REGIONAL REPORT
Rixos Seagate Sharm , Sharm El Sheikh , Egypt
NEW PRODUCTS DEVELOP IN WAKE OF
FINANCING BARRIERS
DIVERSIFICATION
EXPECTED TO CAST WIDER NET FOR TRAVELERS .
Contributed by DEVINA DIVECHA
The idea of traveling to Egypt has long thrown up images of beach resorts or 5-star hotels near the pyramids . But development is following the country ’ s tourism sector .
Euromonitor International reported inbound and domestic tourists to Egypt at 22.1 million in 2018 , and forecasts that to reach 27.3 million by 2022 .
“ We are starting to see some developers and investors considering the 3- and 4-star hotel market space in city locations ,” says Ahmad Yousry , manager , hospitality at Colliers International Egypt . “ In the 5-star market , more consideration is being given to more boutique style offerings .”
One reason is the capital expenditure cost for luxury hotels , which tends to be high . Developers are considering mid-market and upscale products or smaller , 5-star boutique hotels .
Financing and cost of borrowing is another reason behind the change . “ Financing can be an issue with high interest rates , and permits are sometimes difficult to obtain ,” says Accor ’ s development chief in the Middle East , Jean-Baptiste Recher . “ However , that is outweighed by the commitment of the government to invest in the country through infrastructure projects .”
IHG ’ s VP of Operations for MENA Bastien Blanc agrees , adding , “ The government initiatives to develop new cities such as New Alamein is definitely good for hotel development . We believe the current growth momentum is the result of continuous efforts being made to improve safety and security in response to the demands of international travel partners , as well as the government ’ s commitment
“ THE COST OF BORROWING IN EGYPT IS EXTREMELY HIGH , SOMETIMES IN EXCESS OF 20 %, WHICH MAKES ANY INVESTMENT NOT VIABLE . ALSO THE INTEREST ON DEPOSITS PROVIDE BETTER RETURNS THAN HOTELS , SO INVESTORS HAVE SHOWN RELUCTANCE IN INVESTING IN NEW HOTELS .”
– RAMSAY RANKOUSSI
to the tourism sector .”
Ramsay Rankoussi , Radisson Hotel Group ’ s vice president , development , Middle East , North Africa and Turkey , says some owners are prioritizing renovations instead , and the public sector needs to provide new incentives to re-launch hospitality investments while providing better access to financing . “ The cost of borrowing in Egypt is extremely high , sometimes in excess of 20 %, which makes any investment not viable . Also the interest on deposits provide better returns than hotels , so investors have shown reluctance in investing in new hotels ,” he says .
Egypt ’ s hotel sector stands out from the rest of the African continent , Leisure Property Services ’ David Harper says , in developing “ experience ” hotels . “ This is definitely an area where demand worldwide has increased and Egypt has been one of the first African countries to see developments targeting this segment directly ,” Harper says .
Another gap now being looked at is serviced apartments and branded residences . Kerten Hospitality ’ s Marloes Knippenberg says there is growing demand for upscale hotels and mid-market residences for long-term and short-term rentals .
Accor ’ s Recher residences and extended-stay are trends taking hold . He further says the all-inclusive resort segment is showing promise , especially in the Red Sea area , which the company is capitalizing on through its partnership with Rixos . Accor operates three Rixos hotels in Egypt , including two in Sharm El Sheikh , and it just signed the Rixos Makadi Basy in Hurghada , with 1,636 rooms .
40 hotelsmag . com September 2019