Hotel Project Management in Iran


Lesson learned from involvement in Hotel Project Management in Iran for the past few years


Hotel-Development-in-IranThe process is actually more like a marathon, and although a couple of cheats have been known to start in the middle, those who truly succeed are not always first or second, some come in last but they come in to warm applause and admiration. Those that fail do so for different reasons. Typically their preparation was not quite complete. Perhaps their speed was too fast at the beginning, their breathing too quick in the middle or their hydration insufficient. Those that completed it prepared well, trained through thick and thin, set and met deadlines, kept their eye on the date, compensated for shortfalls and climaxed to their best performance on race day.

Hotel Project Management in Iran Lesson Learned

There are many Owners with many large and valuable lots available to them in Iran.  There are different governmental entities that own these lots as well as many private entities that inherited large chunks of land properties all around the country.  In addition, there are many available funds for this, however, many Iranians don’t think of Long-Term Financial Terms.  Hotel Development requires financing and income will be realized many years after construction and successful operation of the Hotel.  Hotel Operation and Branding is where Iranians lack experience and take less seriously when it comes to Hotel Project Management.  A foreign company interested in Hotel Project Management in Iran should consider building a professional team of Owner, Financier, Operator and Construction Team to have a successful Hotel Development in Iran.

Hotel Project Development Process

It is important to realize up front that there is more to the process than construction and operation. There are several steps necessary before an investor, a banker or a hotelier will show any genuine interest. Oh I do not mean that they will not write nice letters of intent, letters of interest and provide the developer with eloquent assurances of commitment but there are some half dozen critical steps that must be complete before these three ‘characters’ will sign anything meaningful.

Here is a list of some of those things that might be required before signatures will start to flow. Choose any six and you will be off to a good start!

  1. Finalized land documents. Title. Lease. Environmental study. Access & egress. Control by owner/developer.
  2. Market Study & Financial Projections. A positive, credible market study completed by a recognized international group. The study will recommend size, market positioning and average rates. It will review growth plans, supply and demand, historical performance of the competition and will estimate market share. The operator and lender will sanity-check these numbers from their own experience and discount where necessary.
  3. Architectural program and Preliminary design. Most hotel groups start with the size of a basic regular room and bathroom module. This is a “Go” or a “No-Go” measurement.
  4. Team. An experienced team will be important to the success of the project. This will include a review of the track record of the Developer, the builder, the architect, interior designer, kitchen & laundry planner, landscape designer, engineers and other specialists where necessary.
  5. Board of Directors. A background check of the Board members will be required.
  6. Construction permit.
  7. Management contract. A signed commitment from a recognized brand or management company.
  8. Investment Strategy….Equity (25%-50%). No, land value is not enough. You must have some cash! Exit strategy…….no, this is not a scam when the builder heads for the exit with your cash, it is the planned exit from this investment.
  9. Debt (50%-60%). Details of the loan will be important to the equity investors and the operator. The existence of a construction loan under the right conditions may make a big difference.
  10. Development budget. Many believe that the budget is merely the design, construction & FF&E and forget the financing, pre-opening and other development expenses.

Financing early operating losses needs to be thought through before running into them! Operating losses are almost guaranteed in most cases. We used to guess at five years. Now we guess at three. How much will be dictated by the operator who, accept it or not, does not ultimately control demand.  There is a useful site with many other Hotel Development Process information from Hilton Hotels at this link.

Hotel Project Management today does not start with construction, it starts with a Project Management Professional Team!

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