Tourism in Egypt
The tourism sector is a vital and strategic component of the Egyptian economy. As a significant contributor to GDP growth, the industry represents c.50% of all service export receipts and employs approximately 12% of the Egyptian workforce. It is also the second largest hard currency earner — USD 12.53 billion in 2010. As a result, the Egyptian government is strongly committed to supporting the growth of this industry; indeed, the government’s stated target of 14 million tourist arrivals by 2012 was achieved in 2010. Among other projects, the state is currently managing an EGP 1.4 billion upgrade to Hurghada International Airport. The new runway and terminal due to open in 2012 are designed to double the airport’s capacity to 14 million passengers per year.
It is clear that the Egyptian Revolution has had a profound impact on both the Egyptian tourism and real estate sectors. Following the outbreak of unrest on January 25, about a million tourists fled the country. However, thanks to the predominantly peaceful nature of the demonstrations – during which not a single tourist was harmed – and the fact that the country has now entered a period of peaceful transition to a new elected government, many countries have removed or reduced warnings against citizens traveling to Egypt.
Throughout the unrest, the Red Sea Coast remained undisturbed by any incidents of violence. In April, the Egyptian Ministry of Tourism launched a coordinated campaign to promote Egypt as a stable destination in a number of markets, with a particular focus on attracting tourists from GCC countries. In the medium term, Egypt stands to gain market share relative to competing destinations in the Arab world, as vacationers realize that the country’s unique selling propositions remain unchanged and once again recognize Egypt as a secure destination.
According to the Ministry of Tourism, tourist arrivals were down 80% in February from the same time last year and down 60% in March year over year. Barclays Capital reported in April that hotel occupancy rates, which dropped to as low as 5% in February, had gradually risen to 25% and 30% by March.
The Egyptian Real Estate Industry
In addition to Egypt’s resilient tourism sector, there are positive indicators in the real estate industry. Over the last few years, the sector has seen the market for second-homes in Red Sea destinations gain relative to the North coast, historically the leading second-home location for Egypt’s upper-middle and upper classes. This new trend is a very positive sign for ERC. As an entertainment hub with a warmer climate, the Red Sea offers Egyptians ideal year-round getaway destinations. Furthermore, Sahl Hasheesh is both a resort city, a first home for families living and working in Hurghada as well as neighboring cities, and a first choice for companies expanding their presence in the Red Sea. Sahl Hasheesh will feature hospitals, schools, universities, corporate offices, convention centers, theme parks and entertainment facilities — all features of a sustainable, live city.
Furthermore, 2011 is already showing signs of being a solid recovery year for the real estate sector. A recent Credit Suisse report predicts that the Egyptian real estate market will outpace all other Middle East and North Africa markets this year, based on first quarter figures. The growth will come from “strong domestic housing demand recovery that should filter through developers’ sales figures this year,” the report projects.
The Construction Industry
The construction industry has been one of the hardest hit by the global economic slowdown, with many projects stalling as financing dried up. This slowdown in the construction industry has benefited ERC, which has more than sufficient cash reserves to continue developing its infrastructure and strategic assets, despite the economic climate.
The cost of labor and raw materials has fallen significantly, while suppliers and vendors offer favorable payment terms. In addition, contractors are eager to work on well-funded projects that have continued apace despite the economic conditions, with many offering their services at a discount.