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Iran's ambitious tourism plans.
Tuesday, 21st July 2015
Source : Joseph Fischer ~ Exclusive for 4Hoteliers.com

Exclusive Views: A huge potential for the global hospitality & Lodging Industry - A great Challenge and a dream for Iran; 

The deal struck between the world powers and Iran is great news for international hotel companies.

Supported by this historic agreement, Masoud Soltanifar - the director of Iran's Cultural Heritage, Handicrafts and Tourism Organization - ICHHTO, has stressed the importance of the tourism industry to Iran outlining aims to attract 20 million visitors a year by 2025, generating up to $30 billion in revenues. (Sorce: The Daily Telegraph Travel July 15th. Titled: "Iran hopes to welcome 20 million tourists a year following nuclear deal" by Lizzie Porter).

For the past 24 months, during the long negotiations between the P5+1 and the Islamic Republic of Iran, many of the global and regional hotel groups have already started doing their own researches on future development of hotel projects all over Iran.

Current Facts

Let me give you some basic facts about Iran's tourism infrastructure: Iran is a huge country with a population of approx.  80 Million.

The capital city " Tehran has a population of over 12 million.

Iran has 17 officially declared UNESCO World Heritage Sites.

According to the World Travel and Tourism Council (WTTC) Iran tourism industry contributed 6.1% of GDP in 2013.

Visitor exports generated US$ 1.6 BN.

In 2013 - 2.9% of total investment was in the tourism industry

Number of visitors to Iran: According to published data by Iranian governmental agencies Iran received 4.8 million foreign tourists during the fiscal year ending 20 March, 2014. According to the same data, 2.5 million tourists visited for religious reasons.

During the past decade, the main two reasons to travel to Iran were: Religious tourism and corporate tourism.

The hotel infrastructure in Iran is poor and dilapidated.

The most recent count showed that the Republic of Iran has a total of 640 hotels compared to a similar size and population neighboring country " Turkey with 3,479 hotels or even Iraq with 1,611 hotels.

The full picture can be seen in Teheran, a metropolis of 12 Million inhabitants which offers a total of 96 hotels out of which, only 13 hotels are categorized as "Four and Five Stars". The total number of 4 and 5 Stars hotel rooms in Teheran is just over 3,000 rooms.

(Sorce: TRI Hospitality Consulting " Awaiting the Gold Rush May 2015) 

Current Interest

Some hotel groups didn’t only focus on research and went along and signed deals.  The UAE based Rotana group was the first hotel group that officially declared its intentions to operate hotels in the Islamic Republic. Currently, Rotana has 4 projects under development, 2 in Teheran and 2 in the city of Mashhad.

Other UAE based hotel groups also show growing interest in Iran, but no concrete deal has been reported yet.

In the few days that passed from the signing of the agreement, some senior executives from global hotel groups- The French based Accor and the US Based Marriott were making clear statements about their interest to enter the lucrative Iranian hotel market.

Accor is being said to have already secured a project that is currently being developed under a local brand called Axis. It is only logical to assume that once the sanctions will be officially lifted, this hotel will be re-braded with one of the Accor international brands. 

Who are the hotel groups that have the greatest potential in Iran?

In my view, the groups that have the greatest potential to have projects in Iran in the very near future are UAE " Based operators as well as individual and institutional hospitality investors.

  • Rotana
  • HMH
  • Jumeirah
  • Katara Hospitality

The UAE has a proven track record of working in the past with the Iranians.

The UAE Based hotel operators are the nearest to Iran in terms of physical distance and understand who to work in a Muslim country under the Islamic Halal laws.

All the research and know-how is easy to obtain - Feasibility studies, technical know-how as well as project management.

The second in line after the UAE based groups are the Turkish hospitality groups.

Turkish hotel operators were amongst the first to enter Irbil in Kurdistan/Iraq. Before that, Turkish brands developed hotel projects in Azerbaijan, Kazakhstan, Georgia, Turkmenistan, Tajikistan and The Russian Federation.

