In four years, we have tripled our market share in online accommodation rentals. In recent years, due to Iran’s inflationary economy and multiple sanctions, the country’s tourism ecosystem has faced numerous challenges and difficulties.
Weak transportation infrastructure, including planes, trains, and buses, along with reduced purchasing power and the gradual disappearance of the middle class, have led to a decrease in foreign tourists and investment, stifling the dynamism of the tourism and transportation industries compared to neighboring countries like Turkey, the UAE, and Armenia. Additionally, economic policies and a command economy have discouraged investment in this sector.
The statistics from the 2023 performance report of Jabama, released last week, also reflect the significant weaknesses in the tourism and hospitality industry. According to this report, only 40% of people can afford to travel, and on average, 50% of the country’s accommodations remain unoccupied.
However, despite these challenges, the online accommodation rental sector, due to its unique nature and lesser dependence on government policies, has experienced significant growth in recent years, especially in the post-COVID era. Unlike the foreign tourism and hospitality industries, which have fallen behind global trends, this sector, through proper investment, raising awareness, and encouraging hosts to build quality eco-friendly accommodations, has managed to increase its market share from 6% to around 17% in the past three years compared to the offline market.
In line with the recent release of Jabama’s 2023 performance report, reporters conducted an interview with Ahmad Izadpour, the CEO of the Jabama platform, discussing the state of Iran’s tourism industry in recent years and the challenges it faces. Here is the conversation:
What is the share of tourism in Iran’s economy, and how much potential for growth does it have considering the current economic conditions?
The most reliable data for 2021 indicates that tourism’s contribution to Iran’s GDP is about 5%, although some sources report it as 4.6%. Two key indicators are typically considered in tourism: the GDP share and the employment share. In terms of employment, around 6% of the country’s total employment is attributed to tourism. For better context, countries with significant tourism sectors, such as Portugal, Spain, or Greece, have tourism contributing about 18% to 23% of their GDP, while in Turkey, the tourism share is around 13% to 15%. Globally, most countries have seen strong recovery post-COVID, and while Iran has been part of that recovery, the country’s economic and security conditions have hindered a return to pre-pandemic tourism levels.
Typically, a country’s tourism is divided into two parts: domestic tourism and potential for inbound international tourism. As someone active in this field, I believe that the potential for domestic tourism is currently much greater than for international tourism. While there are no precise statistics on how much of the total tourism market is domestic versus inbound travel, it is likely that the share of domestic tourism in the economy will grow more than international tourism unless there are significant changes in Iran’s international relations that alter the dynamics. Additionally, investment growth in Iran’s hotel industry appears to be close to zero, whereas substantial investments are being made in the accommodation sector.
Overall, I believe that the accommodation sector, due to its lower investment requirements and faster return on investment, is more attractive today compared to other tourism sectors like hotels or transportation. When we talk about hotel investments, we’re looking at a minimum investment of several thousand billion tomans. Meanwhile, the transportation sector is trapped in a command economy, creating a vicious cycle that discourages investors from entering the industry. In my view, accommodations remain the most attractive investment and growth area. If this sector is entrusted to the people and free from interference, it could be a beacon of hope for the development of tourism in Iran.
The inflationary economy has led to the exclusion of many items from people’s spending baskets, including travel. According to Jabama’s own statistics, 40% of the population is unable to travel, and 50% of the country’s accommodations are currently vacant. In such circumstances, what strategy has Jabama adopted to foster growth and prosperity in this sector?
As someone active in the tourism sector, I believe this industry has yet to make travel accessible to the majority of people. Today, we see many users searching on the platform but not proceeding to book. We are aware of significant economic issues like inflation and reduced purchasing power, but I think these challenges can also present opportunities. We should be able to balance the supply and demand for travel by leveraging the technological platforms we provide to hosts and by raising awareness among the public.
Unfortunately, the middle class in society is weakening, which in turn has led to a decrease in demand for most accommodations that were previously sought after by this demographic. As the purchasing power of the middle class declines, a large portion of mid-range accommodations—those that are neither too expensive nor too economical—remain vacant more than ever.
However, the role of the platform in such situations is to create new dynamics that still make travel possible for people and ensure that accommodations remain profitable. These objectives are part of Jabama’s strategy. Although Jabama neither sets prices nor creates the market, we can assist hosts by providing technical infrastructure that allows them to achieve maximum revenue with fair pricing at any given time, ensuring that people are not deprived of the opportunity to travel.
In Jabama’s report, it’s mentioned that the online-to-offline ratio of accommodation bookings in Iran is 17%. Why do so-called ‘roadside’ renters still hold a significant share of this market despite widespread access to mobile phones and the internet?
