the country. With the government taking initiatives to ease travel to the major tourism spots of the country such as the Dhaka-Chattogram Highway; Padma breeze etc, Bangladesh has seen significant increase in domestic travel and arrival of foreign tourists in the country. As a result, the major tourist spots have seen growth of hotels to meet the increasing demand. In addition, the burst of affordable and luxury resorts has been the much required boost to the national economy to reach the goal of middle-income earning country by 2021.
How to Setup Hotel & Tourism Business in Bangladesh
Tourism can be a major, if not the biggest, sector that can drive the growth of an economy, as we can see in case of countries like Thailand, Nepal in the South-East Asia. Tourism generated 10.4 per cent of all global economic activity, which contributed to generate 319 million jobs, representing one in ten of all jobs globally and is responsible for one in five all new jobs in the world over the last five years in a report mentioned in  The World Travel and Tourism Council 2019 . A few, out of many, tourism sites worth mention, in Bangladesh, are the Sundarban, world’s largest mangrove forest in the south of the Country along with the world’s longest natural beach at Cox,s Bazaar. The country also has Sylhet in the north-eastern part of the country with its hills of tea plantations. To the north of the country, archaeological sites are the main tourist attractions. The International hotel chain Marriott, Hilton, Novotel, Sheraton, InterContinental Holiday Inn, Marriott Courtyard, Radisson Blue and Westin are few of the foreign investments in the hotel worth mentioning. The local investors are also playing a vital role such as  DuSai Resort & Spa in Maulvi Bazar, The Peninsula Chittagong, Hotel Valley Garden and Nazimgarh Garden Resort in Sylhet, Long Beach Suites Dhaka, Six Seasons Hotel in Dhaka, Long Beach Hotel at Cox Bazar, Grand Sultan Tea Resort & Golf  at Maulvi Bazar. Bangladesh is becoming a success story in the hospitably industry. Political stability has also become a key factor for the development of this sector and the Government hopes that introduction of hassle free on-arrival visa facilities will ease the visa system for foreign nationals, including those of Bangladeshi origin.  As foreign investments and donations pour into the Bangladesh economy, top officials of MNCs, NGOs are more prone to visit the country. Recent boom in the number of resorts like Bhawal Resort, Sara Resort, The Base Camp are in high demand amongst people who like to travel just outside Dhaka, like Gazipur, Sylhet etc and the standard of the service provided in these places are quite high, but is bound to take a toll on the wallet of the people visiting. Yet these places are booked fully almost throughout the year – an indication that the disposable income of the general public is on the rise.

The role of travel agency in Tourism is, the travel agencies are basically recognized as an “image manufacture of a nation” since it is the credit of travel agencies which unfolds the attractions and wonders of a nation and produce them to the travelers in a lucrative way. A travel agency usually acts an agent and sells travel products and services on behalf of the service provider eg airline company or the hotels.   Travel agencies provides international and national travel packages to customers tailoring to their needs so that they can embark in their journey of tourism. They provide wide range of options of travel destination such as tour bookings, fight reservations, airline ticketing, cruise line service, railways service, accommodation bookings, car hire, visa processing facility and customized tour package for small groups or couple packages etc. 

Licensing and Registration Procedure for establishing a Travel Agency/ Hotel

The hospitality industry and tourism sector are interdependent on each other; the growth of the hospitality industry depends on travel and tourism and success of the tourism sector is contingent on a customer satisfaction, recreational facilities and quality of service provided at the hospitality industry. Tourists require facilities like accommodation, food beverages and recreation facilities etc. and all of these facilities are available at the hospitality industry. As a result a lot of tourism companies started liaising with the hospitality industries in order to offer their hospitality services in their tour packages. Anyone wishing to enter into the hospitality and the tourism industry has to obtain separate registration and licensing requirements for each sector. The registration and licensing procedures briefly for each sector are to be discussed. The first step of starting a business is to establish an entity for commencing business, either in the hotel or the tourism industry, in accordance with the laws of Bangladesh. The options available are; limited liability company, sole proprietor and partnership, where foreign investment is only possible for limited liability company.

