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Investors and operators eye Kurdistan for hospitality developments

Analysis, Hospitality trends
Expected to open in 2012, the 250-room Baghdad Rotana will be located in Baghdad's International Green Zone .
Expected to open in 2012, the 250-room Baghdad Rotana will be located in Baghdad's International Green Zone .
Rotana signed a management contract with Lebanese holding company Malia Group for the 205-room Erbil Rotana hotel, which is scheduled to open in 2010.
Rotana signed a management contract with Lebanese holding company Malia Group for the 205-room Erbil Rotana hotel, which is scheduled to open in 2010.
A rendering of the Grand Millennium Sulaeimania being developed by Millennium & Copthorne Middle East and Faruk Holding Group in Kurdistan.
A rendering of the Grand Millennium Sulaeimania being developed by Millennium & Copthorne Middle East and Faruk Holding Group in Kurdistan.
Rotana co-founder, president and CEO Selim El Zyr.
Rotana co-founder, president and CEO Selim El Zyr.

Largely undisturbed by the ongoing war in Iraq, Kurdistan is emerging as an attractive prospect for foreign hotel investors, owners and operators alike, but what potential does the rest of the war-torn country have for hospitality development? Louise Birchall reports

A number of tourism developments in the Kurdistan region of Iraq, which has escaped most of the repercussions of the war, have put the ‘safe haven’ on the agenda of hotel owners and operators expanding in the Middle East.

The region’s population of five million, a thriving business environment, two new international airports and a liberal investment law that facilitates foreign investment has made Kurdistan an attractive destination for tourism in Iraq, according to Euromonitor International.

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All eyes on Kurdistan

Just last month, Millennium & Copthorne Middle East signed a management agreement with investor Faruk Group Holding for three hotels in Kurdistan comprising a four-star Tara Hotel with 100 rooms, a four-star, 140-room Copthorne Hotel and a luxury Grand Millennium hotel offering 254 keys.

“It’s part of our expansion strategy to be in every single country in MENA. We found the right investor in Iraq and went for it,” says partner and president of Millennium & Copthorne Middle East Ali Lakhraim.

“Kurdistan is the present and the future and it’s as safe as it can get. The area has been isolated since 1991, so it feels like you’re in a different country. You’re in Iraq, but you could be sitting in Jordan.”

Rotana also recognised the region’s potential when in 2007 the Abu Dhabi-based hotel company signed a management contract with Lebanese holding group Malia Group for a five-star property in Erbil, Kurdistan.

The 205-room hotel occupies 20,000m² of land located in front of the Sami Rahman Park and between the city’s convention centre and the Erbil Exhibition Fair, and is due to open in the first quarter of 2010.

“Guests will be 97% corporate business travellers and their average stay will be between three and six days. In addition, our five-star properties will also be hosting long-term guests that are in Iraq on one-month, three-month and six-month assignments. With the number of contractors, engineers, architects and so on, Rotana is certainly well positioned to cater to these requirements,” says Selim El Zyr, co-founder, president and CEO of Rotana Hotel Management Corporation.

“Iraq is a rich country that I believe will re-bounce into the international business front line much faster than any of us expect,” he adds.

Tourism developments

Speeding up recovery, Kurdistan’s relative stability has led it to establish a State Board of Tourism in Erbil to operate as a tourism development and promotion agency. Campaigns include international tourism seminars focusing on destination development and marketing.

Trade shows are also currently taking place in Erbil, reports Euromonitor, such as the annual DBX Kurdistan Trade Show, which attracts several thousand industry experts and officials each year helping to raise reconstruction funds.

Furthermore, while El Zyr acknowledges leisure tourism will take longer to build as it is more sensitive than business travel, he says this market will not be neglected.

Kurdistan already offers a variety of tourist attractions, including ancient sites that are rich in history, mountains and attractive landscapes, and proposed projects by the tourism board include an amusement park in Erbil.

In summary, Kurdistan could well be Iraq’s “secret weapon” in driving tourism to the country. Euromonitor predicts tourist arrivals to the region will grow on average 22% a year, compensating for drops in other areas and helping convey a positive image of Iraq.

