Tourism sector recovered 

Hotels in Egypt can look back on a successful 1999 and all markets, with the exception of Luxor, exceeded occupancies and average rates achieved before the Luxor massacre in 1997. The Red Sea resorts are popular once again and Nile cruises are also showing a marked increase with operators reintroducing cruises on Lake Nasser. Growth looks set to continue following the government’s open skies policy introduced in January 2000 which allows international airlines to operate scheduled flights directly to resorts. As a result, the number of tourists is estimated to reach eight million by 2005. 

Alexandria on the verge of success 

From being a predominantly domestic resort, Alexandria is becoming a sought-after international destination with improved infrastructure and upgrading of facilities by the local authorities. The city is attracting both local and international corporate business as well as an increased demand for meetings and incentives, representing a cheaper alternative to Cairo. These factors have contributed to the upward trend in both occupancy and average rate over the past year, which the industry looks set to build on.

Occupancy boost drives yield in Cairo 

Cairo’s hotel market was least affected by the decline in tourist arrivals in 1998 due to its high share of corporate guests. Nevertheless, increasing tourists arrivals, healthy economic growth and new large joint ventures have secured an occupancy increase exceeding 20 percent whilst average rates have remained at 1998 levels due to an agreement between major hotels to freeze corporate rates. The higher increase in occupancy in the hotels near the Pyramids is a result of their business mix, which is predominantly tourism related and was badly affected following the Luxor incident. 

Revival of the masses in Hurghada 

Hurghada has finally managed to get back on its feet with many hotels doubling both occupancy and thus rooms yield in 1999. The Red Sea resort has become the most popular mass-market destination in the Middle East. There are now an estimated 15,000 hotel rooms catering to price-sensitive travellers which command clear market superiority in a regional context. With the one million visitor barrier expected to be broken by 2000, Hurghada hoteliers are gearing up for a very strong year. 

Full recovery in sight in Luxor 

Luxor has made great strides following the devastating effects on tourism as a result of the 1997 massacre. Whilst operators have been cautious to minimise increased rates in an effort to stimulate demand, occupancy levels saw a 98 percent growth on 1998 and averaged 53 percent in 1999. Building on this success, 2000 looks set to show further improvement. 

Sharm el-Sheikh bouncing back 

Average room rates proved to be resilient over the past year although several new hotel projects came on-line in 1999 and the beginning of 2000. Hoteliers report low resistance from tour operators and FITs and therefore expect further rate hikes for 2000 supported by the improving quality of hotel stock. Further successful positioning in the international market place, however, also depends on the government’s ability to upgrade the town’s infrastructure, including the existing airport, which currently operates near capacity. 

New supply across all of Egypt 

Whilst new supply in Alexandria is limited, Cairo is experiencing a boom in hotel supply following no change in international quality stock since 1987. The Conrad International, which opened in 1999, is the first of many major new projects. In response, many older properties are expected to start major refurbishment programmes in order to remain competitive. 

Several hotel projects are also expected in Cairo’s suburban areas. These new communities include Beverly Hills, Dreamland and the sixth of October City. International operators such as Accor, Bass Hotels & Resorts, Hilton, Marriott and Starwood are all due to open new hotels during 2000 or 2001 and believe they can be successful in attracting tourists in particular to these newly populated areas. 

In order to satisfy increasing demand for quality resorts in natural surroundings, integrated resort communities such as Sahl Hasheesh and Soma Bay are on the rise south of Hurghada, stretching as far as Mersa Alam. This phenomenon started with the development of the El Gouna resort north of Hurghada and is expected to eventually dominate regional tourism. Similar projects are underway in the South Sinai, notably Taba Heights near the Israeli border. 

The first new supply Luxor has seen in many years is set to come on-line in 2002 with two new properties presently under construction. Operators are confident of a promising year ahead whilst the Nile cruise business also regains its former popularity. 

Sharm el-Sheikh is Egypt’s pride as the little town on the Gulf of Aqaba has managed to emerge from an unknown dive site to a truly unique tourist destination today. From just two hotels in 1987, Sharm el-Sheikh now boasts around 10,000 hotel rooms, the latest addition being the 433-room Hyatt. The number of rooms is expected to double within the next two years as growing demand from European source markets further fuels development. 

Maintaining the environment 

Sharm el-Sheikh’s popularity in European source markets is based on the government’s strict environmental policy applied along the coast to protect the environment. The government has learnt from past mistakes. Hurghada in particular is a negative example of uncontrolled development resulting in the destruction of almost all coral reefs and with it all efforts to create an upmarket destination. As such, the application of strict construction guidelines and environmental laws have made Sharm el-Sheikh a quality alternative destination to Hurghada for which tourists are willing to pay a premium. 

Outlook 

The planned development of the mixed-use San Stefano complex, including a Four Seasons hotel, on the site of the former San Stefano hotel will put Alexandria in the international spotlight. The city is undergoing a major image change, stimulated by the recent international attention following the discovery of significant architectural artefacts, and should look forward to growing visitation. 

In Cairo, city centre hotels look set to continue to out-perform the rest of the Cairo market in coming years. However, as the downtown area becomes more congested and surrounding new communities begin offering a better product for offices, residences and hotels, Cairo’s main hotel market may see a shift. 

Although Hurghada will see an additional 2,800 rooms enter the market this year, increased demand suggests they are likely to absorb frustrated demand from price-sensitive European travellers. Hoteliers in Hurghada are certainly keen to sustain this trend and realise that in order to do so they must remain competitive with Mediterranean destinations such as Turkey, Cyprus and Greece in terms of pricing. 

Luxor was hardest hit by the Egyptian tourism crisis in 1998 and is still recovering.  However, backed by the phenomenal growth of the tourism industry in Egypt generally and nearby Hurghada in particular, visitors to some of the world’s most spectacular heritage sites are bound to return in ever growing numbers. 

Hoteliers in Sharm el-Sheikh report strong reservations on the books for 2000. It appears that the town is well on its way to becoming an established quality resort destination in its own right with international hotel operators such as Sheraton, Hyatt, Crowne Plaza, Four Seasons and Ritz Carlton all with the ability to move the destination further up-market. 

New names will emerge in tourist brochures, including Taba and Nuweiba in the South Sinai and Mersa Alam on the Red Sea which, supported by the new open skies policy, should further drive the relentless growth of Egypt as a prime international tourist destination.