Iran offers tax incentive for hotel developers

Its relationships with other nations may be shaky, but Iran is already preparing for an influx of tourism. With international sanctions lifted in January, the moderate government of President Hassan Rouhani has made tourism a top priority for rebuilding Iran’s struggling economy, and several international companies have announced plans to open hotels in the country.

To drive development, 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 told hoteliers from 18 countries who had gathered in Tehran over the weekend. 

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 under way. Akhoundi also said the government has finalized plans for $10 billion worth of rail projects to help improve the country’s connectivity.

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Rebuilding an Industry

A year ago, French operator AccorHotels opened a Novotel and an Ibis near Tehran’s Imam Khomeini International Airport. Over the spring, Meliá Hotels International announced its entry into the country with 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.  

Last year, Iran developed an investment package worth $25 billion to revitalize its tourism industry—and the efforts seem to be working. Visitor numbers have increased from 2.2 million annually in 2009 to 5.2 million in 2015. Tourism made up 7.6 percent of Iran’s GDP in 2015, and that number could increase to about 9 percent this year. By 2025, Iran could conceivably see 20 million visitors a year, putting it on par with Dubai.

As Bloomberg noted in the spring, citing a forecast by Euromonitor International, Iran is likely to have almost 900 hotels within five years, compared with 768 now. Lodging revenue is set to increase about 25 percent during that time, the firm predicts, as the number of visitors is forecast to grow by a similar percentage to 6.3 million.

Gaining Footholds

With two hotels already a year old, AccorHotels is “working actively” on 10 to 15 projects in Iran, according Christophe Landais, COO for AccorHotels in Iran. Iran’s second city, Mashhad, would be a likely spot for future development, Landais said, as it attracts religious tourism. In fact, Landais said, the city receives more pilgrims than Makkah (or Mecca) in Saudi Arabia—“about 25 million,” he said.

Middle Eastern hoteliers are also looking to improve their Iranian footprint. Imad Elias, chief of the Dubai-based Roda Hotels and Resorts, told AFP, that his company was also about to sign a contract in Mashhad, and that “many, many investors, many developers” want to join in partnerships there. “We had Iran as a potential spot for expansion even before the lifting of sanctions,” he told the news service. “Iran is a gold mine, a jewel that needs to be explored.” 

Middle Eastern hotel companies including Dubai-based Jumeirah and Abu Dhabi-based Rotana are also reportedly looking to gain a foothold in the country. Rotana already has four properties under construction in Iran, and the first—a five-star hotel with 362 rooms—is set to open next year in Mashhad.

But other hoteliers are more cautious. Representatives of U.S.-based companies like Hilton Worldwide Holdings, Marriott International and Choice Hotels International either declined to comment or said they are staying on the sidelines for now. "We have been carefully watching the status of USA sanctions, the regulatory changes to those sanctions and we are evaluating the opportunities as a result of those changes," said Alex Kyriakidis, president and managing director of Marriott International Middle East and Africa, told The Wall Street Journal.

Photo courtesy Luis Davilla

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