Economy, Business And Markets

Hotel Constructions Not in Sight

Hotel Constructions Not in SightHotel Constructions Not in Sight

Even though enough licenses have been issued for building new hotels in Tehran, there are surprisingly few constructions in the capital.  

Down and declining for over two years, the housing market has been experiencing a visible stagnation in the number of new construction permits. Though the Tehran mayor claims that the amount of hotel construction permits exceeded other sectors, yet there is no sign of hotel building in the sprawling metropolis, the Persian economic news website Eqtesad News reported on Friday.

Over the past months an increasing number of reports have emerged to the effect that all hotels in Tehran are overbooked for up to two years, mostly by forging businesses and their agents trying to get a slice of the new economic pie.

However, economists and market analysts have conflicting views about the wisdom of investing in new hotels; some claim that building hotels in the present declining pattern of the housing market would indeed be a risky enterprise.  Others contend that hotels have predictable returns compared to other sectors of the economy that are experiencing low and slow demand.

Despite the views that the tourism and hospitality industry in and outside Tehran has not grown well enough to call for new hotels, the number of tourists has been gradually increasing from early this year, apparently due to the success of the nuclear negotiations between Iran and the six world powers over the former’s nuclear energy program.

Tehran Mayor Mohammad Bagher Ghalibaf says that the Article 5 Commission (a provincial commission set up by the Supreme Council of Urbanization and Architecture tasked with studying and enacting urbanization plans) has allocated huge funds for hotel construction.

Furthermore, his office has issued the permits for new hotels and granted loans but to no avail.

Iraj Rahbar, head of the Society of Mass Housing Builders of Tehran told the news outlet that mass builders are eager to enter the hotel building market but the amount of loans are not enough for the expensive projects.

 “This business usually yields high profit margins and privileges, but there should be more financial incentive that encourages investors and ensures safe returns.”

Rahbar said the former government had urged the housing construction firms to also take part in helping develop the dormant tourism industry by building 5-star hotels and other tourist hubs, “but the whole discussion was soon consigned to oblivion.”