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Fri 16 Oct 2009 04:00 AM

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Cairo and beyond

A growth in domestic travel triggered by the financial crisis has resulted in a boom in Egypt's hotel industry, paving the way for operators to explore emerging destinations, says Louise Birchall.

Cairo and beyond
The former Nile Hilton hotel in Cairo has been renovated and rebranded as The Nile Ritz-Carlton, Cairo.
Cairo and beyond
The Ramses Hilton hotel in Cairo.
Cairo and beyond
Palm Hills chairman and CEO Yasseen Mansour and The Ritz-Carlton Hotel Company president and COO Simon Cooper.
Cairo and beyond
Hilton and Conrad’s Mahmoud Mokhtar.

A growth in domestic travel triggered by the financial crisis has resulted in a boom in Egypt's hotel industry, paving the way for operators to explore emerging destinations, says Louise Birchall.

Egyptian hotels have benefited from a soaring number of residents holidaying at home to save money, with popular domestic tourist destinations seeing a surge in business in spite of the global financial downturn.

In turn, more and more international operators are identifying Egypt has a key market for expansion, but outnumbered by independent properties and a variety of value-for-money, limited-service hotels, each brand is searching for its niche.

Many are heading to the North Coast and Alexandria; both popular domestic tourist destinations, to tap into this growing market. Others are sticking with tried-and-tested destinations such as Cairo and Sharm El Sheikh, but tailoring their products to meet the growing consumer demand for health and wellness.

Growth in domestic travel

In 2008, the number of domestic trips in Egypt soared by 16% on the previous year to reach 78.3 million as economic growth and unfavourable exchange rates encouraged Egyptians to holiday at home, according to Euromonitor International.

The increasing popularity of new resorts among domestic tourists, particularly those in areas such as the North Coast, Alexandria and Ein El Sokhna, paved the way for a steady growth in current value sales and outlet numbers in 2008, which has continued into 2009.

Last year also saw a growth in domestic tourism expenditure of 16% to reach EGP65.8 billion (US $11.9 billion). Looking to cash in on this trend, The Ritz-Carlton took over management of the former Nile Hilton, Cairo on January 1 and is currently in the middle of a renovation programme to reinvent the property as The Nile Ritz-Carlton, Cairo.

The company has also partnered with Palm Hill Developments to manage The Ritz-Carlton Cairo, Palm Hills and a Jack Nicklaus-designed 27-hole golf course and club house, scheduled to open in 2012.

The group was initially spurred on by the success of its The Ritz-Carlton, Sharm El Sheikh Property, according to The Ritz-Carlton area VP Middle East Pascal Duchauffour.

"Domestic guests have doubled in 2009 to 12,000 year to date, which is considered a healthy increase from the local market in the past eight months," says Duchauffour.

Opportunistic operators

The Ritz-Carlton was not the only brand to recognise opportunities in the country and announce expansion plans. The dynamic performance of the Egyptian market also encouraged other international operators, such as Fairmont and Kempinski, to open their first hotels in Egypt.

In 2008, chained hotels grew by 10% in terms of current value and 12% in outlet numbers.

And the trend continues; HMH Hospitality is expected to open its first Coral property in Cairo, the 85-room Coral Cosmopolitan Hotel, in the last quarter of 2010.

However, Hilton Worldwide continues to be the leading hotel group with a value share of 6% in 2008, offering a larger number of outlets and rooms than any other hotel operator in the country. Out of all the Hilton properties, the Hilton Dreams Resort was the most successful last year, registering EGP286 million ($51.9 million).

While Hilton also recorded an 11% growth in domestic guests year to date on 2008 figures, the chain relies on its international, leisure markets.

Its Cairo properties attract mainly Middle Eastern, Spanish and Japanese guests; Sharm El Sheikh attracts UK, Russian, Scadinavian and Middle Eastern guests; Hurghada attracts Russian, Eastern European and German guests; Sinai's main markets are the UK, Eastern Europe, France and Russia, and Luxor targets Germany.

Inbound travel to Egypt weathers the storm

In spite of decreased consumer spending worldwide, favourable exchange rates have also helped Egypt to weather the global downturn, with 2008 showing an increase in tourist arrivals of 14% to 11.8 million people. Russia remained the leading inbound market in 2008. The inbound Italian market was the fastest growing with a increase of 17%.

Based on current growth rates, tourist arrivals into Egypt are expected to grow at a compound annual growth rate (CAGR) of 9% to reach 18 million people in 2013.

But while consumer demand remains, the boom in hotel accommodation has meant even leading hotel brands are feeling the impact of increased competition.

"Particularly in Hurghada and Sharm El Sheikh there is a growing number of hotels, most of them are neither chains nor luxurious hotels, but they pose more competition in terms of rates as supply increases and demand remains steady," said Hilton and Conrad Egypt country manager operations Mahmoud Mokhtar.

