Tehran: dawn of a new era

Hospitality News Middle East - - IN THIS ISSUE - am­ber-con­sult­ing.com

Ralph Nader, CEO of Am­ber Con­sult­ing, of­fers a com­pre­hen­sive anal­y­sis of busi­ness and in­vest­ment op­por­tu­ni­ties in Tehran’s hos­pi­tal­ity sec­tor

In 2016, the eas­ing of sanc­tions bright­ened Tehran’s mar­ket-growth prospects, al­low­ing it to build on the city’s other strengths, which in­clude its sta­tus as Iran’s cap­i­tal, a large pop­u­la­tion and a strong com­mer­cial sec­tor. The tourism sec­tor seems to be at the fore­front of growth plans, with the Ira­nian gov­ern­ment hav­ing un­veiled an in­cen­tive plan grant­ing years of tax ex­emp­tion to both do­mes­tic and for­eign in­vestors in the hos­pi­tal­ity in­dus­try. Like­wise, the gov­ern­ment’s na­tional out­look plan aims to in­crease the num­ber of tourist ar­rivals from 4.8 mil­lion in 2014 to 20 mil­lion in 2025.

In­ter­na­tional ho­tels

Due to a high in­flow of busi­ness trav­el­ers vis­it­ing Iran over the past years, there has been an in­crease in de­mand for branded ho­tels, op­er­ated by in­ter­na­tional ho­tel chains. The French multi­na­tional Ac­corho­tels Group was the first in­ter­na­tional chain to be­gin op­er­at­ing in Iran af­ter the lift­ing of sanc­tions, open­ing a Novo­tel at Imam Khome­ini Air­port and an Ibis brand, with plans to de­velop across the dif­fer­ent seg­ments in Iran’s ma­jor cities, in­clud­ing Tehran. Sim­i­larly, Rotana Ho­tels & Re­sorts has signed man­age­ment agree­ments for four ho­tels in Iran, with plans to open two in Tehran this year.

De­vel­op­ment of Ira­nian-owned ho­tels

About 13 per­cent of ho­tels in Tehran cat­e­go­rize them­selves as 4- and 5-star, de­spite not nec­es­sar­ily meet­ing in­ter­na­tion­ally rec­og­nized stan­dards for such clas­si­fi­ca­tions. Ira­nian-owned ho­tels have been open­ing in rapid suc­ces­sion in the past two years, up­grad­ing their ser­vices and en­hanc­ing their man­age­rial op­er­a­tions. The 84-room Aramis Bou­tique Ho­tel and the 550-room lav­ish Espinas Palace Ho­tel are two such ex­am­ples.

New seg­ments

For years, Tehran has been pri­mar­ily sought out by busi­ness trav­el­ers. How­ever, fol­low­ing the lift­ing of sanc­tions, the gov­ern­ment is ex­pand­ing Tehran’s tourism ap­peal by sharp­en­ing its fo­cus on the de­vel­op­ment of other sec­tors, namely: • Leisure tourism – Sup­ported by the city’s cul­tural at­trac­tions and rich her­itage

• Re­li­gious tourism – Build­ing on Tehran’s po­si­tion as the cen­tral point for re­li­gious tourists vis­it­ing pil­grim­age sites in Iran

• Health tourism – Cap­i­tal­iz­ing on the high qual­ity of health­care to at­tract grow­ing num­bers of med­i­cal tourists from the re­gion

The con­struc­tion in­dus­try has there­fore been work­ing on ren­o­vat­ing old build­ings and trans­form­ing them into bou­tique ho­tels to ac­com­mo­date all types of vis­i­tors, with a fo­cus on mod­ern, mid-range prop­er­ties that will cater to young Ira­ni­ans trav­el­ing do­mes­ti­cally, as well as in­ter­na­tional tourists.

F&B in­dus­try: new vi­sion and ex­ten­sions

Ira­nian and in­ter­na­tional restau­rant chains are en­ter­ing Tehran and also ex­pand­ing there. West­ern food fran­chises have started re­turn­ing to the cap­i­tal’s food mar­ket, with the French en­trepreneur Amaury de la Serre, who has opened a high-end sushi chain, ti­tled Sushi Shop, one name now op­er­at­ing in the city. Spain’s Telepizza, the largest non-us-based pizza de­liv­ery com­pany in the world, opened its first out­let in July 2017 through an Ira­nian group, and is pre­par­ing to in­vest 100 mil­lion eu­ros to ex­pand na­tion­wide.

To in­vest or not to in­vest?

Given Tehran’s large pop­u­la­tion of 8.7 mil­lion peo­ple, rel­a­tively high level of GDP per capita and large con­sumer mar­ket, it’s easy to see why the city would be a draw for for­eign in­vestors, along­side the coun­try’s other pop­u­lous hubs, such as Mash­had, which is home to 3 mil­lion peo­ple, Is­fa­han (1.9 mil­lion), and Karaj, Tabriz and Shi­raz (1.5 mil­lion each). How­ever, a de­gree of un­cer­tainty con­tin­ues to hang over Iran, and in­vestors should act cau­tiously.

Risk is priced in

While in­ter­na­tional in­vestors are con­sid­er­ing Tehran for busi­ness and in­vest­ment, many are still wary about in­vest­ing straight­away. Be­sides the ob­vi­ous geo-po­lit­i­cal risks, there are other lim­i­ta­tions to con­sider, in­clud­ing:

• Lim­ited ad­vance­ment. Iran’s long-term de­tach­ment from the in­ter­na­tional bank­ing sys­tem means the knowl­edge and ex­per­tise in mod­ern fi­nan­cial ser­vices is re­stricted.

• Sep­a­rate stan­dards. The bank­ing sec­tor is be­hind those of Iran’s peers and most firms do not yet ad­here to in­ter­na­tional ac­count­ing stan­dards.

• Com­plex in­ter­ac­tions. Iran lacks an ef­fi­cient for­eign ex­change mar­ket which in­creases the com­plex­ity of mov­ing money in and out of the coun­try eas­ily.

• High rent scheme. The com­bi­na­tion of a down pay­ment and a monthly rent scheme in Tehran pro­duces rents per-squareme­ter that are of­ten higher than those found in ma­ture cities like Paris, Lon­don and New York

China: num­ber one for­eign in­vestor

For many years, China has been a close ally of Iran, largely ig­nor­ing the West’s sanc­tions that were par­a­lyz­ing the coun­try, while Euro­pean com­peti­tors strug­gled to con­vince banks to fund their Ira­nian projects.

• Lead­ing busi­ness part­ner. As a re­sult, China is now Iran’s pri­mary trade part­ner, con­tribut­ing to over 40 per­cent of the coun­try’s ex­ports and im­ports.

• In­fra­struc­ture in­vest­ments. China’s One Belt One Road ini­tia­tive prom­ises more than USD 1 tril­lion in in­fra­struc­ture in­vest­ments, in­clud­ing bridges, rails, ports and en­ergy projects across Europe, Asia and Africa in over 60 coun­tries, in­clud­ing Iran, fa­cil­i­tat­ing the tourism flow in and out of Tehran.

• Oil ex­change. With Iran cut off from global mar­kets due to sanc­tions, China has been flood­ing Iran with con­sumer goods and ser­vices in ex­change for oil, im­port­ing more than 441,000 bar­rels each day.

Newspapers in English

Newspapers from Lebanon

© PressReader. All rights reserved.