Analysis Iraq may be widely associated with war and political instability but Rotana Hotels sees enormous potential for the country's underdeveloped tourism sector.
Hotel chains test waters in Iraq
Iraq may be widely associated with war and political instability but Rotana Hotels sees enormous potential for the country's underdeveloped tourism sector as security in the country improves. In the past two years Rotana, based in Abu Dhabi, has signed up to manage two five-star hotels in Iraq. One is in Baghdad's International Green Zone, the heavily guarded government area; the other in Erbil, in the Kurdistan region in the north. "The opportunity arose when we were approached to manage two new five-star projects," says Selim el Zyr, the president and chief executive of Rotana Hotels. "Based on our research, we believed that these markets were emerging and saw them as an opportunity." Mr el Zyr says the company's expansion into Iraq is part of a "strategic aim" to secure its position as the dominant hotel management group in the Middle East. He says Rotana is primarily aiming to tap into the growing number of religious and business tourists in Iraq, as the leisure tourism segment is likely to take some time to develop. "The leisure side will definitely take longer to build as it is always more sensitive," says Mr el Zyr. "However, this market will not be neglected. "There is a very large percentage of businessmen involved in various kinds of projects and our focus will be mainly on the corporate business. "Regarding the religious tourism, there are hundreds of thousands of pilgrims visiting Karbala and Najaf each year. With the current hotel supply in these cities and the short distance, Baghdad becomes the perfect place for them to stay." Hotel accommodation and infrastructure in Iraq is generally of a low quality, and a number of hotels closed down with the US invasion in 2003. But the Iraqi government is making significant efforts to develop the country's tourism industry, and with historical sites such as the ruins of the ancient city of Babylon, there are aspects of the country that could easily be marketed. Airlines are increasingly showing interest in Iraq as the government co-operates with other countries to launch flights. The Bahraini carrier, Gulf Air, last month announced it would resume flights to Baghdad soon, and would operate flights to the holy city of Najaf once the airport infrastructure was in place. The country's holy shrines in the cities of Najaf and Karbala already attract thousands of religious tourists each year and analysts agree that, despite the country's war-torn image and continuing violence, there is a significant opportunity for growth. "Iraq has the potential to be a year-round destination for religious tourism and is tapping into this opportunity, as it sees religious tourism as a stepping stone towards boosting leisure tourism arrivals further," says a report on travel and tourism in Iraq by Euromonitor, published in June. It says that if Iraq promotes its religious tourism sector more effectively, figures could double within a year or two, with arrivals from Lebanon, Bahrain, the UAE and Saudi Arabia increasing at a faster rate. "As a result of government efforts and improvements, in both the security situation and the country's infrastructure, international arrivals have increased in the past few years," the report says. It adds that this has occurred as domestic tourism is increasing substantially. Analysts at Euromonitor say international tourist arrivals to Iraq will grow at an average of 6 per cent a year over the next three years. Domestic tourism, meanwhile, will grow by an annual average of 3 per cent, bringing the total number of domestic tourists up to more that 3 million by 2012. The Kurdistan region in the north of Iraq, widely considered the safest area of the country, will attract a lot of these visitors, the report says. Rotana notes that the Kurdistan region has two international airports "and a liberal investment law for foreign investors". Rotana's 205-room, five-star hotel in Erbil, which is due to open in the first quarter of next year, has attracted investment of more than US$55 million (Dh202m) from the Lebanese holding company Malia, Rotana said. Attractions in the region include citadels in Erbil and Kirkuk, caves with Neanderthal remains and battlegrounds where Alexander the Great fought, as well as a backdrop of mountains, canyons and waterfalls. "As more developments are taking place, [and with] new hotels opening and more foreign interests establishing themselves in this part of the country, a domino effect might contribute to making it truly the gateway to Iraq," Euromonitor says. The Kuwaiti hotel management company Safir has also identified the opportunity for five-star hotels in Iraq. Safir International Hotel Management (SIHM) has signed an agreement for a hotel in Karbala. It was originally due to open this summer, but has been pushed back to the first quarter of next year because of construction delays partly caused by limited human resources, says Fawzi al Musallam, the vice chairman of SIHM. "In general, in Iraq there is a shortage in the inventory of five-star hotels," Mr al Musallam says. "In Karbala there is no such hotel, so it is really going to close a niche and a demand." He says SIHM is also looking at an opportunity to manage a 500-room hotel in Najaf. "These are two famous religious tourism cities and they have huge demand and huge numbers of visitors, but they do not have proper accommodation," Mr al Musallam says. He believes Iraq has strong potential with its historical sites and culture. "Within the vicinity of Baghdad, there are tremendous touristic and historical sites. Iraq is really very wealthy in that aspect. It just needs to be put on the map and needs to have a very clear tourism strategy in how to create awareness. "Of course, the political situation has really slowed down the process." Mr al Musallam says the safety factor remains a challenge, but "once the safety and stability of Iraq is in place, I'm sure Iraq is going to be one of the most popular destinations for visitors". Mr el Zyr says he expects other major hotel companies to start showing more interest in Iraq as they realise the potential. "There is a tremendous need for this market to be developed, and I am sure that the opportunities will be grabbed by the brands that know the market," he says.