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Goal of 20 million visitors set as tourism sector undergoes revival

Article - August 24, 2015

Tourism suffered losses more than any other sector between 2011 and 2014, but as political stability has returned so have the visitors.  With revenues up 7% so far this year, the Ministry of Tourism has set a target of 20 million tourists by 2020, helped along by new luxury hotel offerings such as the Sahl Hasheesh.

When examining Egypt’s tumultuous recent history, there is perhaps one industry that bears the scars of that difficult period more clearly than any other – tourism.

Having become a stalwart sector of economic growth over the past three decades, with international visitors to the country reaching a pinnacle of 14.7 million in 2010, tourism – along with the rest of the economy – was hit hard in the aftermath of the 2011 revolution.  

While the momentous ‘Arab Spring’ had an invigorating effect for so many Egyptians, for many others, especially those dependent on tourism for a living, it would be a spring that ultimately rained on the summer parade.

Indeed for three consecutive summers after the  revolution – owing to the extended period of social unrest that followed it – the number of tourists and tourism revenues in Egypt decreased drastically, falling to fewer than 9.5 million annual visitors in 2013, with takings that year dropping by 54% compared to 2010.

However, with the return of political stability in 2014, the sun has steadily started to shine again on one of the country’s most integral industries.

Tourism revenues were up 7% in the first quarter of 2015 compared to the same period in 2014, and there is still tremendous potential for considerable growth.

Well-aware of this potential, both the Egyptian government and private enterprises are now mobilizing to create the conditions and provide the amenities necessary to fully revitalize the sector.

Since as far back as 1975, when visa restrictions for European and North American citizens were relaxed, tourism has been a pillar of the Egyptian economy.

Throughout the late 70s, significant amounts of government money were spent to upgrade hotels and infrastructure such as road, rail, and air connectivity, which have served the sector well throughout the years.

At its peak, the tourism sector employed 12% of Egypt’s workforce and contributed to 19.5% of GDP (2007), in addition to being one the country’s main providers of foreign currency.

Despite the sector’s recent decline, Egypt’s year-round sunny weather and world famous historical and cultural attractions, such as The Pyramids, The Sphinx, the Abu Simbel Temples south of Aswan, and the Valley of the Kings near Luxor, home to one third of the world’s antiquities, imbibe it with an evergreen appeal.

Visitors looking for a more leisurely vacation can retreat to the Sinai Peninsula, which is surrounded by pristine beaches, rich coral reefs, and an increasingly large offering of gastronomy and entertainment. 

20 million by 2020
Leveraging the country’s geographically diverse touristic offerings, the Egyptian Ministry of Tourism is drafting a plan to attract 20 million tourists by the year 2020 and boost the sector’s total revenue to $26 billion.

It is being bolstered by an international advertising campaign that kicked off at the beginning of the year, and is focused on the rich variety of tourism in Egypt, from the Nile to desert outings, to sports, therapeutic retreats and religious tourism. 

According to a report published by the General Authority for Investment and Free Zones, private investments in the tourism sector are soon projected to reach $14.6 billion, and the government is also planning to inject additional investments in the range of $4.4 billion.

Significant infrastructural improvements to accommodate increased visitor traffic are also being made, most notably in Al-Minya, which will see the construction of a new airport, and in Mersa Matrouh, where a corniche that is expected to generate 20,000 jobs is currently being built.

In parallel, a new passenger terminal is being constructed at the Al-Arab Airport, and a Cairo-Alexandria high-speed railway is being laid to increase the two-way passenger flow between the two largest cities in Egypt. 

While such transport expansions aim to make travelling to, from and around the country that much easier for the expected influx of visitors over the next five years, a host of other developments are also on the horizon.

The Egyptian Company for Tourism and Hotels (EGOTH), for instance, announced at the Egypt Economic Development Conference in March that it plans to pump $116 million into the development of hotels nationwide over the next year alone.

This will include funds to develop the Shepherd Hotel overlooking the Nile, the Cosmopolitan Hotel in downtown Cairo, and a hotel project in Alexandria.

“Egypt is still fresh out of a revolution... The country has a lot of work to do in order to reposition itself as the region’s most attractive investment destination to both domestic and foreign investors”

Mohamed kamel, 
CEO of Egyptian Resorts Company 

 

This is just one of the many investments that represent a wider push to reinvigorate the “classic” tourism industry in Egypt, a segment of the sector that was most adversely affected after the period of recent turmoil.

