Identifier
Created
Classification
Origin
03AMMAN1526
2003-03-13 07:12:00
UNCLASSIFIED
Embassy Amman
Cable title:  

JORDANIAN HOTELIERS HOPE FOR BETTER DAYS

Tags:  ECON EFIN JO 
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This record is a partial extract of the original cable. The full text of the original cable is not available.
UNCLAS SECTION 01 OF 02 AMMAN 001526 

SIPDIS

COMMERCE FOR 4520/ITA/MAC/ONE/COBERG

E.O. 12958: N/A
TAGS: ECON EFIN JO
SUBJECT: JORDANIAN HOTELIERS HOPE FOR BETTER DAYS
POST-SADDAM


UNCLAS SECTION 01 OF 02 AMMAN 001526

SIPDIS

COMMERCE FOR 4520/ITA/MAC/ONE/COBERG

E.O. 12958: N/A
TAGS: ECON EFIN JO
SUBJECT: JORDANIAN HOTELIERS HOPE FOR BETTER DAYS
POST-SADDAM



1. (U) SUMMARY: Having slightly recovered from a
post-September 11 drop in regional tourism, Jordan's hotel
industry is now reeling in the face of uncertainty over
conflict in neighboring Iraq. Despite the downturn, the
sector is not under threat of financial collapse, due to a
reluctance on the part of banks to assume ownership of hotel
properties and continue creative financing. Hotel managers
continue to seek creative ways to work out of the slump, but
stress that even a post-Saddam Iraq will not bring sufficient
stability to the region that would lead to an increase in
tourism unless concurrent progress on the Palestinian-Israeli
front is attained. END SUMMARY

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LOTS OF ROOM AT THE INN
--------------


2. (U) We met with Michel Nazzal, owner of the Radisson SAS
hotels in Amman and Aqaba and President of the Jordan Hotel
Association (JHA),on March 11 to get an update on the state
of Jordan's hotel industry given continued regional
instability and the possibility of a conflict with Iraq. The
JHA represents Jordan's 400 hotels, and is the major
shareholder in the Amman College for Hospitality and Tourism
Education, one of the largest such schools in the region.
The Nazzal family, owners of the Radisson SAS hotels in Amman
and Aqaba, has been in the hotel business since 1923, when it
built the since-razed Philadelphia Hotel across from the
Roman Amphitheater in downtown Amman. Nazzal has led the JHA
since 1999.


3. (U) Nazzal told us that occupancy rates at Jordanian
hotels for the spring are hovering at about 20%, the
exception being the Intercontinental, currently home to most
of the foreign press. (NOTE: For example, according to
Nazzal, 267 rooms were filled at the Intercontinental on
March 10, compared to 34 at the Four Seasons, 66 at the
Holiday Inn, 88 at the Sheraton, and 100 at the Marriott.
END NOTE) He said that hotels have already written off
spring and are close to doing the same for summer, given the
pending conflict. Room rates have fallen as well, with an
average rate of JD47 ($66) for 2002, down from JD100 ($140)
in the late 90s. Nazzal said that even pre-conflict, the
trend had been heading downward worldwide, as people "are
afraid to fly right now". As a result, the share of tourism
in GDP has dropped from 12% to 9% since 2000. Approximately

25,000 workers are employed in the Jordanian tourism
industry.

--------------
DEBT ROLLS OVER; HOTELS DO NOT
--------------


4. (U) Nazzal stressed, however, that despite the low
occupancy rates and the attendant effect on revenues, most
hotels are not in danger of going out of business, despite
the JD174/$224m in short term debts they collectively owe to
local banks. He said that when a hotel is on the verge of
bankruptcy, the bank that holds the loan simply rolls it over
for another year at 10% interest. Consequently, he said,
what little revenue that continues to roll in is spent on
servicing the debt, not on hotel upkeep or development. He
said that banks don't want hotels to default because "they
can't do anything with them; no one wants to buy them,
bankers do not want to manage them, and they can't just tear
them down". (In addition, some banks already have equity in
hotels, see SEPTEL on the banking sector.) Nazzal added that
efforts to get the banks to refinance the debt for 20 years
at 7% have thus far proven futile. (NOTE: This latter idea
grew from a USAID-organized seminar for hoteliers and bankers
that focused on seeking creative alternatives to traditional
hotel financing held in Amman in February. END NOTE) He
also pointed out that the hotel sector in Petra, which has
been especially hard hit by the decline in tourism, is a
different case. Under a special agreement with the
government-owned Industrial Development Bank, which holds
most of the Petra hotels debt, the bank accepts cars and
houses in lieu of hotel property when default looms, leaving
the owner with the hotel and not much else.

--------------
COME TO CAMP JORDAN
--------------


5. (U) As a result of the slump, the JHA is looking
creatively at other ways to market the Kingdom. He said that
one proposal is regional--to set up summer youth camps in
Jordan for kids from Gulf countries. The JHA is projecting
that, given the right conditions (i.e. regional stability),
the camps could attract 5000 participants the first year. He
said the camps would be geared towards recreation, arts, and
Arab culture. Nazzal said that it is hoped the families of
these kids, with four-five members each, would come to Jordan
as well and "fill up our hotel rooms," with packages that
attracted medical tourists or other incentives that cater to
adults.


6. (U) Another plan is to market Petra as something more
than a tourist destination, as "Petra needs something else,"
according to Nazzal. He said that plans to build a
convention center in Petra are being discussed, with an eye
towards making it a value-added destination, perhaps a
worldwide center for art and sculpture. He said that years
ago, for example, Davos was little more than a ski resort;
now, "it is a place synonymous with economics and its
consequent development into a conference hub reflects that
image." He said that Arabs are not interested in cultural
tourism, so "we have to find something else. We can't
compete with the Emirates on shopping. We can't compete with
Egypt, Syria, and Lebanon on gambling, entertainment, and
night life. What are we to do?" Regarding Aqaba, he said he
still hasn't seen any impact on occupancy rates since the
designation of the ASEZA--"they haven't changed for ten
years." He said there is little coordination between hotel
owners, ASEZA officials, and the Aqaba Chamber of Commerce,
but he said the long-term plans were "sound" and hoped they
would "truly lead to implementing the overall vision of Aqaba
as a world-class tourist destination."

--------------
EX-SADDAM ONLY PART OF THE SOLUTION
--------------


7. (U) Nazzal concluded by saying that the hotels were
girding for better days post-Saddam, but uncertainty over the
duration of the conflict continued to be pervasive. He said
he hoped it would be "clean and fast", and said that
resolution of the Iraqi situation "is only one part of the
solution." He said "the U.S. can't forget the Palestinians,"
and stressed that only stability both east and west of Jordan
would bring international tourists back to the region.
Nazzal cited the prospect of offering Biblical tourism
packages that would include Israel, Palestine, Jordan, Syria
and Iraq has having the potential to lead to a "resurrection"
of the Jordanian tourist industry.

--------------
COMMENT
--------------


8. (U) Nazzal's view that a peaceful, post-Saddam Iraq will
not alone bring stability to the region is consistent with
messages we hear from other Jordanian interlocutors with ties
to business, commerce, and finance. Absent a sustained peace
and stability on either side of Jordan, we can expect the
downturn in tourism to continue, to the detriment of the
country and economy as a whole.

GNEHM