Market update: Egyptian Renaissance
Improved political stability and increased security are drawing tourists back to Egypt, and hotels are ramping up investments to capitalise on the country's comeback
Egypt as a tourist destination, with its historical sites and winter holiday resorts on the Red Sea, makes perfect sense. However, the setback Egypt’s tourism industry has suffered over the past eight years or so caused a dip in its performance. But according to experts speaking exclusively to Hotelier Middle East, this is about to change for the better.
The last two years witnessed positive growth across all performance indicators in Egypt, including occupancy, RevPAR and ADR.
According to the United Nations World Tourism Organisation (UNWTO) 2018 Tourism Highlights Report, Egypt was the Middle East’s fastest-growing tourist destination, with tourist arrivals in the country rising 51.1% year-on-year in 2017, reaching 8.5 million tourist arrivals, up from 5.2 million a year earlier.
The report also noted Cairo as the “world’s fastest-growing tourist destination, with 34.4% year-on-year growth in tourism and travel GDP.”
While several factors have contributed to the country’s growth, Colliers International manager – hotels for Egypt, Ahmad Yousry credits the “Egyptian government’s efforts towards enhancing security across the country and launching marketing campaigns. Another major factor is the growth in domestic tourism, which is considered an essential source market for hotels across the country.”
Bolstered by positive market indicators, hotel operators are returning to the North African country with a spate of new announcements, with some operators even entering the market for the first time. Deutsche Hospitality launched its new lifestyle hotel, Steigenberger Pure Lifestyle in Hurghada, in late 2018, while Swiss-Belhotel will enter the market with three hotels in 2021.
Swiss-Belhotel senior vice president, operations and development for the Middle East, Africa and India Laurent A. Voivenel noted: “While corporate travel comprises 67% of Cairo’s hospitality market demand, other cities are being developed into popular vacation destinations, and have seen a strong flow of visitors from Russia, and from Western European countries, including the UK and Germany. The GCC also remains a significant source market followed by the Egyptian domestic market that drives demand for corporate events, weddings and weekend getaways. At the same time the Chinese tourists are forecasted to grow rapidly.”
AccorHotels, one of the largest operators in the country, has 50 operational and pipeline hotels in Egypt.
Speaking exclusively to Hotelier Middle East, vice president, operations, Egypt for AccorHotels and general manager of Fairmont Nile City, Frank Naboulsi, said: “The Egyptian market has been on the rise since 2017, resulting in increased tourism revenues, an emphasis on manufacturing local products, and the signing of new large-scale projects such as the first industrial city in Fayoum. The year 2018 proved that the economy is getting stronger with tourism on the rise, given the increase in visitor numbers, which has garnered a lot of positive publicity for the country.”
Moving forward, the group is focusing on areas such as Cairo, Sharm El Sheikh, Luxor and Aswan. Naboulsi said: “As the capital, Cairo is an international hub with renewed focus on investment opportunities, in addition to the evident demand that is on the rise; Sharm El Sheikh is making a sustainable comeback and is an excellent opportunity for MICE business while Luxor and Aswan are home to some of the world’s most beautiful pharaonic temples and artefacts.”
Hilton, which currently operates 16 hotels in Egypt, will open a dual property in early 2019 – the Hilton Cairo Heliopolis and Heliopolis Towers Hotel (the first Waldorf Astoria hotel in Africa following current refurbishments).
Hilton vice president of operations, Egypt and North Africa, Mohab Ghali, revealed that the group is also adapting its portfolio to tap new markets. He said: “In general, the Egyptian economy is changing and we are adapting the makeup of our portfolio here in order to tap in to new markets and be ahead of the game. We believe wherever there’s business and investments, there’s potential for growing hotels in these areas; therefore we have some hotels in our pipeline now that are due to open in Ain Al Sokhna, New Cairo, Al Gouna, Damietta and Port Said.”
“The economic and political stability seen in the region is a strong indicator of what we expect will help to create numerous opportunities in attracting business to the tourism sector across the region,” he added.
According to the operators Hotelier spoke to, political and economic stability in Egypt is expected to create numerous opportunities in attracting business to the tourism sector.
