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    Pacts worth over OMR 33 million signed to establish agricultural, fisheries projects

    Pacts worth over OMR 33 million signed to establish agricultural, fisheries projects

    Egypt’s food industries contribute 24.5% of GDP

    Egypt’s food industries contribute 24.5% of GDP

    $36mln contract for construction of Duqm fisheries complex

    $36mln contract for construction of Duqm fisheries complex

    Ministry signs agreement to support Oman’s honey industry

    Ministry signs agreement to support Oman’s honey industry

    Local, Italian companies partner up to establish food retail chain in Egypt

    Local, Italian companies partner up to establish food retail chain in Egypt

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      Food Africa and pacprocess MEA attract over 25,000 trade visitors to the trade fair duo in Egypt

      Egypt’s food industries contribute 24.5% of GDP

      Egypt’s food industries contribute 24.5% of GDP

      Profits at top Saudi banks jump 17.6% in Q1

      Profits at top Saudi banks jump 17.6% in Q1

      GCC can create 600,000 tech jobs and add US$255 billion to GDP by 2030

      GCC can create 600,000 tech jobs and add US$255 billion to GDP by 2030

      What will Qatar do with its World Cup infrastructure after FIFA 2022 ends?

      What will Qatar do with its World Cup infrastructure after FIFA 2022 ends?

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      New study reveals that UAE is most competitive economy in the Arab world

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      Oman Construction Equipment Industry to 2028

      Oman Construction Equipment Industry to 2028

      $36mln contract for construction of Duqm fisheries complex

      $36mln contract for construction of Duqm fisheries complex

      What will Qatar do with its World Cup infrastructure after FIFA 2022 ends?

      What will Qatar do with its World Cup infrastructure after FIFA 2022 ends?

      Madayn working on major Oman industrial city projects

      Madayn working on major Oman industrial city projects

      Foundation stone laid for new 700-bed hospital is Salalah, Oman

      Foundation stone laid for new 700-bed hospital is Salalah, Oman

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      Iraq set to award new Faw Port deals

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        Suez Canal expects US$3.5 billion in revenues in H1

        Suez Canal expects US$3.5 billion in revenues in H1

        UAE and Egypt’s consortium to buy African renewables firm Lekela Power

        UAE and Egypt’s consortium to buy African renewables firm Lekela Power

        Fitch revises Saudi Aramco’s outlook to positive from stable

        Fitch revises Saudi Aramco’s outlook to positive from stable

        Investments in renewables in Egypt reach LE6 bn: Official

        Investments in renewables in Egypt reach LE6 bn: Official

        Egypt signs 8 gas exploration contracts worth $934mn over 15 months

        Egypt signs 8 gas exploration contracts worth $934mn over 15 months

        JGC lands $3.7bn Iraq refinery upgradation project deal

        JGC lands $3.7bn Iraq refinery upgradation project deal

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          Food Africa and pacprocess MEA attract over 25,000 trade visitors to the trade fair duo in Egypt

          Qatar has ‘solid’ line-up of infrastructure, hospitality projects to prepare for large influx of visitors in 2022: OBG

          Qatar has ‘solid’ line-up of infrastructure, hospitality projects to prepare for large influx of visitors in 2022: OBG

          Saudi to be among world’s big leisure tourism hubs by 2030

          Saudi to be among world’s big leisure tourism hubs by 2030

          Qatar’s hospitality sector peaks despite turbulent 2020

          Qatar’s hospitality sector peaks despite turbulent 2020

          Accor inks deal to manage first Swissôtel-branded hotel and residential project in Qatar

          Accor inks deal to manage first Swissôtel-branded hotel and residential project in Qatar

          Staycations to stimulate Qatar’s hospitality sector

          Staycations to stimulate Qatar’s hospitality sector

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        • Agrofood
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          Food Africa and pacprocess MEA attract over 25,000 trade visitors to the trade fair duo in Egypt

          Pacts worth over OMR 33 million signed to establish agricultural, fisheries projects

          Pacts worth over OMR 33 million signed to establish agricultural, fisheries projects