Although the country’s iconic pyramids and temples are a massive part of the ancient Arab nation’s charm, aside from such classic attractions, tourism authorities and industry stakeholders are equally as eager to draw attention to alternative options.

While the capital of Cairo   remains a popular place for historical and religious tourism, for Christians and Muslims alike, it is also becoming increasingly renowned as a leading healthcare hub, for example, drawing a rising tide of health-tourism from the Middle East in particular.

Perhaps Egypt’s most enticing draw for tourists, especially from Europe, is its vast array of beach resorts dotted along the Red Sea coastline.  

This, unsurprisingly, is where tourism’s ongoing recovery has been at its strongest, with occupancy rates in the resort towns of Sharm El Sheikh and Hurghada reaching an average of 70% at the beginning of June, while rates have been as high as 90% at hotels such as Sahl Hasheeh this year.  

Lagging behind, however, were resorts in the South Sinai area, which despite ambitious plans being spearheaded by the Tourism Development Authority (TDA), have been plagued by road closures and security risks.

At present, hotel capacity in the area is 62,000, though that number is likely to increase as the TDA begins to propose land to investors keen to diversify their portfolios and develop in less saturated areas, such as the ones around El-Tor and Ras Mohamed.

As Adel El-Sherbini, Vice Head of the Tourism Investors Association in South Sinai told Daily News Egypt, these areas, though still relatively less trodden,offer a new tourist product that will distinguish them from more popular places like Sharm El Sheikh. 

Setting the standards of luxury
It’s critical to note that the speed with which the tourism industry has rebounded in Egypt is due to a variety of factors, including government support, bold investments, and the courage to innovate, pioneer, and develop unknown areas from scratch.

Perhaps most important, however, has been the determination of Egyptian investors who believed all along that the sector would rebound, and who remained determined to conduct business as usual, even through very challenging times.

Construction of the Baron Palace Sahl Hasheesh, a 6-star property along the Red Sea, began in 2010 – just one year before the Egyptian revolution.

Though it was a difficult decision to proceed with these plans through a time of such uncertainty, Sherif Shahein, Vice President of Baron Hotels & Resorts, explains that his company pushed ahead as planned because of his unwavering faith in Egypt and the knowledge that business would resume sooner or later. 

Today, the 645-room luxury hotel is complete, and has set the standard for a new style of luxury hotel in Egypt.

Guests often remark that they are surprised to find such a high level of luxury in Egypt, which previously fell far behind properties in places such as Abu Dhabi, Dubai, and Turkey.

Yet by insisting on quality, an exquisite landscape, and superb service, Mr. Shahein and his team have exceeded the expectations of guests visiting Egypt and have created demand for a higher level of clientele that has never before considered vacationing there.

Mr. Shahein insists that the overall image of the Red Sea has benefitted from this infusion of luxury, and that the hotel’s popularity with the travel industry in the UK, Germany, and Europe in general, is indicative of good things to come. 

Though competitors in other established tourist destinations such as El Gouna and Sharm El Sheikh are quickly emerging, Mr. Shahein insists that his location is really what sets his property apart from the others.

“If coming for a true Red Sea experience, where visitors can swim safely, snorkel, dive, and go straight away to a sandy beach in a sunny destination, nothing compares to Sahl Hasheesh,” he says. 

Opened in April 2014, the Baron Palace Sahl Hasheesh is 60km from the Hurghada airport. Built with Italian and Belgian marble, it sits along a 12km promenade and has a pioneering swim-up suite concept.

It also offers a Premium All Inclusive or Ultra All Inclusive concept that includes access to 16 restaurants and bars, which have been recognized by the Jeune Restaurateurs D’Europe. 

Within the next three years, Mr. Shahein has plans to build two more hotels in Sahl Hasheesh with a capacity of 360 rooms each.

One step up from the Baron Palace, the new properties will feature a 7-star boutique hotel concept. “I believe Sahl Hasheesh will be the future of Egypt for perhaps the next 20 years,” he says, with confidence. 

Mohamed Kamel, Chief Executive Officer of the Egyptian Resorts Company (ERC), is of a similar mindset. 

“Sahl Hasheesh boasts the longest uninterrupted stretch of beautiful beach on the Red Sea,” he says.

Unlike most other resort areas in Egypt, he explains that everything in Sahl Hasheesh is interconnected and can be easily accessed by foot, providing a sense of tranquility and interconnectedness that makes it very unique.

