Dubai:  Gulf region hotel operators have secured first-mover advantage over international competitors by opening hotels in the Iraqi cities of Baghdad, Karbala and Erbil.

Iraq has seen increasing Gulf investor interest year on year with the number of projects by regional companies growing 87 per cent in 2009. Around $230 billion (Dh844 billion) worth of projects are currently under way in Iraq, 35 per cent dedicated to construction.

GCC hotel operators seem to be going for the high-risk, high-return scenario.

"We're worried, of course. But we hope that by the time we open our property in Baghdad the political tensions will clear up. If not, we will still operate. There are over 300,000 United Nations suppliers and contractors needing a safe place to stay," said Salim Al Zyr, president and chief executive of Abu Dhabi based Rotana Hotels.

"Not that we're going to wear army fatigues," he joked.

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The five-star Rotana in Baghdad's International Green Zone will offer executive floors and 250 rooms and suites as well as a health club and swimming pool and several restaurants. Summit Hotels Limited, a group of Middle Eastern investors, is developing the hotel, which is under construction and scheduled to open in early 2012.

The Baghdad property won't be the first Rotana to operate in Iraq. Much closer to opening, this summer, is the Erbil Rotana Hotel in the peaceful Kurdistan region.

Owned by Lebanese Malia Holdings, this five-star property will offer 205 rooms and suites.

Al Zyr said that he would not rule out expansion in Iraq to cities like Karbala, security permitting.

"We'll first test with the Erbil property how it goes. We had many offers to operate properties all over Iraq, including Basra, but we'll have a look at that later."

Kuwaiti operator Safir Hotels & Resorts has also taken the plunge and opened the Safir Karbala Hotel with an Iraqi owner in September.

"There are a lot of resources in Iraq. Of course, we have generators and top security. We're the safest hotel in town. But it is about how you manage the hotel, applying the right operating system," said Helmut Meckelburg, CEO of Safir International Hotel Management.

Safir plans to open another seven hotels in Iraq over the next two to three years.