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Sanctions Have Unintended Effect on Iran's Tourism Industry - Part 3

This is Part 3 of a 3-part series: Iran Tourism
Parts 1 / 2 / 3

When you're talking about travel and tourism to Iran, you can't overlook the question of U.S. and international sanctions imposed against Tehran as part of the ongoing dispute over its controversial nuclear program. The sanctions were never meant to target Iran's travel and tourism industries, but their effect is felt in numerous ways.

Absolute Travel in Manhattan has been sending American tourists to Iran for more than a decade, in part, says company President Ken Fish, because he was able to find a tour operator in Tehran to manage things on the Iran side.

"When I selected the company that I chose to do business with, I contacted them and asked them to meet with me and on a handshake I said we're going to be doing business together. And eleven years down the road we're still doing business together," said Fish.

Travel and tourism activities are officially exempt from U.S. sanctions. But the sanctions do prevent American travel companies from sending money directly to their partners in Iran. Those wire transfers have to be cleared first through the Federal Reserve Bank of New York, which takes time and is limited to $10,000 per transaction. So business people like Ken Fish find other ways.

"That's really not a problem. We're not dealing with banks in Iran. We always have overseas banks whether they are in Europe or Dubai or some other venue," Fish explained.

The banks do charge transfer fees, however, which can cut the profit margin for smaller tour operators, like this one seen in home video.

And the sanctions also influence the spending habits of tourists in Iran, because of the lack of credit card or debit card services.

The sanctions have also led to a drawdown in Western investment. Kish Island, for example, was poised in the 1970s to become a major tourist paradise. But economist Fariborz Ghadar says that potential has not been realized.

"If you Google Kish you can find a series of very chic hotels, but in fact, some of these hotels only exist online. They haven't actually been built. Hotel construction has fallen behind - hotels which were scheduled to be completed 5 years ago," Ghadar explained.

As the Europeans leave though, other players take their place.
"There's no doubt that the Chinese to some extent will invest in this," noted Sohrab Sobhani, a business consultant, who recently co-authored an article on Iran's economy for the Harvard International Review. "This is a natural thing. When Chinese and Asians see there is a market for them in Iran there is no doubt that in addition to their investments in oil and gas they will make an investment in tourism as well."

But Fariborz Ghadar says that may not provide enough help for the tourist sector.

"When you go to China and Beijing and Shanghai you see that their hotels are all Western brands, the Meridian and the Hyatt and others," Ghadar noted. "If the firms doing business in China are Western, do you really want to import Chinese know-how into Iran?"

Despite sanctions and a loss of foreign investment, there are some positive indicators. Domestic investment in Iran's hospitality sector is said to have nearly doubled in five years with about 500 small hotels being built across the country. Also, nearly two percent of the Iranian workforce is now in the tourism industry. Most of those jobs were created in just the past decade and much of the future growth in tourism will come from Iran's private sector.