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This hotelier seeks opportunity amid turmoil in Iran

Things were looking bright for Iran when Mario Candeias became managing director of Espinas Hotel Group in early 2017: Global relations were thawing amid a deal to limit the scope of nuclear activities; inbound tourism was increasing to explore a rich cultural history; and the hotel market was bursting with opportunities for the right operators, especially at the luxury level.

“The winds were a bit different,” says Candeias, whose career was spent in his native Portugal, including stints at Pestana Hotel Group and Tivoli Hotels & Resorts.

Those winds shifted abruptly in May, when the U.S. administration pulled out of an international accord, and they blew harder in August, when the U.S. announced it would tighten economic sanctions, since enacted, that pushed down the currency and increased?unemployment. European carriers and companies pulled out.

“Now the environment business-wise is a bit more challenging from here,” Candeias says, but he remains optimistic, pointing to a domestic market of 80 million and his shareholders, a family with ties to construction and development. They have invested in three hotels, two in Tehran and one along the Caspian Sea, totaling 800 rooms and 700 employees.

Espinas Palace Hotel is adding a rooftop bar with resident DJ and is considering adding a caviar bar.
Espinas Palace Hotel is adding a rooftop bar with resident DJ and is considering adding a caviar bar.

The US$100 million Espinas Palace Hotel in Tehran, of which Candeias is general manager, is the flagship, with?banquet facilities for 2,000 and an attached, 3,000-seat concert hall to capture a domestic market.  The investments mean that “now they are really stuck in it, in a good way… They are ‘all in,’ like the Americans say, right?” he says.

They certainly are: The company is seeking funding for its next hotel project on property it owns in Tehran -— a US$300 million, 840-room hotel with a condo-hotel and shopping mall.

In a normal market, Candeias says the hotel would be doing around US$200 ADR with 60% to 65% occupancy for the year; now, ADR is around US$120 and occupancy for the year should average about 55%, he says. Before the sanctions, the primary customers were domestic and Chinese; since then, the the drop in Chinese and European business has been compensated with more domestic business.

Long perspective

Up until 2016, most of Iran’s travel dollars came from inside the country, says Joseph Fischer, owner of Tel Aviv, Israel-based Vision Hospitality & Travel. Turkey was a popular destination for outbound travel, seeing about 2 million Iranians a year, but that dried up with the double whammy of sanctions and inflation. Still, Iran’s 23 UNESCO World Heritage sites, culture and climate make it unique. “It’s an?amazing country, but the politics is playing a role here,” Fischer says.

France’s AccorHotels has two midscale hotels located in the vicinity of Tehran’s airport, and Spain’s Meliá Hotels International in 2016 announced a Gran Meliá in a development along the Caspian Sea. That’s been delayed but is still on track, the company says.

Candeias, for his part, takes a long view: “If we invest in a hotel, we are not looking at the timeline of three years, we are looking at timelines of five to 10 years, and then we make the decision.”

Where is the opportunity? Candeias  says the country’s hotels need an upgrade in management, marketing, distribution, revenue management and branding (Espinas itself will undergo a rebranding). “So any hotel in a city of more than one and a half, two million inhabitants, can be very sustainable if you develop it the right way,” he says. “Of course, it’s not going to be the Burj Al Arab or something like that, but you can do, for example, entry-level luxury or upper-upscale or upscale,” with a big potential to scale.

With Tehran’s metro area topping 17 million people, a few more hotels like the Palace could put the company above 4,000 rooms. He offers several ways to get there: management contracts and a franchise model, neither of which is used much; adding a casual midscale brand or developing heritage hotels at cultural sites; and by seeking investments in the U.K. and Italy, where shareholder family members live.

Foodie culture

In the meantime, Espinas Palace is adding a 21st-floor rooftop restaurant with a resident DJ. “When we think of Tehran, we don’t think in these terms, right? But there is a super big market for these types of products here,” he says. 

He compares Tehran to a European city in its neighborhoods, parks and shopping centers. Foodie culture has arrived, as well – or perhaps it has been there all along. “They love to eat… Everything related to food becomes interesting to them,” he says. One F&B concept did not have to be imported, however: Shortly?after his interview with HOTELS, Candeias was headed to the Caspian Sea to scout candidates for a caviar bar.

Candeias settled into Iran easily. “I was not expecting that,” he says. “Which is good because I can really focus on the job. I don’t have to focus on getting adapted.”

One focus: finding employees among the highly educated population who can help the company get ahead in a competitive, contemporary setting. He has imported managers from brands like Kempinski and Shangri-La, and for?revenue management, butler and personal concierge services. He introduced a more metric-based approach to sales and marketing, which has historically not been a proactive role. “Normally the person who takes care of sales is the reservations person,” he says.

It’s so time-consuming, he adds, and hospitality education is so outdated that he is considering opening a school. Given the lack of Middle Eastern versions of the traditional European schools, Candeias believes it’s an idea with potential.

 “We should be ambassadors of Persian hospitality,” he says, “which is a concept that, if I go into the history books, is even earlier than the European hospitality… Persian hospitality is a cultural concept that exists even if there is no hotel.”

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