This issue can be examined from two angles. First, if we compare the online market share to the previous year, we’ve seen significant growth. In 2020, we were dealing with a market share of about 5%, and over the past four years, after the COVID-19 period, the online accommodation rental market has grown more than threefold. However, compared to other industries, the online share of the accommodation rental market is still low. But it’s important to note that this industry is inherently less frequent compared to, say, online taxi services or food delivery.
The nature of the tourism and accommodation rental industry means that even with brand awareness, a user might only travel twice a year. This trend is consistent across markets in other countries. For example, if you compare Uber’s growth to that of Airbnb, you’ll see that Uber experienced rapid growth from 2008 to 2011, while Airbnb’s growth was more gradual and sustained. However, both services have seen substantial growth over the long term.
So, this is an inherent characteristic of the tourism and accommodation rental industry. That said, the growth of this industry in Iran over the past three to four years should not be underestimated. Although market share doesn’t lie—about 85% of people, despite all the marketing efforts made in recent years by both Jabama and other industry players, have only a relative awareness of online accommodation booking services.
They know it’s possible to book a villa, lodge, or cabin online. However, they haven’t yet been fully convinced that online services have a distinct advantage over offline services and that they won’t lose out by using them. I consider this a shortcoming of the industry players, including ourselves.
Addressing this issue requires developments that are part of our future plans. I believe we are now at a stage where we can work with hosts to offer value to customers, convincing them that online booking has much greater advantages compared to offline booking. I feel that within the next three years, online accommodation rentals will experience significant market share growth.
Regarding travel infrastructure in Iran—such as trains, airplanes, roads, and quality vehicles—these face various challenges and shortages. How does this impact the growth of the domestic tourism sector? Given the direct relationship between these infrastructures and the state of online tourism, how can Jabama influence this key part of the tourism cycle, and what is your strategy for addressing this challenge?
The reality is that the development of Iran’s southern islands is directly linked to the number of daily flights from various origins to these destinations. For example, if you compare the tourism development of Kish Island, Qeshm, and Chabahar, you can clearly see the correlation with the number of daily flights to these destinations. After all, if a traveler cannot reach an area at a reasonable price during different seasons, the trip becomes uneconomical, and gradually, the flow of visitors to that destination decreases. Consequently, why would anyone invest in that area or even build a quality eco-lodge for rent? These challenges have a severely detrimental impact on long-distance travel.
On the other hand, tourism is caught in the trap of a command economy, which is, in a sense, suffocating the country’s transportation industry. Since transportation is the backbone of travel and accommodation, we see that this issue is affecting the hotel market in the country, and it can even be argued that the lack of development in hotel infrastructure is linked to the underdevelopment of the country’s transportation network.
Nevertheless, the market for villa and accommodation rentals is largely connected to road trips, and our sector is not as severely impacted as the airline and rail industries. When we talk about road trips, we mean travel by personal vehicle, which has led to the accommodation rental market being less affected by the country’s public transportation network compared to hotels.
This factor may have contributed to the growth and development of the accommodation market in Iran in recent years. There have been many instances where hotel rooms remain empty due to the lack of flights to that destination. In fact, demand often exists, but the air and rail networks are unable to meet it.
What tools does Jabama use to assess the quality and provide a realistic evaluation of accommodations?
One of Jabama’s key advantages is its stringent approach to adding new accommodations to the platform. We have various quality control processes in place and conduct thorough checks to ensure the ownership of the property aligns with the accommodation listed. We carry out multiple photography sessions of the accommodation to ensure that what is listed on our platform and given the opportunity to be seen and booked accurately reflects reality. Once listed, we give the accommodation a chance to generate sales, and the more attention it gets from users, the more visibility it gains.
After an accommodation is booked, we strive to gather feedback from the traveler, and today, we collect reviews for over 70% of Jabama’s bookings. If the reviews are positive, the accommodation tends to earn more, but if they are negative, it can face penalties. In our evaluations, every interaction between guest and host is significant as it helps us improve our service, and the overall quality of the accommodation greatly impacts our hosts’ earnings. Therefore, if a host wants to earn more, they need to offer better quality.
These days, we’re seeing an outdoor advertising campaign from Jabama across Tehran. In your opinion, what impact will this new campaign have on users’ behavior towards opting for online accommodation booking?
Today, we are no longer interested in comparing our market share with others, as we believe we’ve already achieved a significant portion. Our current goal is to capture a larger share of the offline accommodation rental market, and perhaps this campaign is the beginning of a series of messages aimed at leveraging the awareness we’ve already created. As the leading player in the online accommodation sector, we aim to make commitments and promises to offline customers. After all, users have chosen offline rental for various reasons, and our effort now is to increase their awareness of the advantages of online booking compared to offline methods.
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