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Hotel Market Trend in Iran

Posted on Posted in Business Guidelines

We can divide Hotel Market in 2 separated times. Before Nuclear Deal era and after nuclear deal era. Before Nuclear deal, especially in 8 years which Mr. Ahmadinejad was in charge, as result of his aggressive attitude, number of western tourists with relatively more full money pockets declined, however decreasing exchange rate of Iran’s Rial, made trip to Iran cheaper and number of neighboring countries tourists increased, at that time occupancy rate of hotels except Mashhad, was about 50% and lower. It was worst in 4, and 5 star hotels.

But after 2013, when President Rouhani started new negotiations, hope came back to the market as travelling from business men increased drastically, especially to Tehran.

Meanwhile, after JCPOA, attitudes toward Iran changed more positive and it could be seen in positive articles about Iran in western newspapers. Also because of some political problems between Turkey and Western countries also between Russia and Turkey, Iran was a replacement destination for part of travel agencies, but just for cultural tourism. All of these lead hotel market to a better position in demand and occupancy rate.

Lack of enough Standard touristic facilities such as Hotels, air travel facilities, and hospitality services experience caused Iran not to benefit from this increasing demand.

High demand and low facilities, especially in Tehran, made tourism and hotel construction one of the interesting fields of investing. Before JCPOA, Accor Group constructed two hotels in IKA airport, and some German, Turkish and Emirati investors are looking seriously to invest in Iran’s tourism industry after JCPOA.

 Incentives to invest in hotel development

 

The main incentive that is now practically applicable is full tax exemption for 5 years for newly-built hotels. Also all hotels have 50% tax exemption.

Also government announced that it will give loans for hotel investors from National Development Fund of Iran, for which the process of receiving loan is relatively hard and slow.

Number of Hotel (each grade), Tehran Hotel location

 

There are more than 1,100 hotels in the country, only 130 of them rank three or four stars, and during the next 10 years, 400 new hotels should be built. According to the goals of Government, it should increase Iran`s investors from 5 million to 20 million per year. (Al-Monitor, 2015)

Iran uses the standard ‘star’ category for ranking hotels. The quality of services, facilities, employee training, cleanliness, construction standards (finishing), and food determine the number of stars a hotel receives. However, Iranian standards for giving stars to hotel are different from global standards, it is much easier to get higher stars in Iran in comparison to international standards.

 

FAR Law Firm

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