          Egypt’s food industries contribute 24.5% of GDP

          Egypt’s food industries contribute 24.5% of GDP

          $36mln contract for construction of Duqm fisheries complex

          $36mln contract for construction of Duqm fisheries complex

          Ministry signs agreement to support Oman’s honey industry

          Ministry signs agreement to support Oman’s honey industry

          Local, Italian companies partner up to establish food retail chain in Egypt

          Local, Italian companies partner up to establish food retail chain in Egypt

          Trending Tags

          • Business & Economy
            • All
            • Business
            • Economy
            • Finance
            • Industry
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            • Transport & Logistics

            Food Africa and pacprocess MEA attract over 25,000 trade visitors to the trade fair duo in Egypt

            Egypt’s food industries contribute 24.5% of GDP

            Egypt’s food industries contribute 24.5% of GDP

            Profits at top Saudi banks jump 17.6% in Q1

            Profits at top Saudi banks jump 17.6% in Q1

            GCC can create 600,000 tech jobs and add US$255 billion to GDP by 2030

            GCC can create 600,000 tech jobs and add US$255 billion to GDP by 2030

            What will Qatar do with its World Cup infrastructure after FIFA 2022 ends?

            What will Qatar do with its World Cup infrastructure after FIFA 2022 ends?

            New study reveals that UAE is most competitive economy in the Arab world

            New study reveals that UAE is most competitive economy in the Arab world

            Trending Tags

            • CES 2017
            • Election Results
            • eSports
          • Construction
            • All
            • Infrastructure
            • Real Estate
            Oman Construction Equipment Industry to 2028

            Oman Construction Equipment Industry to 2028

            $36mln contract for construction of Duqm fisheries complex

            $36mln contract for construction of Duqm fisheries complex

            What will Qatar do with its World Cup infrastructure after FIFA 2022 ends?

            What will Qatar do with its World Cup infrastructure after FIFA 2022 ends?

            Madayn working on major Oman industrial city projects

            Madayn working on major Oman industrial city projects

            Foundation stone laid for new 700-bed hospital is Salalah, Oman

            Foundation stone laid for new 700-bed hospital is Salalah, Oman

            Iraq set to award new Faw Port deals

            Iraq set to award new Faw Port deals

            Trending Tags

            • Energy
              • All
              • Oil & Gas
              • Power & Electricity
              • Renewable Energy
              Suez Canal expects US$3.5 billion in revenues in H1

              Suez Canal expects US$3.5 billion in revenues in H1

              UAE and Egypt’s consortium to buy African renewables firm Lekela Power

              UAE and Egypt’s consortium to buy African renewables firm Lekela Power

              Fitch revises Saudi Aramco’s outlook to positive from stable

              Fitch revises Saudi Aramco’s outlook to positive from stable

              Investments in renewables in Egypt reach LE6 bn: Official

              Investments in renewables in Egypt reach LE6 bn: Official

              Egypt signs 8 gas exploration contracts worth $934mn over 15 months

              Egypt signs 8 gas exploration contracts worth $934mn over 15 months

              JGC lands $3.7bn Iraq refinery upgradation project deal

              JGC lands $3.7bn Iraq refinery upgradation project deal

              Trending Tags

              • Hospitality

                Food Africa and pacprocess MEA attract over 25,000 trade visitors to the trade fair duo in Egypt

                Qatar has ‘solid’ line-up of infrastructure, hospitality projects to prepare for large influx of visitors in 2022: OBG

                Qatar has ‘solid’ line-up of infrastructure, hospitality projects to prepare for large influx of visitors in 2022: OBG

                Saudi to be among world’s big leisure tourism hubs by 2030

                Saudi to be among world’s big leisure tourism hubs by 2030

                Qatar’s hospitality sector peaks despite turbulent 2020

                Qatar’s hospitality sector peaks despite turbulent 2020

                Accor inks deal to manage first Swissôtel-branded hotel and residential project in Qatar

                Accor inks deal to manage first Swissôtel-branded hotel and residential project in Qatar

                Staycations to stimulate Qatar’s hospitality sector

                Staycations to stimulate Qatar’s hospitality sector

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              Iran’s emerging hospitality market

              Tamimi

              April 21, 2016
              in Hospitality
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              Iran sits at the cross roads of civilizations. Once, the seat of the great Persian Empire with its rich, ancient and enchanting historical narrative, the country has always retained a lasting allure to the visitor.
               
