Years of strained international relations has allowed Iranian hotels to monopolize the hospitality industry in the absence of foreign competition, leading to a palpable drop in service quality and a steep rise in room rates. That could now well be a thing of the past.
The lifting of economic sanctions last month and Tehran’s growing rapprochement with the West has helped improve Iran’s global image and apparently compelled foreign firms to take notice of the country’s nascent travel market.
The French company AccorHotels, the world’s sixth-largest hotel group, was the first international group to set up shop in Iran, opening and managing two hotels — Ibis and Novotel — at the Imam Khomeini International Airport south of Tehran last October.
“When international chains expand their business into Iran, it will undoubtedly create an environment conducive to progress for Iranian hotels,” Tasnim news agency quoted Mohsen Qarib, chief executive of the Iran Touring and Tourism Investment Company, as saying.
He said the presence of five-star hotels managed by foreign firms will leave domestic hotels with no choice but to wake up from their long slumber and catch up with the competition, and that includes improving quality.
“When five-star international hotels start operating in Iran, top rated domestic hotels will shed one or two of their stars,” Qarib noted.
There are just over 1,100 hotels in Iran, only 132 of which boast four- and five-star ratings. In order to meet its stated goal of 20 million annual visitors a year by 2025, Iran needs 400 top quality hotels.
The majority of hotels in Iran are old and need renovation.
“Most of our facilities are about 40 years old,” Qarib said of hotels owned by the ITTIC, adding that his company is planning to open ten new hotels in the next five years across the country.
Cumbersome Regulations
It costs about 2 trillion rials ($55.5 million) to build a midscale hotel, a considerable sum of money the industry needs. But cumbersome rules and the bloated bureaucracy deter foreign investors, Qarib said.
“International financiers face problems in Iran that they’ve never have to deal with anywhere else,” he said. “Restrictions need to be lifted and regulations eased to incentivize investment in the sector.”
Numerous international groups have expressed interest in doing business in Iran.
Spain’s Melia Hotels International last summer announced interest in the Iranian market, with Maria Zarraluqui, the chain’s managing director for global development, saying that the huge demand for more hotels in Iran has not been met.
“We see the potential. We see that there is huge internal demand that is not well met at the moment. So Iran is a market we would like to explore,” she said.
According to Zarraluqui, Melia Hotels is interested in introducing to Iran its midscale brand Innside, and its upscale brand Melia.
The UAE-based Rotana Hotel Group has a brand aimed at Muslim travelers – Rayhaan Hotel and Resorts – and the company is preparing four properties to open in Tehran and the shrine city of Mashhad by 2018.
Mashhad, in northeast Khorassan Razavi Province, is home to the mausoleum of Imam Reza (PBUH), the eight imam of Shia Muslims. The second most populous city, it is Iran’s top destination for religious tourists and attracts 25 million domestic and foreign tourists throughout the year.
“With the lifting of sanctions, we are sure that all developers and operators will be racing to secure their position in one of the world’s largest untapped markets,” says Omer Kaddouri, Rotana’s president and chief executive.
Furthermore, Crista Hotels and Jumeirah Group, both of which are based in the UAE, are reportedly preparing to invest in Iran.
