Syria Today | Syria cancels contract with Turkey-based Dedeman Hotels

The deteriorating relations between Syria and Turkey have gained a new dimension with the Syrian Ministry of Tourism’s decision to cancel the management contracts of Turkey-based Dedeman Hotels and Resorts International for three of the country’s leading, state-owned five-star hotels in Damascus, Aleppo and Palmyra.

The Damascus and Palmyra contracts were scrapped because the ministry “had discovered serious financial, legal, and technical flaws in the way the hotels were managed,” a source in the Legal Affairs Department in the Ministry of Tourism told Syria Today. According to the contract, the company is required to pay an average of their yearly profits. Thus in Aleppo, “the Turkish group was supposed to provide at least 87.5 percent of their financial offer, but they only provided 30 percent,” the source explained. “We have the right to cancel the contract,” he added.

The Ministry of Tourism owns a number of properties across the country. In Damascus, besides the property operated by Dedeman, it owns a hotel managed by Starwood Hotels under the Sheraton brand.

The ministry first cancelled the Aleppo hotel’s contract on December 29, and then the remaining two contracts. However, “Dedeman has not received any official notice from Syria yet,” Dedeman Hotels and Resorts International CEO Tamer Yürükoğlu told Anadolu news agency  on December 31.

Syria’s tourism industry plunged last year in the wake of the political crisis engulfing the country. From April to November, the hotel occupancy rate stood at 31 percent, down from 96 percent in the same period of 2010, Syria Steps news website reported. The number of tourists visiting Syria has also declined by 64 percent from the previous year, according to the Ministry of Tourism.

Only four months ago, the Turkish company affirmed that it would not even consider reversing its decision to invest in Syria. “Currently, we do not have full capacity in our Syrian hotels; however, we are continuing with our projects and investments [there],” Yörükoğlu told Turkish daily Hürriyet Daily News on October 6. The company’s hotels in Aleppo, Damascus, and Palmyra were operating at approximately 25 percent occupancy, according to the daily. Dedeman had also aimed to open a new hotel in Lattakia in 2013.

“The hotel has not achieved great popularity during the last three years,” one of the hotel’s administrators, who requested anonymity, told Syria Today. He doubts that the decision to cancel the contracts was caused by the deteriorating political relations between Syria and Turkey.

In 2008, Dedeman signed a contract with the ministry to manage three five-star properties across the country: the former Le Méridien Hotel in Damascus and two properties previously managed by the Cham Hotel Group in Aleppo and Palmyra. At the time, this decision was criticised because the international experience of the Turkish firm was limited to Cyprus, Uzbekistan and Bulgaria. Critics thus argued that the Turkish company had been favoured due to the strong political links between the two countries, not because of the quality of its offer.

However, those links have since deteriorated, and on December 4 last year, the Syrian government reacted to Turkey’s decision to freeze Syrian governmental assets and stop dealing with the Central Bank of Syria by announcing a freeze on the free trade agreement signed between the two countries. Syria also imposed a customs tariff of 30 percent on all Turkish imports. Turkish corporate investment in Syria amounts to nearly USD 260m and Turkish companies have undertaken the greatest number of projects in Syria of any international investors.

“Business life should be far from domestic political developments; this [mixing of politics and business] was the fault of the previous cabinet which made many concessions in the past for the sake of political alliances, but at the expense of the country’s commercial interests,” a member of the Damascus Chamber of Industry who requested anonymity told Syria Today. “We should learn our lesson now,” he urged.