              From the ruins of the Persian Empire in Persepolis in the Southern Fars Province, to the Mountains of Sabalan and Damavand in the north and the torquise waters of the Gulf to the South, this ancient land has never ceased to intrigue.  With a large and young population, relatively high GDP per capita, and a strategic location, Iran has strong potential to become a leading, well-educated economic and tourism market globally. The recent major lifting of the crippling sanctions imposed on Iran’s key energy and financial sectors has already shifted the attention of global business leaders to the largest closed market to open for decades. In the year and months leading up to the implementation of the agreement that has effectively ushered in the new business opportunities, Iran has seen the inflow of interest from international business looking to either re-engage, or engage for the first time, with Iran in a cross section of sectors.
               
              In the tourism and hospitality sector alone, the country will undoubtedly expect a marked growth in the inflow of tourists / travellers in a full range of segmentations – such as cultural, religious, medical, eco-tourism and adventure – business tourism alone demands a great deal of consideration in the aftermath of the removal of sanctions. Today, Iran and the capital Tehran in particular, is home to only a handful of locally branded hotels that have to some extent met the global hospitality standards. By contrast, Turkey as an immediate neighbouring country of similar size houses more than 20 internationally and 5 star branded hotels. The lack of internationally branded accommodation and quality business hotels is indeed an immediate market opportunity and a critical shortcoming in the coming years and beyond. The current predicament has not always been the case. Prior to the Iranian revolution in 1979, Tehran’s hotel market had one of the highest penetrations of international hotel operators in the region, when it was home to IHG, Hyatt, Hilton Sheraton and Starwood, all of whom operated properties in prime locations within the city. Following the revolution, the industry witnessed decades of stagnation, which was compounded by the onset of the (1980-1988) Iraq-Iran war which made owners and investors reluctant to maintain and improve properties and to invest in new hospitality projects. Of course the post-revolutionary expropriation of foreign-owned assets in the hospitality sector was a major deterrent for any new inward investment.
               
              The departure of international hotel operators had a profound impact on the management of the hotels in Tehran, which until recently, with the opening of a few locally branded hotels, tended to be old-fashioned and lacking in key techniques such as yield management. Furthermore, historically service levels in the hotels were generally poor, due in part to a shortage of suitably trained talent and a lack of quality hospitality and tourism training facilities in the country. The latter has been in part due to Iran’s over-reliance on the public sector in recent years which has effectively owned and operated the tourism properties. In fact, most of the international brands that were once present in Tehran were expropriated by the revolutionary government and were in turn owned and managed by quasi-governmental entities such as the various “foundations” without any formal internationally accepted industry knowledge.
               
              The current administration under President Rouhani is now keen to re-prioritize Iran’s Travel and Tourism sector. Under Iran’s 2025 vision, the government has planned for certain key structural improvements (through incentives) for the privatisation of the hotel and hospitality industry. Accordingly, with a sudden tourism boom that is expected, an indication of which is the almost exponential expansion of airline routes to various destinations within Iran from regional hubs like the UAE led by Emirates Airlines (four full flights per day into Tehran alone), Fly Dubai and Air Arabia, as well as internationally, hotel Average Daily Rates (ADR) – as one of the most important indicators for hotel valuation and feasibility assessments – will surely witness an organic growth to reach close to regional standards. Iran is also upgrading its own fleet of aircraft by deals with Airbus and expected deals with Boeing. As a result, hotel development projects will begin to attract a significant share of investments initially from the domestic private sector, with foreign / regional investment to follow. The government has already undertaken concrete measures in that respect with the privatisation of the formerly publicly owned properties in Tehran, such as the former Hilton and Hyatt brands under the management of the “Parsian Group”.
               
