Raising Hotel Rates Despite Low Demand

Experts say raising rates when hotel occupancy is low is counterproductive and may yield opposite results
The occupancy rate of Iranian hotels is less than 50%.The occupancy rate of Iranian hotels is less than 50%.

Despite the admission of hotel owners that occupancy rates are down, they are now preparing to increase room rates.

According to hotel industry news website, top hoteliers who previously refused to raise room rates have submitted requests asking for permission to implement hikes.

The website specifically names Hossein Siadatan, president of the Fars Province Hoteliers' Society, who has reportedly written to the provincial office of Iran's Cultural Heritage, Handicrafts and Tourism Organization, seeking to increase room rates in the south-central province by 20% in the next Iranian year (starting March 21, 2017).

Speaking to Mehr News Agency, Jamshid Hamzehzadeh, president of the Iranian Hoteliers’ Society, said hotel owners across the country have been asked to submit their proposed rate increase to the society for the second half of the Iranian year (starting September 22).

A little over a month ago, hotel owners slammed tourism officials for making false claims about hotel occupancy rates and claiming hotel occupancy is high because it makes them look good.

It did not take long for hotel owners to start pointing out the problems they were facing due to the spread of wrong information about occupancy rates, with Hamzehzadeh claiming that hotels were under increased scrutiny by the Iran National Tax Administration that has moved to implement jeopardy assessment.

This is undertaken when the assessment or collection of tax is determined to be in jeopardy. Under the circumstances, the tax authority is allowed to make an immediate assessment without following the procedures required for an ordinary assessment (such as evaluating the accounts) and file for tax collection without delay.

“On average, the occupancy rate of Iranian hotels is less than 50%, but claims by tourism officials have compelled tax authorities to put us under scrutiny,” Hamzehzadeh said.

Relying on these statements, tax collectors are “billing us without even assessing our books”.

“They’ve even billed a hotel for three times the tax they’re supposed to pay,” he said.


Hoteliers have long blamed tourism officials for ignoring vacation rentals, which they say are taking away their customers.

Due to their affordability, vacation rentals have become immensely popular in Iran among budget travelers and those traveling with family. While at first they were only found in northern provinces, such as Mazandaran and Gilan, vacation rentals can now be found all across the country.

"Hotels at 50% occupancy normally have two ways of increasing their profits: Either find a way to improve occupancy to 70%, or slightly increase the room rates," Mohammad Hossein Baqerian, a hotel industry researcher, was quoted as saying by

"But that only applies to hotels that are consistently half booked."

Baqerian said hotels whose occupancy keeps fluctuating or budget hotels whose main selling point is their affordability cannot benefit from increasing their rates.

"They basically end up pushing guests toward vacation rentals," he added.