People, Travel

Incentives for Expanding Hospitality Industry

Incentives for Expanding Hospitality IndustryIncentives for Expanding Hospitality Industry

Discussions regarding constructing new hotels with world class amenities have been going around ever since the government mentioned boosting tourism as a top priority in its economic plans. The government is hoping to attract more tourists from around the world by creating better infrastructure and lodging.

Meanwhile, the government officials have advised investors to look at private sources for funding the new hotel construction projects, declaring that only the construction projects with more than 60% progress are eligible for government funds. Banks on the other hand are adamant to offer incentives for construction of new hotels since they are skeptical about their investment return. This has put the industry in a dilemma regarding funding for construction of new hotels.

In a meeting of hospitality industry associates held in Tehran Babataher hotel on Saturday, officials from the Iran’s Cultural Heritage, Handicrafts and Tourism Organization (ICHHTO) addressed some of the concerns raised by those associated with tourism and hospitality, as reported by Donya-e-Eghtesad newspaper.

Pointing to the interest shown by the Supreme Leader Ayatollah Seyyed Ali Khamenei and President Hassan Rouhani in developing the tourism sector to boost cultural interactions and economic growth, Vice-President and Head of ICHHTO Massoud Soltanifar said projects worth 8 trillion rials ($3 million) have been passed on for approval to the National Development Fund of Iran. He also hinted at possible formation of a new organization, with the approval of the Majlis, to bring all of the diverse activities in tourism sector under single management.

 500 New Hotels

Iran needs around 250 to 260 new luxury hotels in order to answer the need for sufficient standard lodgings. Noting that currently around 500 new hotel projects are going through different phases of construction, Soltanifar said if 20 to 25 of these projects reach completion every year, the goal is not far-fetched.

He also pointed to private lodgings as alternatives to hotels for accommodating the tourists and said the ICHHTO has taken up supervising these lodgings to ensure safety, hygiene and adherence to ethical values in these places. He suggested the Hotel Managers Union to manage booking of these accommodations in the holiday season.  

Deputy Head of ICHHTO for planning and investment, Saeed Shirkavand also acknowledged the government’s responsibility of allocating funds for tourism infrastructure and providing technical and financial aid to the tourism industry particularly because the private banks and financial institutions, being mainly shaped around profitability, are not interested in national development projects. Therefore, the deputy minister said the government has decided to pay the banks the 8% difference in interest rates on the loans given to investors on hospitality projects.

But, he said, the banks are still reluctant to give out loans for hospitality projects, citing concerns about timely repayment of the loans and the long duration of these projects as reasons. According to Shirkavand, the banks expect the government to bear the full risks of these projects, but the government is not abiding. After long discussions with bank managers, he said it was decided to put the bank’s satisfaction a priority while giving loans to hotel builders. This means that the incentives are offered only to borrowers who can satisfy the banks’ lending conditions.

Regarding construction of hotels in relatively remote areas which the private investors are not interested to take up, the deputy minister said discussions are underway with Mostazafan Foundation for construction of twenty new 4 and 5-star hotels in these areas.