More hotels being built in Egypt than elsewhere in Africa

 

While it may be early days for the Egyptian tourism industry’s recovery, investors appear to be convinced by it’s medium to long-term prospects. Indeed, despite the difficulties faced by hospitality firms in the last few years, Egypt has the most hotels under construction on the continent. According to a mid-2017 report by the trade news site Hospitality Net, there are currently 53 hotels under construction in Egypt. This is three more than the second most active market, Morocco, where 50 hotels are being built, and ahead of Nigeria, where there are 20 under construction.

Turning A Corner

As these figures suggest, the Egyptian hotel industry appears to have turned a corner in 2017, bolstered by both foreign visitors and domestic tourists. Indeed, the devaluation of the Egyptian pound has made the local market more affordable for foreign guests and has also made overseas travel more expensive for Egyptians, with both trends providing a boost to the local hospitality market. In Cairo, hotel occupancy increased by 11% in the year to May 2017, reaching a rate of 68%. However, the flotation of the Egyptian pound has caused a substantial drop in the average daily rate (ADR) during the equivalent time period. The ADR fell from $106 in May 2016 to $86 in May 2017, a year-on-year decline of 19%.

In terms of supply, the Cairo market was expected to offer approximately 24,000 rooms at the end of 2017, according to global real estate consultancy Jones Lang LaSalle. Given the difficulties that have blighted the tourism market over the last few years, it is perhaps unsurprising that supply has been relatively stable for the past 24 months, with only 400 rooms added between 2015 and the end of June 2017. However, things are beginning to pick up again as delayed projects are pushed towards completion, and a further 2700 rooms are expected to be added before 2019, as well as a number of renovations and rebrands. In 2016 and 2017 alone, the additions and renovations included the 292-room, five-star St Regis hotel, which is part of Qatari Diar’s $464.3m Nile Corniche project, a mixed use mega-project, which will also include office and residential properties, and the renovation of the Sheraton Cairo, a 326-room property on the banks of the Nile, which subsequently reopened in March 2017.

Coastal Development

Hospitality investment is not confined to Cairo, as the foreign and domestic tourism rebound is also being felt at the country’s beach resorts. In December 2016 AccorHotels announced that it had signed a hotel management deal with local developer ARCO for four new hotels on Egypt’s North Coast. The hotels – Fairmont Fuka Bay, Swissotel Fuka Bay, Novotel Al Alamein City, and Ibis Styles Al Alamein City – will bring 1100 new rooms and 350 residences to the North Coast in the middle and upper segments of the market. The first to open will be the Novotel Al Alamein City in 2018, while the Fairmont Fuka Bay will open in 2019, followed by the Swissotel Fuka Bay in 2022. The four developments will bring the number of properties in AccorHotels operational and development pipeline in Egypt to 31: with 17 under its management, and 14 in the pipeline.

There is also plenty of activity on the Red Sea coast. For example, in June 2017 Movenpick signed an agreement with Galalah Co. for Touristic Investments to manage a 214-room property in the El Sokhna area. The Movenpick Hotel El Ein Bay will open in 2020 and have full resort amenities, including a swimming pool, spa facilities and an 18-hole golf course. This will broaden Movenpick’s reach in Egypt, with the company already operating facilities in Aswan, Cairo, El Gouna, El Quseir, Sharm El Sheikh, Soma Bay and Taba.

As these moves suggest, the appetite for investment in the hospitality sector appears to have returned. Despite pressure on operational costs as a result of state subsidy reductions around power and energy, and a drop in dollar room rates related to the currency devaluation, the environment for hotels in both Cairo and the country’s holiday resorts is rapidly improving.

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The Report: Egypt 2018

Tourism chapter from The Report: Egypt 2018

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This article is from the Tourism chapter of The Report: Egypt 2018. Explore other chapters from this report.