Global hotel companies seek inroads to Iran

The Gran Melia Ghoo Hotel is under construction in Salman Shahr on the Caspian Sea. (Gran Melia Ghoo Hotel)

As we’ve noted over the past few years, with Iran’s global relationships improving, several international hotel companies are looking to establish footholds in the country.

Way back in September 2015, French hotel group AccorHotels announced plans to become the first Western group to manage a hotel in Iran since the country signed its nuclear deal with global powers, and opened a 196-room ibis hotel and a 296-room Novotel branch close to Tehran’s international airport last October. Those hotels are still going strong more than a year later, and the company is “working actively” on 10 to 15 other projects in Iran.

In the spring, Spain's Meliá Hotels International announced plans for the first five-star branded hotel to be managed by an international hotel company since Ayatollah Khomeini’s revolution forced Hyatt, Sheraton and owners of other brands out in 1979. The Gran Melia Ghoo Hotel, located in Ghoo, Middle East Diamond—the largest mixed residential, commercial and hotel complex to be developed in Iran—is under construction in Salman Shahr, a popular vacation spot on the Caspian Sea.

Other international hotel companies, including Germany's Steigenberger Hotel Group and Abu Dhabi-based Rotana, have opened properties in Iran, and the country’s hospitality industry seemed to be growing, with three new hotels opening in the capital city of Tehran alone since 2015 and more in the planning stages. 

But as the New York Times noted, overall tourism services are poor in many parts of the country, and the U.S. still restricts business with Iran based on terrorism and human rights concerns. U.S. banks are forbidden to do business with Iran, making investment in hospitality all but impossible. 

Growing Interest

That doesn’t mean that U.S.-based businesses are not interested in Iran, however. A major representative of Marriott International told the Gulf News recently that the company is “very keen” to enter the Iranian market pending the removal of legal barriers. 

Alex Kyriakidis, president and managing director for the Middle East and Africa at Marriott, said that Iran represents a “substantial market” to be responded to in terms of demand for hotels.

“Today, Marriott International, being a United States publicly floated company, is precluded from doing business in Iran,” he told the paper. “Depending on what happens in the future and what agreements are reached between the United States and Iran, if the doors open legally to do business in Iran, we would be very keen to pursue that opportunity.” 

Until there’s a legal framework for Marriott to enter Iran, the operator said it plans to capitalize on a growing number of visitors from the country to its hotels, building brand awareness among a growing demographic.

And while several international companies already have a presence in Iran, the market is still too uncertain to attract large-scale investment. In October, Anton Bawab, regional president at Viceroy Hotel Group, told Gulf News that while the Los Angeles-based company was interested in developing a presence in Iran, he would prefer to see how other hotels fare in the country before they made any moves.

Incentives and the Future

Still, there may be some strong rewards for the companies that invest in Iran’s hotel sector now. President Hassan Rouhani has made tourism a top priority for rebuilding Iran’s struggling economy, and the country is offering up to 13 years of tax holidays for hoteliers in an effort to improve infrastructure. “All economic activities related to tourism will enjoy 100-percent tax holidays between five to 13 years depending on the region,” deputy economy minister Mohammad Khazaei said in the fall. 

The government wants 300 new hotels to open over the next five years, and Abbas Akhoundi, the minister for roads and urban development, said that projects to build an estimated 170 four- and five-star hotels are already underway. Rotana, for example, plans to open two hotels in Tehran in 2018 and two others in Mashhad in 2017. Akhoundi also said the government has finalized plans for $10 billion worth of rail projects to help improve the country’s connectivity.

Those developments can help spur competition that may lift the restrictions on U.S.-based businesses operating in Iran. After all, once the value of Cuba's tourism industry became apparent, Marriott and Starwood Hotels & Resorts Worldwide secured permission to open hotels there. And Iran's travel scene is proving resilient: In spite of sanctions, Iran earned about $6.5 billion from 4.8 million tourists in 2014. Tourism accounted for 7.6 percent of Iran's GDP last year and that number is expected to rise to about 9 percent this year, according to Akhoundi.