By Louise Birchall
Move by luxury hotelier comes amid diminished demand in country following Arab Spring
Four Seasons Hotels and Resorts has puts two of its upcoming Egypt properties on hold due to diminished demand in the country, attributed to the Arab Spring.
The luxury Toronto-based hotel group has halted its hotels under development in Luxor and El Gouna, executive vice president of worldwide development Scott Woroch told Hotelier Middle East at the International Hotel Investment Forum in Berlin.
The 200-room Luxor hotel had been due to open in 2013, while the 215-key Four Seasons Resort El Gouna owned by Swiss/Egyptian firm Orascom was scheduled to launch in 2014.
“Right now we’re at a wait-and-see stage given the inbound potential into Egypt today is very soft. It’s very slow. El Gouna is on hold, but on hold collectively because we’re waiting to see what happens.
“In Luxor, they’ve undertaken a value engineering exercise to reduce the scope and scale of the project to allow it to move forward given the current environment. We had gotten fairly close to the end of the design phase, now they’ve said relook at this - there’s some things we can do that will allow us to save money and reduce the scale and scope of the project to allow it to move forward,” Woroch continued.
“In El Gouna we didn’t get that far, we stopped the design work that was being done until things clarify.”
Four Seasons currently has four existing properties in Egypt comprising two in Cairo, one in Alexandria and one in Sharm El Sheikh.
Woroch said that – in terms of existing properties – the Middle East currently made up a “relatively small” market for the hotel group due to unrest in Egypt and Syria in particular, which caused the market revenue in 2011 to fall “quite dramatically”.
He added that that the firm was focusing on reducing costs at its Egypt properties because “there’s not a whole lot you can do to drive demand to those markets which are in the midst of some very difficult and turbulent times”.
“That’s the condition that you’re dealt and you can do all you want from a promotional perspective or a pricing perspective, but having someone save $100 on a room is not going to drive demand, guests are not going to change their travel patterns, so we’re focused on controlling expenses. Obviously the biggest expense is labour, so we’re just trying to be careful and responsive to the markets,” said Woroch.
Good decision in light of the continued chaos in Egypt. The dust needs to settle and a period of calm and orderly transition of new government, investors generally are conservative bunch. But take heart in the knowledge investment has interest and is prepared to move forward .