Company

The procedure of incorporating a Company commences with the obtaining of the Name Clearance certificate from the Company House, Registrar of Joint Stock and Companies (RJSC) along with the preparation of the Articles and Memorandum of Association of the Company and Form XII and FORM IX. The signed MOA and AOA, the relevant forms mentioned above along with the requisite fees needs to be submitted with the RJSC. Upon finding all correctness and the authenticity of all the documents, the RJSC shall issue a certificate of incorporation along with RJSC certified memorandum and article of association which shall confirm that the company has been duly registered. The procedure is slightly different if a foreign shareholder is involved, as a bank account needs to be opened in order to receive the foreign shareholders’ capital investment before the documents are submitted to the RJSC. 

Partnership 

A partnership business can be established by executing a partnership deed between the partners and registering the partnership at the Registrar of Joint Stock Companies And Firms (RJSC). 

Sole Proprietorship – 

This type of entity is established by one person only and has no partners. In order operate business through such entity, one has to obtain trade license from the relevant city corporation. A foreigner cannot operate a sole proprietorship business. 

Once the entity has been formed, the following step would be required to be obtain the various operating licenses required for the hotel industry and the travel agency. If an entrepreneur wishes to establish any Hotels of three, four and five-star categories, then he shall need to apply for a hotel license from Ministry of Civil Aviation and Tourism (MoCAT) or if he wishes to set up any Hotels of one and two-star categories, then shall have to apply for a hotel license from District Commissioner (DC) with the relevant documents and processing fees. 

On the other hand, if an entrepreneur wishes to incorporate a travel agency then the license to run a travel agent business must be obtained from the Ministry of Civil Aviation and Tourism. The other licenses required, even though not mandatory, for obtaining for business would be Association of Travel Agents of Bangladesh (ATAB) license and Association of International Travel Agents (IATA) license. 

The other perquisite licenses which needs to be obtained for both the Hospitality Industry and the Travel Agency shall be TIN certificate and the Value Added Tax (VAT) Certificate which needs to be attained from the online portal of the National Board of Revenue (NBR) and the trade license which needs to be obtained from the respective city corporation/local government office.

LEGAL ISSUES 

The entire process of incorporation of an entity for a hotel industry or a travel agency gives rises to a lot of legal issues which needs to be carefully addressed in order to avoid legal implications. While incorporating a company/sole proprietorship or partnership, it is essential that all the original signed  documents along the relevant forms are to be submitted at the relevant government authority or else the application for incorporation of the entity shall fail without a doubt. The annual filing requirements, are declared mandate for the entities such has renewing the trade license at the respective city corporation.

Essentially, hospitality and tourism even though interlinked are diverse from each other in terms of regulatory governance. Any entrepreneur willing to invest and run a hotel business must comply with the Bangladesh Hotel and Restaurant Act of 2014 and the Bangladesh Hotel and Restaurant Rules 2016. 

Legal issues also arise upon application of the hospitality laws on the hotel owners of Bangladesh. Hotel owner must ensure that he chooses a commercial establishment rather than a residential establishment for the setup of the hotel which must consist of at least 10 bed rooms for the guest to stay there with or without food and other services in exchange of money and irrespective of the fact that the name of the entity, such as motel, guest house, resort etc. It is obligatory on the hotel owner to attain a registration certificate and license in order to run the hotel business and a license should be obtained as soon as possible within the first 2 years from the date of issue of the registration certificate.
 A register inclusive of all the necessary information of a guest must be maintained by every hotel in Bangladesh as mandatory compliance requirement imposed by the the Bangladesh Hotel and Restaurant Rules 2016. The register shall comprise the following information of the guest which includes time of arrival and departure of the guest, phone number, current and permanent address, National Id or passport number or any other identification car number. In case of foreign guest, the hotel shall keep a copy of the passport pages where the name, address and visa of such guest is present. 

The penalties imposed on the hotel industry are pretty strict and as such the hotel owner must at all times be alert before violating any law of the hospitality industry. The punishment applicable will be for a period of 6 months’ simple imprisonment or a fine not more than BDT 2 lakhs or both in case any person or owner breaches any law under the Bangladesh Hotel and Restaurant Act of 2014. 