Braving Baghdad

But hotel operators have not written off the rest of the country for development, as Lakhraim says Millennium’s expansion in Iraq “will not stop at Kurdistan”. Rotana has already ventured out of Kurdistan having signed a second agreement in Iraq with Summit Hotels to manage the five-star Rotana Baghdad.

The 250-room hotel will be located in Baghdad’s International Green Zone; a heavily-guarded, diplomatic area in central Baghdad and is expected to open in 2012.

“There are hundreds of thousands of pilgrims visiting Karbala and Najaf each year. These cities are only 70km away from Baghdad. With the current hotel supply in these cities and the short distance, Baghdad becomes the perfect place for them to stay,” says El Zyr.

In fact, religious tourism has kept Iraq’s tourism industry from completely disappearing, according to Euromonitor. Iraq’s Shiite shrines have been most popular among Iranians, who can now travel freely to and from the country and made up almost all of Iraq’s tourist arrivals into the country in 2007.

The organisation predicts the number of domestic tourists to Iraq will increase by three million by 2012, with the potential to boost religious tourism even further.

However, Euromonitor raises the question whether Iraq’s supporting infrastructure can handle increased tourism and hotel developments. In Safir International Hotel Management’s case, the answer was no.

The Kuwait-based group signed a hotel management contract in Kabala and the property was due to open this summer, but was allegedly delayed due to construction delays and limited human resources. When Hotelier Middle East approached the group for an update on its Iraqi developments, Safir was unavailable to comment.

Speaking of HR challenges, Lakhraim says, “It’s difficult to employ local staff, but you have a lot of Iraqis living outside the country who want to go back. They don’t want to stay away forever so we’re attracting Iraqis to come and run the hotels to our standards”.

Chain reaction

In conclusion, it seems that hotel investors, owners and operators alike are undeterred by the challenges faced in Iraq, even the most significant; safety.

For Rotana, “safety is always an issue and not only in Iraq. Unfortunate events have occurred in the Middle East and outside the region,” says El Zyr. “It is a fact that Iraq is a special case, but we as hotel operators will be looking after the safety of our customers and associates by taking the highest level of precaution possible,” he asserts.

And with an increasingly-stable situation, Euromonitor predicts arrivals to Iraq will increase. Tourists coming from Iran, Pakistan and India are expected to grow by 6% and by 2012, 159,000 tourists are predicted to be visiting Iraq annually. It is believed 140,000 of these will be religious tourists from Iran.

Furthermore, if Iraq promotes the religious tourism sector better, these figures could double within a year or two, and arrivals from Lebanon, Bahrain, the UAE and Saudi Arabia could also increase at a faster rate, claims Euromonitor.

So while growth in religious tourism is dependent on infrastructure; most crucially the availability of hotels and transport, the positive attitude being displayed by hotel investors and operators should reflect favourably on the country’s outlook and be the catalyst needed for other services to follow.

“There is a tremendous need for this market to be developed and I am sure that any opportunities there will be grabbed by the brands that know the region’s market.

“Iraq is very close to us, we know the traditions and we know the needs,” concludes El Zyr.

Fast facts: IRAQ

  • Iraq Airways has ordered 30 aircraft to increase flight destinations and frequency on its existing routes
  • Tourists from Iran, Pakistan and India are expected to grow by 6% a year
  • By 2012, 159,000 tourists are predicted to be visiting Iraq annually
  • Out of those 159,000 visitors, 140,000 are expected to be religious tourists from Iran
  • Rotana’s Erbil Rotana investment is estimated to exceed US $55 million
  • Australian Airlines has reopened its office in Kurdistan after being closed for more than 17 years
  • The Japanese foreign ministry has lowered its travel warning for Kurdistan
  • Denmark, Austria, UK, Sweden and Germany have also positively changed travel advice for Kurdistan region
  • Tourism arrivals to Kurdistan have been predicted to increase by an average of 22% a year

Source: Euromonitor International, June 2009

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