Opinion
8:50 am
Tue February 28, 2012

Foreign Policy: The Ritz-Carlton of Failed States

Originally published on Tue February 28, 2012 6:43 am

Michael Z. Wise has covered Central Europe for Reuters and the Washington Post.

Amid gunfire between the Pakistani military and Taliban fighters in the Swat Valley a few years ago, BBC reporter Nadene Ghouri found herself the lone guest at the luxurious Serena Hotel just outside the city of Mingora — and right in the center of the action. Despite the nearby battle, uniformed staff attended to her every need. When Ghouri inquired how they could afford to keep up the impeccable service, a saffron-suited waiter replied: "We are a five-star hotel, madam. We must maintain standards at all times."

The intense fighting eventually proved too much, and the Swat Valley hotel, part of the Serena chain operated by the Aga Khan Fund for Economic Development, was mothballed for more than a year. It reopened in April 2010, after the Pakistani military had pushed back the militants. Now the chain is looking to expand operations in — of all places — war-torn Afghanistan, where its five-star hotel in Kabul has been struck by Taliban rocket fire, beset by rioters, and damaged in a deadly bombing. Rooms at the Kabul Serena start at $356 per night, sealed off from the disheveled crowds, street noise, and fetid sewage outside. Call it blind optimism, but Serena now wants to create what it calls a "tourism circuit" in Afghanistan, with possible hotels in Herat and Mazar-e-Sharif.

It's a niche: the Ritz-Carlton of failed states. Serena owns 35 hotels, resorts, and lodges across nine countries, most of them outposts of multi-star luxury in places where residents live in zero-star conditions. High-risk hostelry has proved to be a booming business, as the chain — named Serena in a deliberate echo of the title "His Serene Highness" used by the Aga Khan's father — has doubled in size over the past decade, inaugurating a new property every two years, the most recent last November on the site of a Soviet-era shoe factory in Tajikistan. The Serena properties in East Africa reported a 33 percent rise in profits for 2010, and the entire hotel group is estimated to be worth more than half a billion dollars.

Serena doesn't confine its operations to dangerous locales, but the chain is very much driven to the world's political frontiers by its unusual benefactor. The 75-year-old Aga Khan — with personal wealth estimated at $2.7 billion — is the spiritual leader of the world's 15 million Ismaili Muslims, followers of a Shiite branch of Islam who regard him as a direct descendant of the Prophet Mohammed. He started the Serena chain in the 1970s in Africa and then began opening hotels closer to large Ismaili communities in Central Asia.

Today's Serena touts its unusual business strategy — in effect, combining development work with the quest for profits. "We are not in business to lose money," says Serena's managing director, Mahmud Jan Mohamed, "but our objectives are different from other hotel companies. We're happy to take on difficult projects." The Aga Khan himself has described Serena's involvement in troubled states and post-conflict areas as bringing an "investment seal of approval" to attract even more foreign capital. "In all of these places," he said at the 2006 opening of the Serena in Kampala, Uganda, "our goal is not merely to build an attractive building or to fill its rooms with visitors, but also to make a strategic investment which many private investors might be reluctant to make."

Continued At Foreign Policy (With Slideshow)

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