US embassy cable - 03AMMAN1526

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. 
 
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DEBT ROLLS OVER; HOTELS DO NOT 
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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. 
 
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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." 
 
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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. 
 
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COMMENT 
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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