Establishing A Hotel In Cyprus

Cyprus, being a well-established tourist destination, has a robust hotel industry. The economic sector of tourism and hospitality is one of the largest sectors in the country, with a GDP contribution of almost 15%, expected to further grow up to 25% by 2030. This has led hotel chains and leading hospitality groups to invest and to establish their presence in the country. Large scale projects and luxury developments such as golf resorts, marinas, and the casino resort, have further enhanced the island's hospitality industry.

Tourists and business visitors enjoy a variety of hospitality options ranging from city hotels, luxury resorts, wellness hotels, agricultural accommodation, traditional guesthouses, boutique, and beach hotels. The new label of "historic hotels" has been introduced earlier this month by the Deputy Ministry of Tourism to further enhance the industry, and to showcase the country's historical and architectural heritage.

Hotels must have a valid licence to operate. The Cyprus Law 34(I)/2019 Regulating the Establishment and Operation of Hotels and Tourist Accommodation Establishments (the "Law"), as amended, provides for different types and categories of hotels in Cyprus. As per the Law, the definition of a hotel includes any accommodation which provides temporary residence by profession, with or without food, having a valid licence for operation.

Categories and classes

Hotels are categorised by the Deputy Ministry of Tourism, following inspections and evaluations, to the following classes: 5 stars (*****), 4 stars (****), 3 stars (***), 2 stars (**), 1 star (*), and no stars.

The final classification of the hotel is conducted by the Deputy Ministry of Tourism within two weeks from the issuance of the operation licence. The classification is renewed every three years following the submission of an application for renewal of classification which should be submitted to the Deputy Ministry of Tourism six months before the expiry of the classification validity period.

The classification is based on a number of criteria including the hotel's facilities and amenities, food and entertainment options, size of reception and common areas, size of rooms, cleaning and hygiene, concierge and business centre services, qualifications of the hotel manager and of the staff.

A preliminary classification, which is valid until the issuance of the final classification, is granted by the Deputy Ministry of Tourism based on the Building Permit with regards to the number of rooms and the quality characteristics of the hotel.

New trends

Over the years the hotel industry has seen new trends, adjusting to the market's conditions, as well as to customers' changing needs. To reflect the new trends in the industry, the Law introduced new hotel categories as follows:

• Boutique Hotels: A hotel falls into this category if the number of the hotel's rooms does not exceed 80, or 100 in the case of a city hotel. Moreover, a boutique hotel meets at least one of the following criteria:
  1. Is comprised of a particular theme or a particular design of decoration and/or architecture throughout the establishment, or
  2. Each of its rooms has a different themed design, or
  3. The hotel defines a specific decorative theme for each communal room.

• Suite Hotels: A hotel falls into this category if 80% of the hotel's rooms are at least 40 sqm. in size.
• City Hotels: A hotel falls into this category if the number of the hotel's rooms does not exceed 100 and the hotel is located within an urban or a Central Business District area.

Licensing

The licence to operate a hotel in the Republic of Cyprus is granted by the Deputy Ministry of Tourism. Such licence is issued within two months from the date of submission of a completed application, provided that the relevant criteria are met. The licence is valid for a period of three years from the date of issuance, and can be automatically renewed for a further three years, provided that the required documentation is presented and the relevant application fee is settled.

The licence for the hotel is issued to the entrepreneur, i.e. the individual or the legal entity disposing financially the hotel and having the responsibility for the hotel's management. The entrepreneur may appoint a hotel manager to undertake the administration and management of the hotel. In such a case, the manager undertakes the entrepreneur's responsibilities. The licence is transferable to the beneficiaries of the entrepreneur.

To secure a licence of operation, the entrepreneur should submit the relevant application form along with the required certificates (e.g. Health Certificate, Electrical and Mechanical Services Certificate, Fire Department report, confirmation by the Department of Labour) depending on the hotel's facilities.

The hotel must have secured a Building Permit, a copy of which is submitted together with the application. The entrepreneur should settle the application fee which is defined by the Regulations issued in accordance to the Law. In the case of legal entities, the company's corporate documents must be submitted (Certificate of Incorporation, Certificate of Directors and Secretary, Memorandum and Articles of Association). The details of the hotel manager are provided, along with their academic qualifications and professional experience. Hotel managers of three-star and above hotels must possess a degree or diploma from a tertiary institution or college/university.

The hotel may operate only after the completion of construction of the main building and of the surrounding areas. The Deputy Ministry of Tourism may inspect a hotel, at any given time, to confirm the existence of a valid licence and compliance with the terms of such a licence.

Naming

The hotel's name is the hotel stated on its licence of operation. The suitability of the hotel's name shall be examined by the Deputy Ministry of Tourism. A name might be rejected if it is deemed to be contrary to the public order.

Penalties

Any person who uses the term "hotel" or any relevant term of the same meaning without having the licence of operation, or who maintains or operates a hotel without a valid operation licence, can be subject to imprisonment of up to one year or a penalty of up to (E_5,000, or both, and any subsequent violation following the person's conviction could result to further penalty of €200 per day of violation. The Cyprus courts have ruled that in such cases, in addition to the other penalties, an order for the termination of the hotel's operation for up to two months, can be issued. An administrative fine might by imposed by the Deputy Ministry of Tourism in case of violation of the Law, of up to €2,000 and up to €4,000 in case of repetition or continued violation.

Extension for license

As per the recent amendment in the Law in May 2024, a person operating a hotel, is obliged to secure a licence of operation until the 31^stDecember 2024 as per the provisions of the Law and the relevant Regulations. A grace period is provided until the 31^stDecember 2025 in cases where the entrepreneur submits to the Deputy Ministry of Tourism by the 31^stDecember 2024 the architectural plans (as built) stating the actual building structure of the hotel, provided that the hotel has been granted a Building Permit.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.