Turbulent times

It has been a roller coaster ride for Egypt’s tourism industry over the last year. Despite the ups and downs, however, the country’s hoteliers have remained determined and optimistic throughout

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By  Sarah Gain Published  October 8, 2006

|~|Sharm-El-Sheikh-B.jpg|~|Sharm El Sheikh.|~|This time last year, Egypt’s tourism industry was gradually recovering from the July 2005 Sharm El Sheikh bombings. At the time, the terrorist attacks resulted in a significant number of cancellations in Red Sea resorts, but the country has become resilient to such assaults and the market recovered quicker than was anticipated, with occupancies returning to near normal levels by late 2005 and early 2006. According to the UN World Tourism Organisation (UNWTO), the number of tourist arrivals actually grew by 6% for the year, despite the terrorist attacks. Leisure destinations around Egypt were particularly affected by the bombings, but end-of-year results were less depressed than was expected. Despite being at the centre of events, a 9% increase in average room rate offset the decline in occupancy in Sharm el Sheikh. Although RevPAR in the resort in 2005 was almost static at US $32, HVS International estimates that the growth in average room rate had a positive impact on profit margins, with gross operating profit per available room (GOPPAR) achieving 7% growth on 2004, to $36. However, occupancy in Cairo at the Pyramids and in Hurghada declined considerably and RevPAR for the Cairo — Pyramids hotels remained unchanged at $30, resulting in turn in static GOPPAR performance, according to HVS. The researchers also found that quality hotels in Hurghada were even harder hit, experiencing an 8% decline in RevPAR in 2005, to $31. This resulted in a drop in GOPPAR, from $36 to $32. Other internal markets actually managed to show moderate growth, which meant that the country as a whole was able to post positive results for the year overall. RevPAR in Cairo - Heliopolis, for instance, grew by approximately 9% in 2005, growth that was attributable mainly to a 20% rise in average rate. This in turn stimulated GOPPAR to grow by 10%, to $53. Quality hotels in Cairo — City Centre also saw RevPARs rise for the year, this time by 17% on 2004 figures, to $68, triggering a 20% rise in GOPPAR, to $86. Undeterred by the turbulence of 2005, plans for hotel development across Egypt continue, and the country’s Ministry of Tourism remains upbeat for the future. Approximately 3000 rooms are now set to enter the market in Cairo over the next three years and approximately 3800 rooms are planned in Red Sea destinations. With about 8.6 million visitors arriving yearly, tourism accounts for around 15% of Egypt’s gross domestic product (GDP) and provides over two million jobs, making it one of the pillars of the country’s economy. As such, developing the tourism industry is high on the government’s agenda and a number of policies have been put in place to support and encourage the continued growth of the industry. “We’ve been working very hard with marketing campaigns, which will be launched soon. The national campaign will urge our people to get a fair share in the industry that sustains the country’s economy,” said Egyptian Tourism Minister Zoheir Garannah, at the 7th edition of the Mediterranean Travel Fair (MTF), which was held in Egypt from September 5-7. Garannah emphasises that solidarity among destinations throughout Egypt, and across the Middle East as a whole, is vital for surviving the recent crises in the region. He also extols the value of private sector involvement in injecting variety into the country’s tourism activities. “We see developers coming in to launch integrated mixed-use developments, some the size of new cities. [The private sector is] our bread and butter,” he confirms. ||**|||~|Taba1-B.jpg|~|Intercontinental Resort Taba Heights.|~|At MTF, the minister announced that the Egyptian hotel rooms inventory has reached a record high of 175,000, with a further 120,000 rooms currently under construction. Upon Garannah’s insistence, the government is now targeting further development, aiming for an additional 50,000 new rooms and an increase of one million new visitors per year. In turn, this growth is anticipated to create 200,000 new jobs every year. “In past years, we added only 60,000 rooms per year. Today, we double the rate of inventory increase,” says Garannah. “Arrivals as of July 2006 had already reached 5.14 million. By the end of August 2006, we anticipate six million tourists, a 5% increase compared to the same period last year.” This determination to continue to build the country’s tourism sector in the face of the enduring threat of terrorism caused HVS to conclude in its Middle East Hotel Markets Report 2006 that the leisure markets in Egypt were likely to experience a strong increase in occupancy in 2006, which they have. An improvement in both profitability and investment values was also predicted… as long as there was no re-occurrence of terrorist activity. Proof of this resilience can be found in the occupancy levels of hotels in Sharm El Sheikh, which saw occupancies bounce back to near normal levels by the beginning of this year. “The government was quick to react with advertising campaigns and airplane subsidies to counter the losses. Business has recuperated and, as of November 05, hotels were enjoying occupancies of over 75%,” recalls Karim El Ghazzawi, general manager of the Grand Rotana Resort and Spa in Sharm El Sheikh. Having soft-opened just two weeks after the July 23 bombings, the Grand Rotana felt the effects of the terrorist attacks perhaps more strongly than other properties in Sharm El Sheikh. Nonetheless, the five-star resort’s GM started the new year confidently, forecasting an average occupancy of 55% for 2006, with an average room rate of $75. This optimism for the year ahead was echoed across Sharm El Sheikh and, indeed, throughout the country. Then, on April 24, three bombs went off in the resort town of Dahab. The explosions occurred in a bustling area popular with tourists, killing 24 people. Two restaurants and a souvenir shop were laid to waste on Dahab’s seaside promenade, which is a popular destination with Western backpackers, budget Israeli tourists and scuba divers. “The start into 2006 was promising until the Dahab incident happened,” says Daniel Twerenbold, general manager for the Radisson SAS Resort and the Golden Resort by Rezidor SAS, Sharm El Sheikh. But still Egypt’s hoteliers did not lose