              In terms of Foreign Direct Investment, the government has provided a series of incentives through the law on foreign investment in Iran named Foreign Investment Promotion and Protection Act (FIPPA). These incentives include a 50% full term tax reduction on income, loan structure and eligibility of government funding, property ownership rights including 100% ownership in free zones, unlimited reparation of profit capital and dividends from the country and security of ownership. This presents an immediate opportunity for international hotel operators through the rebranding of existing properties in the city, particularly the four and five star hotels. The rebranding of existing properties has a number of advantages including immediate market penetration, market leader positioning and direct cash flows from an existing hotel asset. With Iran now effectively being reintegrated into the global banking system (SWIFT) after the lifting of sanctions, the concerns over the ability of hotel operators to repatriate funds out of the country, or the initial cash injection into the proposed project is largely mitigated even thought there is still some apprehension on the part of regional and international banks to fully support the industry and re-engage with Iran. The laws governing direct foreign investment into Iran aim at alleviating some of the traditional concerns respecting the security of investment, repatriation of capital and profit, a lack of a transparent legal framework and a fair operational environment. In particular, whether the foreign investor enters the Iranian market on “Build-Operate-Transfer” (BOT) model, FDI or Joint Venture schemes with an Iranian counterpart, the government, via the instruments of the law on foreign investment (FIPPA), is intent on reducing the red tape of setting up companies, easing the facilitation of procurement of various operational licenses, and a sovereign guarantee in the event of expropriation or nationalization as well as the establishment of a one stop shop for foreign investors (Organization for Investment, Economic and Technical Assistance of Iran (OIETAI) in addition to laws on Public-Private Partnerships (PPP). The Government and indeed the City Municipalities may well be prepared to enter joint ventures under which they supply land and appropriate licences/consent in return for a slice of the action.

              Iran is also a signatory to over 60 Bilateral Investment Treaties (BIT) all designed to encourage and protect the investment of foreigners.

              It is against this backdrop that the French Accor Group acting as an operator officially signed two inaugural properties in Tehran with owning firm Aria Ziggurat Tourism Development Company of Iran. The two properties, Novotel and Ibis open their doors in October of 2016 at the site of the Tehran International Airport (IKA) being the first international hotel brands to have entered the Iranian hospitality market in 36 years post the Islamic revolution. Other international brands are looking at the huge growth potential in Iran. In particular, the UAE-based hospitality firm Rotana, has also signed management agreements for four hotels in Iran, two in Tehran (opening in 2018) and two in Mashad (opening in 2017). President Rouhani’s ambitious plan to attract 20 million visitors to Iran by 2025, is being heeded by the international investors in the hospitality sector. However, the leisure travel to Iran is unlikely to lead the pack save and except for emerging tour operators who would typically package travel to the key destinations within the country. Rather it will be the regional and international corporate travel that will drive the growth in the medium term. Additionally, Iran has the potential to be the natural “halal destination”, a feature that is uniquely attractive to Muslim travellers, and should be to potential foreign investors in this sector. This is indeed a significant factor given that Thomson Reuters has valued the global halal tourism market at $140 billion in 2013 and has predicted it to rise to at least $238 billion by 2019. Perhaps it is no surprise that the UAE based Rotana Group’s upcoming Iranian properties, 4 and 5 stars alcohol free Rayhaan-branded properties will be in both Tehran and Mashad with the latter destination attracting large numbers of Muslim pilgrims and religious tourists.
               
              Despite the promises offered by the region’s last frontier market, there are still challenges facing foreign investment in Iran’s hospitality sector. While regional and international brands like Accor and Rotana, who have pioneered entry into the market, have surely benefited from a prior established and good relationship with their Iranian property owners/ counterparts, the same may not prove to be the case for others following suit. It is, therefore, imperative to have proper and sophisticated local knowledge and advice on the legal and commercial nuances of the Iranian landscape, including an ability to properly assess potential local business partners in Iran. Other challenges include the high and unpredictably volatile land prices in the country, in particular the capital, Tehran, which can prove to be prohibitive for new hospitality development projects. There are however, local entities in Iran that have large portfolios of land, both in the private sector and the public (including the Municipalities in Tehran and other major cities) who are in principle eager to enter into business partnership with the foreign investors and operators on a variety of models including a syndicated investment model that can offer the protections available under the FIPPA law. A further challenge, albeit one that will be ameliorated in time, is the scarcity of local talent with international standards of training in the hospitality sector. While Iran does have a young and highly educated population, with about 70 percent being under the age of 30, the absence of international brands in the market has not necessitated the requisite training and acquisition of skill sets, particularly in the service sector.

              In light of the foregoing, perhaps the best early approach for the uninitiated foreign investor entering Iran’s hospitality sector is to consider entering into management agreements for the re-branding and operation of the existing portfolio of properties in major cities including Tehran. This will allow for an immediate, soft market entry that can be the basis for future de novo direct investment in the development of new hotel / hospitality projects in Iran. In any event, the need for sophisticated local knowledge of Iran’s legal and business landscape is paramount in order to mitigate the inherent risks associated with entering a frontier market. Fortune favours the brave, but the brave should not be foolish.
              Tamimi
              21 April

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