Uzbekistan looks for Arab investment in hotels

Unlike many parts of the Former Soviet Union, Uzbekistan has been slow to open up to foreign direct investment. But that is changing in the hotel sector as the most populated country in Central Asia looks for more tourists from the GCC.

‘We only really have two five-star hotels in Tashkent, the Sheraton and InterCon, and would welcome foreign investment,’ Uzbektourism chairman Zahid L. Khakimov told ArabianMoney.Net last week during a media trip to mark the signing of GCC representation agreement with the UAE based Planet Group.

Officials said there have been talks with an Omani investor about the Tashkent Palace Hotel but nothing has been finalized yet.

Potential growth

Mr. Khakimov commented that the present one million tourists visiting the country each year was ‘not enough’. He noted that most of the hotels of the country were completed in the 18 years since its independence and that the majority are privately owned.

Uzbekistan is the home of the ancient Silk Road and a wealth of Islamic architecture, as well as relatively low-cost restaurants, shopping and nightlife within three hours’ flying time from the UAE.

Arabian investors might be attracted to invest in this relatively undeveloped tourist destination at such an early stage. This has, after all, been a successful formula for hotel investment in many parts of the world in the past.

Assuming that the price is right, the reward would come for taking a risk that is difficult to evaluate. Legal due diligence could establish if a strong title is available. But foreign investors can find themselves at a disadvantage to local partners for reasons ranging from language to government support for its own nationals.

Mutual interest

In any foreign direct investment the foreign party has to clearly represent a beneficial interest to the home party, then as in most business deals mutual interest will prevail.

GCC hotel investors in Uzbekistan would probably need to come with more than money, and an existing link with an international hotel management chain might be an advantage. Local hotel management is good but could be polished to global standards, particularly for the luxury end of the market.

The rewards for successful pioneers in foreign hotel investments can be considerable, and the number of new opportunities has dwindled around the world. But then again in the global economic crisis hotel investors with cash to spare may be waiting for opportunities closer to home.
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