Hoteliers Demand Municipal Tax Breaks

Hoteliers say their establishments are at a disadvantage because alternative lodging facilities do not pay taxes and are more affordable
Hoteliers claim municipalities use every excuse to tax hotels.Hoteliers claim municipalities use every excuse to tax hotels.
Hotel owners say the removal of municipal tax will help reduce room rates by 35%

The Iranian Hoteliers’ Society has renewed calls for striking down municipal tax, arguing that doing so would help reduce room rates by 35%.

Speaking to ISNA, Jamshid Hamzehzadeh, the president of the society, said municipalities “pose the biggest challenge” for hotel owners.

“They use every excuse to tax you, from setting up billboards to expanding the wastewater network,” he complained. “This has hiked room rates by around 35%.”

Blaming vacation rentals and state-run schools that function as temporary lodging in peak travel season, Hamzehzadeh said hotels face an impossible situation because “vacation rentals and schools don’t pay taxes, which make their prices cheaper and more appealing”.

Labeling the competition “unfair”, the hotelier warned that hotels risk “going bankrupt” unless a comprehensive plan is devised to put a limit on the number of accommodations in any given area based on the region’s potential.

“Vacation rentals and alternative lodging facilities must be spread out across the country to prevent their concentration in one area,” he added.

Hamzehzadeh’s call for more tax breaks comes only three months after the government announced it was giving new hotel construction 100% tax holidays for three to 13 years, based on the location of the business.

The hoteliers’ society has long been critical of vacation rentals, constantly blaming them for the continuing decline in occupancy rates and accusing tourism authorities of turning a blind eye to their presence.

Nevertheless, experts say it is the right of any tourist to be able to select between a vacation home, a hotel, or other types of accommodation, and the elimination of alternative facilities from the tourism market is an infringement on travelers’ rights.

They say instead of questioning the operation of vacation rentals, policies must be devised so that these homes are officially recognized, compelled to meet standards and abide by regulations.

Last week, hotel owners said occupancy rates had fallen by 10% since the current Iranian year (started March 20, 2016), blaming their poor performance on affordability of alternative lodging facilities such as repurposed state-run schools and vacation rentals.

  Losing Stars

Tourism experts and even officials are adamant that an Iranian hotel’s star rating is rarely reflective of its amenities and service quality. They say tourists have no guarantee that they will get their money’s worth during a costly stay in a hotel.

In September, Morteza Rahmani Movahed, tourism deputy at Iran’s Cultural Heritage, Handicrafts and Tourism, said it will take a while for hotels across the country to reach acceptable international standards.

“Less than half of our hotels can claim to meet international standards,” he said, adding that hotel grading in Iran does not follow the norm.

“Provinces in Iran regard star ratings as prestigious, so once a hotel is given a high rating, reducing it becomes nigh impossible unless their problems become too big to ignore.”

The star ratings are “honorary”, he added.

Observers say once foreign hotel chains establish a foothold in Iran, domestic hotels will have no choice but to catch up with foreign competitors, or perish.

“When five-star international hotels start operating in Iran, top-rated domestic hotels will shed one or two of their stars,” says Mohsen Qarib, chief executive of the Iran Touring and Tourism Investment Company.

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