Even with increased competition, Euromonitor reveals hotels in most major tourism destinations, such as Sharm El Sheikh and Hughada, were fully booked in 2008.

The organisation explains that while independent hotels outnumber international brands, global chains need not be concerned as foreign tourists visiting Egypt tend to prefer renowned brand names over independent hotels, particularly when travelling outside Cairo.

While this is partly because the cost of staying in a four- or five-star hotel in Egypt is cheaper compared to other countries, it is suggested visitors feel safer in branded establishments bearing in mind Egypt's unfavourable history of terrorist attacks on tourists and kidnappings.

But with increased security and fewer occurrences of terrorism, it is  not of great concern to the majority of people visiting Egypt nowadays and so international operators are not resting on their laurels. Instead, they are exploring new trends and destinations to stay ahead of competition. Wealth in wellness

Euromonitor forecasts health and wellness tourism to boom over the next few years as people worldwide become increasingly health conscious and opt for hotels with well-equipped gyms, spa facilities, or other therapeutic features when on holiday.

The trend is already evident in Egypt; Soma Bay's Hotel Des Cascades, for example, offers thalasso services, which have proved extremely popular with tourists, and Egypt's first Six Senses Spa is hosted by InterContinental The Palace Port Ghalib Resort, Red Sea, Egypt.

Angsana will open its first Cairo property in 2012, after Banyan Tree signed up to develop a 100-room property, destination spa and Greg Norman signature golf course with Egypt-based developer Sodic.

Similarly, Hilton's Egyptian properties are very much focused on health and wellness tourism; the Hilton Luxor brought a first-class Nayara spa to the city, says Mokhtar. Meanwhile, Emaar Properties in partnership with Armani S.p.A has announced its flagship resort development, Armani Residences in Marassi; the first villa-based property under the Armani Residences collaboration.

The resort style residences featuring a combination of stacked three- and four bedroom villas facing the Mediterranean Sea will be an integral part of Marassi, which is located on the Sidi Abdel Rahman Bay, on the North coast.

"Marassi has several distinctive features that make it a prized resort development, including one of the region's largest marinas. A beach club and hotel are already operational and work on the resort is progressing ahead of schedule," says Emaar Misr for Development SAE, an owned subsidiary of Emaar Properties, CEO Sameh Muhtadi.

"The Armani Residences at Marassi will further build its appeal as an unparalleled Mediterranean destination on par with Greek, Italian and French beach resorts," he adds.

Developing destinations

And such developments are not confined to the North coast. Mokhtar pinpoints the West coast of Egypt's Red Sea as an area that offers the most potential for Hilton.

"Marsa Alam is a popular holiday and diving destination, which attracts tourism with its marine life, coral reefs, ancient mining sites, temples and Roman garrisons. The city is also linked to Aswan via a highway, opening up the city to combined extended-holiday programmes with Nile cruises," says Mokhtar.

Also popular with Egypt's residents, Euromonitor predicts Hurghada (Hurgada, Marsa Alam, Sahl Hashish) will show the fastest growth in the number of domestic trips taken in 2009, with a predicted CAGR of 72%.

Mokhtar says Cairo, with its new international airport forecast to handle up to 20 million passengers a year, is also an important development market for Hilton.

"Egypt is a very important and a strong market for us; that is why we're planning expansion that will further bolster our profile as one of the key players in Egypt's hotel industry," Mokhtar  asserts.

And according to Euromonitor, Egypt is a safe bet for hotel developers as there are no major threats to domestic tourism, in particular on the North Coast and Alexandria; increasingly popular  destinations, which offer promising prospects.

Fast facts: EgyptDomestic trips in Egypt soared 16% to 78.3 million in 2008

Domestic tourism expenditure grew 16% to EGP65.8 billion (US 11.9 billion) last year

Number of domestic trips within Egypt is expected reach 133.6 million in 2013

Tourist arrivals grew 14% in 2008 to reach 11.8 million

The North Coast, Alexandria and Ein El Sokhna are popular domestic tourist destinations

The Ritz Carlton, Sharm El Sheikh's domestic guest market doubled to 12,000 in 2009

Hilton remains the leading hotel operator in Egypt, followed by Starwood Hotels & Resorts

Hilton recorded an 11% growth in its domestic market in 2009 compared to previous year

Tourist arrivals expected to reach 18 million in 2013

Unfavourable exchange rates have helped Egypt to weather the global downturn because more Egyptians holidayed at home

Russia remains the largest inbound tourism market, while Italy is the fastest growing

Independent hotels represent the largest number of outlets

Chains and branded hotels are the fastest growing in terms of value and number of outlets

Luxury hotel rates are cheaper in Egypt when compared rates globally

Hotel sector internet transactions grew by 6% in 2008 on previous year

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