Egypt’s tourism sector is attracting more foreign and Arab investors, especially after the flotation of the Egyptian pound against the US dollar. The sector benefits from currency fluctuations and domestic tourism and expects more promising investments in the future.
The sector started to recover gradually from the impact of the COVID-19 pandemic and the Russian-Ukrainian conflict at the end of 2021, as tourist arrivals increased by 117.5% year-on-year to reach 8 million, after a sharp contraction of 71.8% year-on-year in 2020 due to travel restrictions related to the pandemic.
Mohamed Alabbar, the chairperson of Emaar Properties, said that Egypt’s tourism sector was promising and that Emaar’s investments in the sector would double to EGP 100bn from EGP 50bn in the previous year. He said in a TV interview last week that Egypt was currently the third largest market for Emaar, after the UAE and India, and that he expected it to become the second largest in the next few years due to the huge opportunities available.
Emaar Misr, a subsidiary of Emaar Properties, plans to develop 10 hotels with about 3,000 rooms in Egypt’s North Coast region, with an investment of EGP 26.3bn, according to Alabbar.
$17.4bn in tourism revenues by 2027
A report by Fitch Solutions Research Unit projected that Egypt’s tourism sector would benefit from an increase in arrivals in 2023, reaching 13.1 million, up by 11.6% year-on-year from 11.7 million in 2022. The report also estimated that tourism revenues would reach $17.4bn in 2027.
Mohamed Ayyad, the non-executive chairperson of Prime Holding Company for Financial Investments, said that the tourism sector was witnessing unprecedented demand from foreign investors, and anticipated a great boom in investments in the sector in the coming years.
He told Daily News Egypt that hotel occupancy rates would reach their highest levels after achieving record highs in the first half of this year, due to several factors, such as the currency devaluation and the improved infrastructure. He added that the end of the pandemic and the enhancement of Egypt’s security situation abroad contributed greatly to the increase in tourist numbers.
According to Fitch Solutions, the average occupancy rates in hotels reached about 80% in the first half of 2023, with Hurghada hotels topping the list with about 100% occupancy in April, followed by Cairo with about 80% to 85%.
High hotel occupancy rates
Mostafa Shafie, the head of the research department at Arabeya Online, said that the occupancy rates would likely increase further, especially in the winter season, when Egypt usually receives more tourists. He said that the currency devaluation and the diversity of tourist attractions in Egypt were favorable factors for the sector.
Shafie also said that the tourism sector had a positive impact on the companies operating in it or having subsidiaries in it. He cited Orascom Development Egypt as an example, which achieved strong growth in profits and revenues from its tourism investment arm by more than 118% and 5.4%, respectively.
A research note by Arabeya Online attributed the increase in Orascom Development’s revenues by 62.2% to the growth of the hotel sector, which was supported by the recovery of the tourism movement to its pre-pandemic levels, as well as the increase in the average room prices.
Maryam Al-Saadani, a real estate sector analyst at HC Securities, stated that Orascom’s hotel sector directly benefited from the strong tourist season this year, as tourism revenues contributed 32% to its revenues in the first quarter of 2023, higher than 28% in the same quarter last year.
She projected that Orascom’s tourism sector revenues would grow by 28% annually for four years and that its average profit margin would reach 30% during that period. She also suggested that Orascom would increase its real estate selling prices, hotel room prices, and rental prices to maintain its profitability amid inflationary pressures.