Dark clouds ahead for Iran amid economy, coronavirus
Dark clouds ahead for Iran amid economy, coronavirus
13 MARCH 2020 7:34 AM

Up to 70% of tourists canceled trips to Iran following a January passenger plane crash in the country. Now, economic pressures and the coronavirus outbreak are adding to Iranian hoteliers' concerns.

REPORT FROM TEHRAN—Iran’s hospitality industry is in a perfect storm, with multiple factors promising to negatively impact business, according to sources.

Iranian hoteliers were hopeful of increased tourism and revenue due to:

  • the 2015 Joint Comprehensive Plan of Action, known as the Iranian Nuclear Deal;
  • the Iranian government’s 2025 Tourism Vision Plan that sought to boost inbound tourism from 4.8 million in 2014 to approximately 20 million in 2025; and
  • more relaxed visa requirements for countries that are members of Asia’s European Cooperation Organization.

According to Iran’s Ministry of Cultural Heritage, Tourism and Handicrafts, Iran saw a 52% year-over-year increase in inbound arrivals, with 7.8 million tourists over a 12-month period ending March 2019.

Dark clouds started to pile up in late-2018 when the administration of U.S. President Donald Trump reinstated sanctions lifted under the 2015 nuclear deal; when in November street protests in Iran’ capital Tehran started in response to gas-price hikes; and in early 2020 with the death of Iranian general Qassem Suleimani, killed by a U.S. drone strike.

Added to all of this is coronavirus (COVID-19), which has so far affected Iran much more than most other countries. As of press time, approximately 10,075 positive cases of the virus had been counted in Iran, with the United Kingdom’s Guardian newspaper stating that number includes 8% of the country’s Parliament.

Hoteliers are concerned the good work of previous years will be reeled back, despite initially seeing one benefit from U.S. sanctions—a devaluation of the rial, Iran’s currency, and a subsequent uptick in visitors seeking bargains, sources said.

That advantage has largely gone, hoteliers said.

“This bad event and other political problems will kill the small-scale local hospitality and tourism business. If these current conditions continue, we would need to think solely about surviving and maintaining some minimum of what we have in the industry. Our occupancy would go down, and nobody would come as a tourist,” said Hamid Vahabzadeh, GM at the 70-room Adina Hotel in the Iranian city of Mashhad.

“Current problems are not only associated with foreign arrivals but also with internal tourism, as local citizens are not able to afford traveling amid current economy conditions,” he said.

Iran’s government has also imposed travel restrictions within the country amid the rapidly spreading coronavirus outbreak.

Even before the virus outbreak, Mehdi Gharib, GM of the Persian Traveling Center, said he had noticed many recent cancellations.

“We have been trying to keep (guests from canceling), but there was no airline to bring them up,” he said, noting that he expects the travel impact of U.S. sanctions “to change the life of everyone in Iran.”

“People may not act any longer like they did in the past as they can’t afford to stick to their living standards,” Gharib said.

Sources said they believe the hoteliers on the Persian Gulf coast are likely to be most affected by recent developments.

Already before coronavirus, a lot of properties in that region were on the brink of bankruptcy, said Hasan Siadatian, chairman of the Hotel Owners Association of Fars Province, a region very close to that coast and containing Iran’s fifth-largest city Shiraz.

Capital is fleeing, too.

A recent paper by Amirkabir (Iran) University of Technology’s Nima Golghamat Raad, titled “A strategic approach to tourism development barriers in Iran,” added that “tourism investors have no tendency to invest in the tourism infrastructure of Iran due to lack of political and economic stability.”

Careful optimism
Despite all this, some hoteliers believe things will eventually get back to the way they were and there will be no major long-term impact on the hospitality industry.

“Recent events were unanticipated constraints that had negative impact on the performance of the tourism industry. As the situation evolves into normality, we expect to resume and are focused on resuming previous and even higher performance levels,” said Mario Candeias, GM and managing director of Tehran’s 400-room Espinas Palace Hotel.

Candeias said he is hopeful an eventual resurgence in global tourism dynamics and Iran’s unique cultural attractions will help the country’s hospitality industry bounce back. However, he said, a target of 20 million arrivals is not realistic.

“The 20-million target is ambitious when compared to the past performance of Iran but rather unambitious when compared to benchmarks, and we will need to deliver on those higher numbers to grow the tourism industry into one of the key economic levers of Iran's development. It is not an option; it is an obligation and a necessity,” he said.

Government resources, legislation and marketing will be essential to making that happen, he said.

“We, as a private sector venture, are unaware of the profile and intensity of the allocation of such resources so we cannot determine if the country is on or off-track into achieving it, nor if it needs to be revised given recent occurrences,” Candeias said.

“We wish that the government would change its current path and not harm the industry anymore,” Vahabzadeh added.

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