Hotel Industry Shaping Up

Travel & Environment Desk
Hotel Industry Shaping UpHotel Industry Shaping Up

Hassan Rouhani, who had pledged to normalize ties with the international community and end the crippling economic sanctions during his presidential campaign, was elected in 2013 to deliver.

When Iran and the six major world powers (five permanent members of the UN Security Council plus Germany) reached a comprehensive agreement in last July in the Swiss resort of Lausanne to limit Iran’s nuclear program in exchange for lifting of economic sanctions, Iran’s top tourism official Masoud Soltanifar famously said that “no other industry will benefit from the nuclear deal as much as tourism.”

Iran has set itself an ambitious target of 20 million tourists a year by 2025, which should potentially generate $25 to $30 billion. The main obstacle, however, is its aging and underdeveloped infrastructure, particularly hotels. The country has just over 130 four and five star hotels, while industry insiders say it needs at least 400 quality lodging facilities to accommodate the projected 20 million travelers.

It has almost been a year since the landmark nuclear deal was signed. Let’s take a glance at how the agreement has helped bring major hotel brands to Iran.

  French Connection

French group AccorHotels became the first foreign branded hotel to set up shop in Iran after  the 1979 Islamic Revolution when they opened two hotels – Ibis and Novotel – last October near Imam Khomeini International Airport, 30km south of Tehran.

Although the UAE-based Rotana was the first international group to sign a deal to open hotels in Iran, Accor beat the Arab firm to the punch, unexpectedly announcing the opening of two midscale hotels. Rotana, which is building hotels in Tehran and Mashhad, is expected to launch its hotels by 2018.

Accor has also taken it upon itself to train middle managers and staff in an effort to improve the quality of hotel services in Iran; an area in dire need of further investment.

  Spaniards Reach Iranian Shores

In March, Spain’s Melia Hotels International announced in a statement that it plans to open a five-star property called Gran Melia Ghoo in a 130-meter tower in Salman Shahr, Mazandaran Province on the Caspian Sea as early as 2017.

Once the hotel is open, it will become Iran’s first foreign-branded seaside hotel in nearly 40 years.

The hotel will provide all of the luxury services and facilities expected of a five-star hotel, with seven restaurants and bars, over 1,300 m² of meeting and banquet facilities, two swimming pools, a spa, and diverse leisure and shopping facilities.

  Turkish Investment

With Russian tourists banned from traveling to Turkey and Europeans in two minds over visiting the Near East country, Turkey’s once-thriving tourism industry is in dire straits. The sector’s revenue dropped by 14.3% in the fourth quarter of 2015 and by 16.5% in the first quarter of this year.  

The government is struggling to get the key industry back on track. Ankara hopes to find a solution in Tehran, and they are willing to pay for it.

Last month, a trade delegation from Turkey comprising business leaders and investors agreed to build at least 10 hotels in Iran. The hotels are to be built in Tehran, Isfahan, Shiraz, Tabriz and Mashhad, all of which are among Iran’s most visited cities and suffer from insufficient lodging facilities.

  German Quality

German Luxury hotel company Steigenberger Hotels reached a deal with Iranian officials on Sunday to open 10 hotels in the next decade.

While details of the agreement remain in wraps, a source, who spoke to the Financial Tribune on the condition of anonymity, said the Abu Dhabi-based firm Lulu Group International will help finance the projects.

In addition to the abovementioned deals, there is plenty of interest from other firms to get in on the action.

The Middle East and North Africa branch of Louvre Hotels Group is close to signing agreements to open three hotels, with the group’s president for the MENA region, Amine Moukarzel, saying in May that the French group is in advanced talks with an unnamed Iranian investor to open a 300-room Royal Tulip-branded hotel in Tehran.

Furthermore, the Dubai-based Shaza Hotel, an affiliate of the prestigious Kempinski Hotel chain, is targeting entry within the next five years to open five hotels in Tehran, Isfahan, Shiraz, Rasht and Mashhad, while two other Emirati hotel operators, Crista Hotels and Jumeirah Group, are reportedly exploring the possibility of investing in Iran.

Still, some of the biggest hotel companies are holding back. UK-based InterContinental Hotels Group, owner of the Holiday Inn and Crowne Plaza brands, currently has no plans to expand to Iran, while US-based Hilton Worldwide Holdings is also holding off, despite seeing “significant potential for hospitality growth,” the company said in an e-mailed statement to Bloomberg in March.

While the UN, US and European nations lifted sanctions connected to Iran’s nuclear program in January, most American firms are still prohibited from exploring the Iranian market due to other sanctions imposed by Washington on Tehran.