  • Dedeman Hotels
  • Rixsos hotels
  • Divan Hotels
  • Merit Hotels
  • Kaya Hotels
  • Marmara Hotels

The Turks have several huge advantages to bring onboard. In many cases they are involved with their own project development and construction and technical engineering companies. In some cases they are JV partners with the local developers. Turkish hotel operators are used to develop and operate in developing markets. They do understand how to operate hotels under Islamic laws and regulations.

The third tier of hotel groups will be Asian hotel brands

As we have seen in the last 12-18 months, China based hotel owners/operators as well as investors show great appetite for hotel chains and hotel assets.

Iran is bound to become one of China's trade partners and as such, the Chinese will have a huge interest in getting a piece of the 'booming' Iranian hotel industry.

The Chinese could bring to the table: project financing, construction companies, technical know-how and if needed, they will enter JV's.

Clearly from all Asian nations, China will enjoy the biggest share of the development in Iran in General and in its tourism industry in particular. It is not only China that will take its share. I can see also Thai companies, Indonesian and Malaysian hotel operators entering the Iranian hotel market. A good example is the Malaysian based budget chain TUNE Hotels which was developed by the owners of ASIA'S largest LCC " Air ASIA

  • Homeinns Hotel Group
  • Plateno Group
  • Shanghai Jin Jiang International Hotels Group
  • Huazhu Hotels Group (China Lodgings Group)
  • GreenTree Inns Hotel Management Group
  • Mandarin Oriental (HK)
  • Peninsula  (HK)
  • Shangri La
  • Dusit Hotels (Thailand)
  • Amari Hotels (Thailand)
  • Minor International Hotels (Thailand)

The great advantage that most if not all Asian groups bring to the table is the fact that they are not restricted "Asset right or Asset light" strategies. Asian owners actually like to invest in the real-estate.

The forth tier of hotel groups will be selective European hotel brands

Following last Saturday's speech by Iran's supreme leader - Ayatollah Ali Khamenei in which he said among others “Our policy toward the arrogant U.S. government won’t change at all,” It is difficult to see how US based brands such as HILTON, HYATT, MARRIOTT, STARWOOD, RADDISSON AND IHG will enjoy the tourism boom expected in Iran.

Europeans however will be more welcome. As I mentioned before, The French operator Accor is already involved in projects in IRAN.

Swiss, German, Austrian,Spanish and Maltese operators will be most welcome.

  • Kempinski Hotels (Swiss)
  • MOEVENPICK Hotels (Swiss)
  • SWISSOTELS
  • Swiss-Belhotel International
  • Steigenberger Hotels (German)
  • Maritim Hotels (German)
  • MotelOne (German)
  • Vienna International (Austrian)
  • Melia Hotels (Spanish)
  • NH Hoteles  (Spanish)
  • Corinthia Hotels (Malta)

It was crystal clear in the statements made by Iran's supreme leader that the distrust between Iran and America isn't over and won't be over anytime soon.

As a result, it would be most logical to assume that if having a choice the Iranian business community would prefer to deal with non-American brands rather than with known American brands.

Having huge opportunities also puts great challenges for hotels and developers alike:

  • Project financing and difficult financial system which was severely crippled by the sanctions 
  • Bureaucracy and 'red-type' in Iran are notoriously known
  • Corruption
  • Very different Legal system
  • Shortage of know-how and equipment
  • Need of infrastructure development to support the construction of many hundreds of new hotels. New roads, Airport terminals, Runways, new modern western aircrafts

On the short term, it is clear that growing demand will clearly out-pass any additional new supply. Accommodations prices will sky-rocket.

The one solution fast and easy to put in palace will be the introduction lodging sharing-economy solutions such as Airbnb to Iran. 

I won't be completely surprised to read in the next weeks to come that Airbnb is entering Iran. Just a few months ago they moved on Cuba after the lifting of the sanctions so Iran could be next…   

This is strictly an exclusive feature, reprints of this article in any shape or form without prior written approval from 4Hoteliers.com is not permitted.

Joseph - Yossi - Fischer the CEO of Vision Hospitality & Travel - international lodging & Travel Solutions

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