Also, travel agencies owners must ensure adherence to a Bangladesh Travel Agency (Registration and Control) Act, 2013 Bangladesh Travel Agency (Registration and Control) Rules, 2014 while conducting travel agent’s business in Bangladesh.  Obviously, the license must be obtained from the registration authority, the Ministry of Civil Aviation and Tourism and it is an obligatory requirement for the travel agency to retain the travel agency licensing certificate safely and conspicuously at the business premises or office of the travel agent. Additionally, legal compliances in relation to promptly providing information in regards to the business affairs of the travel agency is mandatory on the travel agent upon instruction of the government or the registration authority. Non-compliance with any of the laws and rules related to Travel Agency shall adversely affect the owner and he has to face serious legal implications amounting to not more than 6 months imprisonment or fine not exceeding BDT 50,000. 

Evidently, both the hospitality industry as well as the tourism industry is labour intensive and huge amount of skilled and unskilled labours are being employed in these industries and as such quite naturally it involves legal issues related to the working hours, overtime pay, leaves and termination benefits of employees. Other than that, every employee employed at these industries regardless of their nationality must have an appointment letter executed with the entity. Many foreign employees are employed at the hotel industry eg consultants, chefs, waiters, bar tenders and in such cases they must be employed as per the labour and the Immigration laws of Bangladesh. 

The entities in this sector shall also have to be very compliant with the Consumer Rights Protection Act 2009 as any valid complain brings strict consequences as per the said Act. The purpose of the Act is to protect the consumers from any violation of their rights and to monitor the standard of the goods and services which are to be provided. As this is an important industry for the local economy, any valid complaint from the respective consumers are dealt diligently and if proven strict measures are taken by the authority as per the applicable laws.

Furthermore, as per the Bangladesh Standards and Testing Institution (BSTI) regulations there are 71 Agricultural and Food Products which are under the compulsory Certification Marks (CM) scheme of BSTI which in other words means that marketing of any of these items needs conformity certificate of Bangladesh Standard from the BSTI. There are imported 23 Food Products required mandatory certification before customs clearance. If any hotels serve any of the products from these two lists, to its customers, it must check whether the products have the Certification Marks on it. 


INTRODUCTION OF FMA AND ITS SERVICES 

FM Associates is a renowned law firm in Bangladesh which endows a widespread of legal services for both domestic and international clients. It is full serviced law firm led by a dedicated team of professionals collaborating together to provide the best legal solution for their clients. FMA has earned the status of one of the leading law firms in Bangladesh due to their several years of experience, skill and knowledge in key practice areas. 

FMA, since its inception has created a trustworthy relationship with each and every one of its clients. To provide quality legal services to the Clients is the motto of the firm. FMA has assisted Hotel owners as well as Travel Agency owners in the entire procedure of the incorporation of the entity, obtaining the relevant licenses and approvals on behalf of the client from the relevant government authorities. 
Many a times, anomalies are found in contracts/service contracts executed between the hotel industries and the travel agencies regarding the referral services to be provided by the travel agencies to the hotels in exchange of commission. FMA supports entities in reviewing and drafting these contracts/service agreements according to the needs of the clients 

In relation to the immigration services required for foreign employees employed by the entities, FMA’s immigration law team can assist the entity to obtain the E-visa (employment visa) recommendation letter and work permit on behalf of the foreign employee and can also assist to obtain the extension of the work permit and the E visa for the foreign employee. The service shall include drafting all the necessary application and documents and collecting the relevant documents from the foreign employee and the entity; and submitting the same to the relevant government authorities and also liaise with them to obtain the necessary work permit and visa extension.
The legal team of FMA, due to their years of experience in employment law, has attained proficiency in drafting and reviewing employment agreements/appointment letters of employees for such entities. Their experience in labour matters is exceptional. They have assisted clients via legal opinion on the available termination options, resignation procedure and dismissal procedure etc .

FMA also provides legal opinion to the clients, in relation to implication of laws and its impact in various matters which enables them to take informative business steps by considering the legal aspect. Additionally, FM Associates also provides due diligence report to the interested clients for their entities which flags out all the legal requirements which are required to be followed and also non – compliances, if any, which needs to be fixed. 

Furthermore, FM Associates has a very strong litigation team which assist and represent the clients to defend/file disputes at court or tribunals in relation to all types of litigation. 
 
