Abu Dhabi-based Rotana Hotels said it would develop a $55 million five-star property in Arbil in Iraq's Kurdish region.

Rotana, which has 25 hotels across the Middle East, will compete for a growing hospitality business with the Erbil International Hotel, the city's only other five-star property, where a standard twin room costs around $300 a night.

'This is part of our strategic aim to have a property located in every key city in the Middle East,' Selim el-Zyr, president of Rotana, said in a statement.

The semi-autonomous Kurdish Regional Government is trying to encourage investors to develop Arbil's hotel infrastructure and turn the city into an entry point to Iraq for foreign businesses.

The city's international airport handled about 170,000 passengers in 2006 and the regional government is building a new airport to handle 1.5 million, according to the London-based Kurdistan Development Corporation.

Austrian Airlines became the first European carrier to resume scheduled flights to Iraq last year when it began twice-weekly services to Arbil from Vienna.

The Rotana's Arbil property is owned by Lebanese holding company Malia and will have 205 rooms.