He also believes that the area is just starting to appear on the radar of favored tourist destinations, and that it will become increasingly competitive over the next decade, as new and more differentiated hotels and residential offerings are constructed.

Already, the area has become a hit for triathlons and other special sporting events. Its calm waters and uninterrupted roads are ideal for swimmers, runners, and cyclists, and there are several health and sports events being penciled onto the agenda, including Ironman events.

Hurdles to overcome
Despite a very rosy general outlook, Mr. Kamel is aware that there are still huge hurdles to overcome.

For example, beyond the aftershocks of the Egyptian revolution, he explains that the collapse of the ruble also had a heavy impact on the Egyptian tourism industry.

Russia is the largest exporter of tourists to Egypt (19.7% of all tourists in Egypt are Russian), and as a result of the collapse, several Russian and Turkish tour operators were unable to deliver payment as scheduled.

Following new regulations by the Egyptian Central Bank, however, Russian operators may soon be able to clear their debts through a semi-barter deal that uses Russian goods as payment for services in Egypt, given that Egypt imports a substantial amount of wheat and other raw materials from Russia. 

Yet following the ERC’s signing of approximately $79.4 million in contracts, there are compelling reasons to be optimistic about the future of the tourism industry in Egypt, and especially in the Red Sea area.

Mr. Kamel finds it especially heartening that although new developers are being drawn to Sahl Hasheesh, existing developers are also choosing to expand their business there. 

Aware of how important an industry such as tourism is for future growth, the Egyptian government is also lending its support.

The Tourism Development Authority has given permission for ERC to launch its Sawari Marina project, an ambitious undertaking that will span 1.1 million square meters in its first phase.

However, at the same time Mr. Kamel argues that taxes need to be decreased, and that the government needs to stabilize the foreign currency situation.

“All investors need to feel that they are able to repatriate their profits on any investments they have made – without delay,” he says, emphasizing that Egypt is competing with places like the UAE, where there is no tax in place.

“Egypt is still fresh out of a revolution with an economy that has been suffering for more than four years. The country has a lot of work to do in order to reposition itself as the region’s most attractive investment destination to both domestic and foreign investors.” 

Continuing the recovery, and beyond
While both the number of tourists and investments in the industry are back on the rise, there are undoubtedly obstacles that still remain for the sector, not only for it to get back to its pre-2011 level, but also for tourism to reach levels that it has never seen before.

“The number one issue we face is pricing,” explains Islam Mahdy, CEO and Chairman of Credence, a mixed-use destination developer.

He emphasizes that though the numbers of tourists coming to Egypt are acceptable, the real problem lies in the amount of money spent per visit – most tourists go for an all-inclusive cheap package.

“The main reason people come back is because it’s affordable, they don’t come back because of the experience,” says Mr. Mahdy.

This is problematic because it means that guests don’t leave the hotel, and as a result, they rarely spend money beyond it.

Making matters worse is the fact that most of the tourism in Egypt is beach tourism, which is almost exclusively controlled by tour operators who require heavy compromises on prices and quality.

Due to the pricing policies of airports and the lack of budget operators, it’s much cheaper to fly in as part of a tourist package, rather than to separately pay for a flight and hotel, which further drives down pricing, and by extension, quality. 

Mr. Mahdy points out that although Egypt seems to be on the travel lists of many people from a variety of socio-economic backgrounds and cultures, when it comes down to actually booking a trip, many people don’t follow through.

Cairo isn’t the kind of place where you can buy a guidebook and explore on your own – it’s not easy for independent tourists to come to Egypt, which needs to change.

He suggests the creation of a fast train joining different areas such as Cairo and the Red Sea, so that there can be a bit of cross selling between different attractions. 

In order to increase the caliber of touristic offerings in Egypt, Mr. Mahdy’s company is focused on developing lifestyle hotels, which he believes there will be a strong demand for, despite the current over-saturated market for budget hotels.

“We are betting on the fact that tourists, at some point, are not necessarily going to be targeting the package vacation with which they come for seven days and don’t get out of the hotel,” he says.

By offering lifestyle hotels with quality products designed based on experience, Mr. Mahdy believes he will be able to satisfy a new type of demand and overcome the pricing dilemma.

“It might be hard in the beginning but I believe that eventually this is what’s going to happen,” he says.

 

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FUJISASH CO.,LTD.

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Katsumi Ishizaka

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