Egypt's tourism and hotel scenes struggle11 Apr, 2012 By: Jena Tesse Fox
Egypt's hotel scene is continuing to struggle, and even foreign companies are feeling the impact. At the end of March, Reuters noted that Swiss-listed Egyptian property and hotels group Orascom Development reported a full-year net loss of $76.82 million due to the political turmoil in Egypt and elsewhere in the Arab world last year.
The firm reportedly took "extraordinary charges" in 2011 of $90 million, which included provisions, revaluation of investment properties, and legal fees connected to the political events in Egypt. Orascom Development made a profit of $103 million in 2010, after minority interests. But revenues in its hotels segment fell 29 percent due in part to one month of virtually zero occupancy in Egypt's El Gouna and Taba Heights during the first quarter of 2011 and also because guests traded down from five-star to four-star hotels.
It also said its real estate and construction segment revenues fell 71 percent due to a 50-day halt in construction activities in Egypt and a slowdown in demand for homes.
Last week, Property Magazine International said that hotels in Egypt have started to recover, but they remain a long way from their previous highs prior to the Arab Spring, citing the latest HotStats survey of full-service hotels in six MENA cities by TRI Hospitality Consulting.
Hotel performances in Cairo and Sharm El Sheikh have stayed low since early 2011 when the uprising and related violence started. Full service hotels in Cairo reported occupancy of 41.2 percent and ADR of $110.19 in February. TrevPAR for the month was $91.13 and GOPPAR stood at $36.1.
Occupancy levels in Sharm El Sheikh have remained relatively steady since December 2011 and stood at 52.0 percent in February. ARR for the month was reported at $42.26 while GOPPAR levels remained low at $11.0. Although the monthly performance indicators for February 2012 for both cities show substantial growth over the same period last year, such a comparison may be irrelevant as the hotel performance last year reflected the aftermath of a violent start of the Egyptian Revolution which saw widespread protests and related violence across the country.
Tourist arrivals in Egypt has declined by 32 percent to 10.2 million visitors and revenues dropped by 30 percent to $9 billion in 2011 following the political uprising in the country. Although the street protests and violence have reduced, the risk of sporadic violence remains. Nevertheless, Egypt’s Ministry of Tourism has issued a positive outlook for 2012 and expects the country to receive 12-13 million visitors and revenues to improve to $11 billion during the year.
And it's not just hotels feeling the pinch: The Egyptian Gazette is reporting that the country’s nightlife is also struggling. Some nightclubs have already shut down amid rumors that wealthy Islamists are buying them out in a bid to turn them into Sharia-compliant businesses.
The article also hints that a businessman with connections to the Muslim Brotherhood offered $3 million for the Hor Moheb Hotel in el-Haram. But the offer has been rejected—with the owner reportedly asking for $4 million. There are also rumors that businesspeople related to the Salafist Al-Nour Party and the Muslim Brotherhood are thinking of turning all nightclubs into shopping centers for clothes and domestic appliances, and despite denials from Islamists and officials, four of them were sold last month.
All of which begs the question: If the Muslim Brotherhood can help support a struggling industry, should international businesses look to start negotiating with the organization? While Egypt's political future remains unclear, cooperation between the Brotherhood and secular companies may provide stability and a way for Egyptians to determine their own business model. On the other hand, if the Brotherhood's policies make international relations too difficult, Egypt's international reputation could become even more unsteady. We'll just have to wait and see...Topic : Egypt
External Source : Reuters, Egyptian Gazette, Property Magazine International
Reproduction in whole or part is prohibited.