Iran tourism has potential but visitors still underwhelmed

Iran tourism has potential but visitors still underwhelmed
Masjed-e Sheikh Lotfollah, Esfahan, Iran.
By Daniel Khazeni-Rad in Tehran April 25, 2016

As the Iranian government casts around for extra sources of income now that relations with the global community are warming, tourism and travel are top of the agenda. In fact, tourism has become so popular amongst the Rouhani administration that ministers have been dispatched to sign visa-waiver schemes with several regional countries over the past few months.

After several years of flat-lining tourism rates, and a general level of apprehension by foreign tour agencies and travellers alike, Iran is becoming one of the world’s hot topic places to visit again according to several foreign newspaper and magazines.

“Air France resumed flights to Tehran yesterday, the latest sign that Iran is well and truly back on travel itineraries. The Foreign Office lifted its advisory against trips to the country last year, and British Airways will begin flying there in July,” The Telegraph wrote in a piece headlined “18 reasons to visit Iran” on April 18.

Tourism is also being seen as one of the few industries that can quickly bring hard currency into the country. In the previous Iranian year (ended March 20), it was estimated by the Iranian Tourism Association that the country earned $6bn in added revenue from foreign visitors.

Iran’s ambitions to attract foreigners doesn’t end with hotel renovations and desert tours – it also has a dedicated bank created in 2001, called Tourism Bank. The bank’s original mandate was to help and assist people visiting the country. However, the lack of tourists means that since then it has had to find other means to survive, like giving loans to small businesses at rates of around 25%, according to one branch manager who didn’t wish to be named.

As exciting as these developments sound, Iran isn’t Turkey – and won’t be anytime soon. Travellers are expected to conform strictly to the Islamic Sharia laws and regulations of the country. To the chagrin of many tourists, especially female, things like the mandatory hijab, which is required by rules set out after the Islamic Revolution in 1979, leave a sour taste in many visitors’ mouths.

In addition to these annoyances, many Europeans and a smaller number of Asian and African tourists bemoan the financial isolation of Iranian tour operators, airlines and hotels – none of which are able to accept payment by international card systems that Iran was disconnected from the 1980s.

But no matter how difficult some of these obstacles are, tourism sources say an increasing numbers of visitors are coming, and it is mainly the retirees and not the backpacker crowed – so far.

Iranian authorities have no qualms with bus loads of grey-haired folks flailing under Tehran's scorching sun, or pottering around trinket shops around Isfahan’s majestic bazaar; these are high-paying customers who are unlikely to cause a fracas in public. So the government is actively pushing these sorts of trips, and tour agencies are happy to oblige.

With this demographic in mind, the announcement of the latest Golden Eagle Express train trip on April 16, which will debut its latest route from Moscow and ultimately finish in Tehran, comes as little surprise. Tickets for this trip range from anywhere between $20,000 to $79,000 per person. For this price, customers will get the Orient Express-like treatment made famous in the Agatha Christie novel. These sorts of train tours are the majority, not the exception.

Russians not rushin’ in

An opportunity for Iran is to woo citizens of Russia and the Commonwealth of Independent States (CIS) market, especially after the freezing of relations between Moscow and Ankara over the downing of a Russian jet. However, so far Iran’s Caspian shores and Persian Gulf beaches have made little to no impact on this market.

Back in November, the Tourism Association was reported as saying Iran’s share of Russia’s 45mn outbound travel market was a mere 20,000 people, or 0.04%; in 2014 Turkey attracted around 4.5mn Russians, making it the largest contributor to Turkey’s tourism sector. However, with a ban on bikinis and the closure of all bars in the country 37 years ago, Russians are unlikely to see Iran as an alternative.

The Rouhani administration has also thrown its weight behind upgrading Iran’s overlooked Imam International Khomeini Airport. The country’s main airport has a lot to catching up to do with the region's other major airports in Dubai, Abu Dhabi, Qatar and Istanbul, which already have the lion’s share of the regional and Eurasian flight markets, as well as much younger fleets than that of Iranair, whose planes are on average 25 years old.

Also, the country's main hub is woefully underfunded, with the large terminal – delayed for many years due to a spat between the Revolutionary Guard and the Turkish contractor in the early 2000s – lacking much of the infrastructure expected of a capital city of over 12mn people. As Iran’s main airport authority said in November 2015, the airport needs $25mn in immediate improvements. 

“We made a mistake over the past 20 years by not developing this airport,” Taadol newspaper quoted airline expert Alireza Shirmohammadi as saying recently. “The lack of strict planning has been the main reason behind the slow development – and by planning I do not mean the airport’s design, but its financial and profit model.”

Much of the problem with the lack of investment for the airport has been down to a lack of focus in recent years. However, things are looking as they may be finally turning around.

In March 2015, the current government gave the airport Free Trade Zone status, practically allowing the space around the runways to act as an import tariff free zone. Accordingly, a budget of $300mn has been set aside for this development in the course of the next few years.

In addition, the airport has also developed a CIP (Commercially Important Person) terminal, though it's clear that many foreign business people don’t know this facility exists, as it looks the exclusive preserve of wealthy Iranian expatriates who can speak Persian to the mono-lingual staff inside.

Also, plans for the second and third terminals that were mothballed due to sanctions and lack of funds are now underway, enlarging the current airport grounds by seven-fold. The second terminal is expected to be ready by 2018.

However, time is of the essence, as traffic through this hub is already exceeding its capacity. Prior to the cessation of sanctions, it was reported by the Iranian media that the airport had a capacity for 6.5mn passengers annually. In the Iranian year that ended in March 2015, around 6.3mn passengers used its only terminal, while in the year just ended it was estimated to be over 7mn, according to the Tourism News Agency of Iran.

The airport is also home to Iran’s first foreign privately owned hotel since the revolution. Originally called Axis (no pun intended) prior to sanctions, the well-designed hotel that looks a strangely out of place has been officially re-badged as a Novotel Ibis since February.

The elephant in the room about Iran’s ambitions of becoming a global hub is the lack of alcohol available to non-Muslim fliers. Even Saudi Arabia, which is seen by many as far more conservative country, allows certain areas for non-Muslims to drink.