Iran's lifted sanctions are driving tourism—and a hospitality boom

Gran Meliá Ghoo Hotel, opening next year, will be part of the Ghoo, Middle East Diamond mixed-use development in Salman Shahr, Iran. (Hotel groups are jumping on investment opportunities as Iran gears up to welcome over 20 million visitors by 2025. )

Now that many of Iran’s international sanctions have been lifted, the country is on its way to becoming a popular tourist destination once again. More than 6 million visitors have traveled to Iran in the first quarter of 2017, a 50-percent increase year-over-year and three times the number achieved in 2009.

The increase follows on the heels of the 2015 nuclear deal between Tehran and other world powers, which ultimately resulted in the lifting of many sanctions in early 2016. European airlines, including British Airways and Lufthansa, resumed direct flights to Iran as authorities in the country relaxed visa requirements.

Now, booming visitor numbers have caused demand for accommodation to skyrocket, creating investment and development opportunities for local entrepreneurs and foreign businesses. International hotel chains have been jumping on investment opportunities as demand for guestrooms is rising. France-based AccorHotels was the first chain to take advantage of skyrocketing demand for Iran in 2015. The group currently operates two hotels in the country. Spain’s Meliá Hotels International has signed its first hotel in Iran, which is set to open in 2018. Meanwhile, UAE’s Rotana also has a hotel opening early next year and has planned for three more openings by 2020. The UK’s EasyHotel also signed a deal to open 500 guestrooms in Iran.

The growing market has room for many more investors and developers. The state tourism agency reported that the country is expecting to attract over 20 million visitors by 2025. Young backpackers from Europe and Asia make up a big percentage of the new visitors to Iran who are attracted to the country’s history and culture, making three of the most popular tourist destinations the ancient cities of Esfahan, Shiraz and Persepolis, a UNESCO World Heritage site. Many of these travelers are also opting for budget accommodation, Jalal Rashedi, who runs five hostels in Iran, told CNN. He operates bed and breakfasts starting at $15 a night plus internet access. Rashedi said, “During the past few years, we have had a rise in the number of tourists who are young, and they’re individual travelers. They’re young, curious, adventurous people, who want to discover the truth about Iran, and they mostly stay at hostels.” According to a World Economic Forum report from early 2017, Iran is the world’s cheapest travel destination.

However, travelers continue to face many obstacles before they can make the trip. Americans, Brits and Canadians are required to submit a visa application in advance while citizens of many other Western countries can get one upon arrival in Iran. The country still has few links to international banking networks because some sanctions are still in effect, leaving few working Western credits cards. Therefore, making payments in advance to secure reservations is a huge hassle. To help guests circumvent the block, Rashedi launched a website for travelers to book stays at his hostels and those operated by others without payments.