Iran sits at the cross roads of civilisations. Once the seat of the great Persian Empire with its rich, ancient and enchanting historical narrative, the country has always retained a lasting allure to the visitor. With a large and young population, relatively high GDP per capita, and a strategic location, Iran has strong potential to become once again a leading well educated economic and tourism market globally. The recent major lifting of the crippling sanctions imposed on Iran’s key energy and financial sectors has already shifted the attention of global business leaders to the largest closed market to open for decades.
Today, Iran and the capital Tehran in particular, is home to only a handful of locally branded hotels that have to some extent met the global hospitality standards, so the lack of internationally branded accommodation and quality business hotels represents an immediate market opportunity. Of course, it was not always like this. Before the revolution of 1979, some of the world’s largest hotel operators had hotels in prime locations in Tehran. Since then, the post- revolutionary expropriation of foreign owned assets in the hospitality sector has been a major deterrent for any new inward investment.
Now, though, the current administration under President Rouhani is keen to re-prioritise Iran’s Travel and Tourism sector, through the privatisation of the hotel industry and the introduction of such measures as tax incentives, ownership rights and the repatriation of profits. An exponential expansion of airline routes to various destinations within Iran from both regional hubs and internationally is being matched by Iran also upgrading its own fleet of aircraft through deals with Airbus and potentially with Boeing. All of this points to a major tourist boom, with Hotel Average Daily Rates (ADR) set to reach close to regional standards, presenting an immediate opportunity for international hotel operators through the rebranding of existing properties in the city, particularly the four- and five-star hotels.
The flurry of recent commercial activity by regional and international operators suggests that President Rouhani’s ambitious plan to attract 20 million visitors to Iran by 2025 is being heeded by the international investors in the hospitality sector. Iran also has the potential to be the natural “halal destination”, a feature that is uniquely attractive to Muslim travellers, and should be to potential foreign investors in this sector. This is indeed a significant factor given that Thomson Reuters expects the global halal tourism market to rise to at least $238 billion by 2019. Perhaps it is no surprise that the UAE-based Rotana Group’s upcoming Iranian properties, four- and five-star alcohol free Rayhaan-branded properties, will be in both Tehran and Mashad with the latter destination attracting large numbers of Muslim pilgrims and religious tourists.
In conclusion, there is no doubt the hospitality industry in Iran represents a significant opportunity for investors. Domestic political instability and a lack of transparency may present some risks, but for a canny operator prepared to acquire sophisticated local knowledge of Iran’s legal and business landscape, the potential rewards could be significant.
This is a sponsored article written by Hamid Mojtahedi, Head of Iran Group at Al Tamimi & Company.
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