Egyptian hospitality on the road to recovery

Egyptian hospitality on the road to recovery

Cairo’s hotels are growing again after the uprisings that sent the Egyptian tourism industry into a nosedive.

“The dark days of the Egyptian tourism industry look to be finally over after four years in the wilderness,” said Philip Wooller, the Middle East and Africa director at the hospitality research company STR Global.

“If the political stability continues, 2015 should be a good year for Egypt,” he said.

Overall tourist numbers increased 16 per cent last year, according to data from the ministry of tourism, which pushed up room yields in Cairo by about 57 per cent compared with the previous year, according to data from the consultancy Ernst & Young.

Room yield, a measure of the financial health of the hotel sector, is the product of total occupancy and average room rate, and provides an indication of the revenue that a typical room produces over a given time period.

Yields in Cairo, which is home to 19 million of Egypt’s 90 million people, rose from US$21 per typical room per night in 2013 to $33 per typical room per night last year.

This is a different figure to the average daily room rate – the actual price charged for a room – because it takes into account unoccupied rooms.

The yield is predicted to increase significantly to $65 per typical room per night this year, according to the real estate consultancy Colliers International.

That will be the result of a 6 per cent increase in occupancy this year, and a rise in the average price of a room to $127 per night.

Average daily rates increased significantly from $81 per night in 2013 to $93 per night last year after government efforts to raise the price of hotel rooms.

“Hotels have been affected dramatically by the political situation over the past three years,” said Ayman Sami, the head of the Cairo office at the property consultancy JLL. “It has been really difficult to keep a hotel business running because of low occupancy rates and low room rates.”

The handover of the new Nile Ritz-Carlton in Cairo has been repeatedly delayed, in part because of the length of time it has taken for the sector to recover, Mr Sami said.

Outside Cairo, yields are set to increase more slowly.

Room yields in Sharm El Sheikh are predicted to increase 6 per cent this year, while Alexandrian hotel yields will rise 3 per cent. Occupancy is predicted to fall in both cases over the next year, with average room rate increases making up the difference in room yields.

Significant oversupply continues to characterise the Egyptian hotel market, with occupancy rates falling as low as 17 per cent in Luxor.

About 1,000 new rooms are expected to be added to Egypt’s hospitality sector over the next four years, according to JLL. Dubai will add 27,000 rooms over the same period, by comparison.

“We need to wait a while before we see new supply,” Mr Sami said. “There is still more to do to fill up hotels before investors begin to look at increasing supply.”

“With new growth and new jobs … it will eventually happen. But first, hoteliers need to increase the performance of current hotels,” he said.

http://www.thenational.ae/business/travel-tourism/egyptian-hospitality-on-the-road-to-recovery