EFFECT OF COVID 19

The hotel and tourism industry is amongst the many sectors that have been affected gravely by the COVID-19 virus. With countrywide lockdown in place and travel restrictions to and from the major cities of the country – people are staying indoors and even if restrictions are lifted in the near future – they will not be encouraged to take a trip to Cox’s Bazaar or Sylhet even during the Eid vacations. This means all the industries that depend on local and foreign tourism in these areas – hotels, food, transport will be impacted for quite a long period of time.  Hundreds of small hotels, motels, restaurants, and resorts will close down which will create a vacuum in the employment sector of Bangladesh as thousands of people will lose their jobs. As the time period of these travel restrictions increase, the loss incurred by this sector will increase too. On-arrival visas for tourists has also been halted from March 31 and has not been lifted yet. As countries all over the world are curbing all incoming and outgoing international flights, with little possibility that they will resume in this year. While one can only be hopeful that they will resume, it is quite unclear what regulations or policies will be undertaken to do so. Bangladesh is to host the 2020 Women's Twenty20 Asia Cup in September of this year and while such events are a huge boost to the hotel and tourism industry – with matches being held all over the country and teams using hotels, visiting popular tourist spots in the time between the games –  the authorities are quite unsure whether or not to go ahead with the tournament. Additionally, foreign nationals are being withdrawn by their respective countries on a regular basis which means the hotel business is also seeing a slump in their revenue. 
Cancellation of trips, airline, bus and railway tickets including hotel reservations are leading to a lot of small hotels and travel agencies to shut down. The big shot hotels and travel agency owners are trying real hard to cope up with this blow that they have received in the form of  Covid 19. They are either not paying the employees or opting for a pay cut from their salary. Nevertheless, the correct procedure should be laying off the employees or going directly for retrenchment. Under the layoff scheme, the employees who have completed at least 1 (one) year of service shall be entitled to the compensation which shall be half of the total basic salary of the employees and full amount of housing allowances. If the employers do not wish to retain the employees, they may terminate them on the ground of redundancy.  

Taxation

General rate of tax is 32.5% currently in the laws of Bangladesh. Several exemptions are in place for constructing a physical undertaking of a tourist industry. Nominal requirements for a limited company formed locally includes a number of reporting to be done to NBR, such as: Opening a TIN, Monthly Tax deduction statement, Half Yearly Withholding Tax statement, Yearly statement related to tax return submission of its employees, Yearly statement related to salary disbursed from company to its employees, Quarterly Advance tax deposition, Yearly Tax return submission, attending appeal/hearing session as required on behalf of the company, Monthly VAT return etc. FMA can advise and assist to satisfy all regulatory compliances to enable the company to run smooth and hassle free.  

CONCLUSION 

As we continue to improve infrastructure services, bring down the expensive hotel rates and increase availability of healthy and affordable food at the tourist hubs of the country like Cox’s Bazar, St. Martin Island, ancient Buddhist temples in the north while focusing on sufficient marketing policies are in place – the next 5 to 10 years holds huge prospects for this sector. Yet there is still scope for accommodation facilities to improve in all the above stated places and even more.  Currently there are no standard educational institutions involved in the training of management personnel for all the tourist attractions and hotel all over the country – a sector which can use an injection of institutions which would be able to do so.

EXECUTIVE SUMMARY

The Hotel and Tourism industry in Bangladesh has a huge potential as the demand of the local market is continuously growing. The continuous urge to experiment with different cuisines increasing the demand of restaurants.   
To become a part of this industry there are various options of entities, Sole Proprietorship, Partnership Business and Private Limited Company are available for investors. To create a business-friendly environment, BIDA has now open up a one stop services center for investors where all the services from incorporation of entities to post incorporation licenses are available 

FM Associates as a full-service law firm provides all sort of legal and financial assistance starting from registering entities to obtaining required licenses; drafting agreements and notices to providing annual compliances and litigation services. FM Associates is enriched with experienced Barristers and Advocates who have expertise in different legal sectors which enables to provide the required services with high standard and the clients can obtain all the essential and ancillary legal services under one umbrella.  

Corona Virus Pandemic has hit this industry to the maximum due to lockdown imitative taken by the government before the festive occasion of Eid and Ramadan (i.e. the two pick period of business in Bangladesh). Due to continuing lockdown all hotels and travel agencies are almost closed to ensure the safety of their employees and customers and as a result business as whole is severely hampered. However, it is expected that the lookdown shall be eased soon, and business shall resume though not in full swing. 

Nonetheless, it is expected that, as the epidemic starts to decline, business shall resume and find its steady growth in a short period of time.