heart. For its part, the Golden Resort resolutely ploughed ahead with its plans for a 225-room extension and a water park development, both of which are due to be completed by early 2007. Other hotels strategically targeted Egypt’s traditionally strong feeder markets in Europe and adapted their offerings to make the destination more attractive, according to Twerenbold. “The all-inclusive properties are doing very well now, having strongly marketed themselves to the British market. The five-star regular hotels are implementing aggressive rate campaigns to attract more guests to their resorts and some are turning into all-inclusive destinations to try to appeal to a broader market,” he says. While Sharm El Sheikh has become increasingly popular in recent years among visitors from Europe and North America, the destination is now also actively striving to build its reputation as a weekend getaway destination for residents of the UAE. Helping to facilitate this growth is the increasing number of direct flights to the Sharm El Sheikh international airport, such as Air Arabia’s weekend flights from Sharjah. “Sharm is an ideal destination for anyone looking for a fun and interesting break living in the UAE,” says Kyle Haywood, commercial director for Air Arabia. “It is a great place to go for people seeking lots of sun, relaxation, great nightlife and of course diving and water sports.” Many Dubai residents are already drawn to Sharm El Sheikh by the abundance of hotels and entertainment venues on offer in and around the town, as well as by the relatively short flying time. The resort is now also becoming increasingly popular with travellers from around the GCC looking to cool off during the summer months. ||**|||~||~||~|Visitor numbers from the UAE were up more than 20% between January and July this year, with more than 11,000 travelling from the Emirates in July alone — a 23% rise on the same period last year. Keen to drive occupancy levels not only at its Sharm El Sheikh property but also at its two hotels in Cairo, Four Seasons is hoping that marketing initiatives such as cross selling and twin centre holidays will help keep business on track. With its fourth property in Egypt, the Four Seasons Alexandria, due to open in Q1 2007, the company believes there is strength in numbers. “We have a big strength in our other three hotels in Egypt and will be pushing twin centre holidays, as well as tapping into the MICE market coming out of Cairo,” confirms general manager, Stephan Killinger. “Cairo has the pyramids. Alexandria is different. There are treasures here: catacombs, Pompei’s pillar. There are things to see, but not at the level of the pyramids, so we need to create packages,” he explains. Another option for those wishing to combine sightseeing in Cairo with some rest and relaxation is the up-and-coming resort of Taba Heights. According to Ashraf Khalil, area general manager for the InterContinental Hotels Group in the Taba Region, Taba Heights is developing at a rapid rate and is fast becoming one of Egypt’s premiere tourist destinations. “Guests are always impressed with the location and its short travelling distance to amazing places such as the Taba Protected Area, Mount Sinai and the Blue Desert, and some of the Middle East’s top dive spots,” Khalil says. “The InterContinental Hotels Group realised the potential of Taba several years ago and we recently opened the doors to our new five-star development, the Intercontinental Resort Taba Heights.” Intercontinental Resort Taba Heights is situated on the northernmost tip of the Gulf of Aqaba and located 35km from Taba International Airport, encompasses 5km of prime waterfront location and is becoming a popular year-round leisure destination. The new 503-room InterContinental property includes a total of 35 suites and is spread across three buildings: the Pentagon, the Atrium and the Crescent. “This latest property takes the number of hotels currently under the group’s management to 12, further enhancing our imprint in Egypt,” says Khalil. “Our continuous investment [illustrates] our resounding belief in the future of the country.” ||**||High priority|~||~||~|With about 8.6 million visitors arriving yearly, tourism accounts for around 15% of Egypt’s gross domestic product (GDP) and provides over two million jobs, making it one of the pillars of the country’s economy. As such, developing the tourism industry is high on the government’s agenda and a number of policies have been put in place to support and encourage the continued growth of the industry. “We’ve been working very hard with marketing campaigns, which will be launched soon. The national campaign will urge our people to get a fair share in the industry that sustains the country’s economy,” said Egyptian Tourism Minister Zoheir Garannah, at the 7th edition of the Mediterranean Travel Fair (MTF), which was held in Egypt from September 5-7. Garannah emphasises that solidarity among destinations throughout Egypt, and across the Middle East as a whole, is vital for surviving the recent crises in the region. He also extols the value of private sector involvement in injecting variety into the country’s tourism activities. “We see developers coming in to launch integrated mixed-use developments, some the size of new cities. [The private sector is] our bread and butter,” he confirms. At MTF, the minister announced that the Egyptian hotel rooms inventory has reached a record high of 175,000, with a further 120,000 rooms currently under construction. Upon Garannah’s insistence, the government is now targeting further development, aiming for an additional 50,000 new rooms and an increase of one million new visitors per year. In turn, this growth is anticipated to create 200,000 new jobs every year. “In past years, we added only 60,000 rooms per year. Today, we double the rate of inventory increase,” says Garannah. “Arrivals as of July 2006 had already reached 5.14 million. By the end of August 2006, we anticipate six million tourists, a 5% increase compared to the same period last year.” Despite his optimistic predictions and his enthusiastic support of Egypt’s tourism sector, the minister admits that security continues to be a concern for the country’s Ministry of Tourism. “Any warning is taken seriously by us,” says Garannah. “Security has unfortunately been threatened by events, not only in this region but also elsewhere around the world. [However], we are ready and able to provide the highest levels of security for our guests.”||**||

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