It is a sentiment echoed by Yousry, who said: “Watersport activities and guests travelling for adventure and sports tourism is a key trend in the market. This segment is supported by beautiful diving reefs and windy beaches (ideal for kite surfing) such as those found in Hurghada and Ras Sedr.
“The main opportunities we see at present are for the introduction of more vibrant lifestyle hotels aimed at the next generation of travellers – such as the new Steigenberger Hotel in Hurghada – and the development of standalone food and beverage, entertainment, and cultural destinations across the core urban areas of the country,” he added.
Voivenel agreed, adding: “Like the rest of the region, Egypt has a massive opportunity in internationally branded, economy, midscale and lifestyle hotels and serviced apartments. There is a need for distinctive, trendy and affordable hotels catering to millennials.”
Naboulsi said: “With the economy bouncing back, investments are coming into the country in addition to various large-scale projects in the oil, gas and petroleum industries.
“With regards to the tourism industry, it is pivotal that we capitalise on the gradual – but evident – return of visitors that is on the rise. Development and the signing of projects has been key in this regard, with a number of hotels in the development pipeline. For example in late 2016, we announced developments on Egypt’s North Coast, slated to open by 2022, including Fairmont Fuka Bay, Swissôtel Fuka Bay, Novotel El Alamein City, and Ibis Styles El Alamein City.”
The market is not without its challenges, however.
Ghali believes the Egyptian government should consider making pre-arrival visa procedures easier, and add more charter flights and cruises to help hoteliers tap into new destinations.
He explained: “We still see areas of growth in regards to hotels and the industry gearing up for the anticipated high increase in [inbound] tourism numbers, where hotel companies need to develop and invest in renovations, staff training and quality of the products and services that they offer. We also hope for facilitation of pre-arrival visa procedures and e-visas, to encourage visitors and investors and make their decisions easier to come to Egypt. This, in addition to more charter flights and cruises into the country, can open some new destinations for us.”
Recruitment also remains a challenge, according to Yousry, who said: “Similar to other markets in the region, attracting young and enthusiastic people to choose hospitality as a career is a key challenge in Egypt. Promoting hospitality as a profession should be a key focus for all stakeholders involved in the industry, and not just hotel operators, to ensure the best and brightest are attracting into our sector.
“On the property side, access to funds to carry out refurbishments is a key challenge for operators at present. Many owners would like to carry out refurbishments to their hotels. However, due to the difficult trading climate over the past eight years or so, many owners do not have the necessary access to capital,” he notes.
The constant need to convey a sense of security following the unrest presents its own challenges, according to Naboulsi. He says: “I believe that the challenges stem from a lack of communication and the constant need to convey a sense of security, which sometimes takes the focus away from promoting the positive and sustained momentum of the destination.”
Voivenel added: “High interest rates, imposition of real estate taxes on operating hotels in Egypt, need for more tourism attractions, security concerns like other tourism destinations and faster decision making are just some of the current challenges we face.”
The recent bomb attack in Cairo that targeted tourists in December 2018 also raised safety and security concerns again. However, Yousry is hopeful the attack will be considered an isolated incident, with minimal impact on tourism numbers.
“This unfortunate incident was a shock to everyone involved in tourism in Egypt, especially after the country was experiencing a sustained period of stability. We are hopeful that this was an isolated incident and will not impact the market majorly,” he said.
The overall outlook, however, remains positive, with growing tourism and flights resuming from European destinations.
Yousry stated: “We are hopeful of stable and healthy growth across the various submarkets of the country. Leisure tourism growth in particular should be assisted by the resumption of direct flights from Russia to Egypt, which returned during the second half of last year. Russia is considered a very important source market for Egyptian tourism. In addition, further growth could come from the return of UK flights to destinations such as Sharm El Sheikh, which have traditionally been a popular destination for British holidaymakers.”
The steady growth is likely to attract more investment in the hospitality sector too, Voivenel notes: “There are many international hotel brands such as ours seeking to expand in Egypt given the enormous opportunity for growth and expansion. Competition is always good and key driver for higher levels of innovation, service and quality that in turn boost the market. We look ahead with a great deal of confidence and are very excited about the upcoming opportunities.”