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This week, Colliers International Hospitality released their Egypt Hotel Market Overview 2013, with some interesting insights on Egypt as a whole and Cairo in particular. Here are a few highlights:
EGYPT
In 2012 leisure spending is estimated to have risen by 1.1 percent while business spending was estimated to have fallen by 4.5 percent.
Domestic spending is estimated to have fallen by 5.8 percent in 2012 while international spending is estimated to have grown by 5.7 percent. These trends are indicative of increased international leisure travel over the past year.
Leisure Markets made a strong recovery in 2012 with strong performance indicators in Sharm El Shekh, Hurghada and Alexandria.
CAIRO IN FOCUS
Downtown Cairo experienced the lowest occupancy and highest average rate in 2012 when compared to Giza and Heliopolis. Of the three areas, performance in Heliopolis was the strongest with high occupancy rates attributable to its close proximity to the airport.
The events of 2011-12 affected the entire market with the largest decreases seen in the tour group and corporate segments. During this period, roomnight demand decreased by 77 percent and 60 percent for the two segments respectively as companies were less inclined to send potential guests to Cairo. Although demand picked up among most segments in 2012 this was not the case for corporate tourism for which roomnight demand continued to decline.
TOURISM ECONOMICS
Tourism is a significant contributor to the Egyptian economy, representing an average 8.4 percent of GDP between 2008 and 2010. In 2011 and 2012 this figure dropped to circa 6.5 percent as a direct result of the political unrest.
Egypt is estimated to have attracted over 11 million international tourists in 2012 which resulted in a growth of visitor spending by 11 percent.
Travel & Tourism accounted for 5.8 percent of employment in 2011 which is estimated to have increased by 0.6 percent in 2012.
In 2012 leisure spending is estimated to have risen by 1.1 percent while business spending was estimated to have fallen by 4.5 percent.
Domestic spending is estimated to have fallen by 5.8 percent in 2012 while international spending is estimated to have grown by 5.7 percent. These trends are indicative of increased international leisure travel over the past year.
Egypt’s population is heavily skewed, with 69.5 percent of the total population classified as ‘Generation Y.’ Given the low disposal income and purchasing power of this segment, it is Colliers’ view that demand for quality economy hotels will grow in the coming years.
HOSPITALITY MARKET OF EGYPT
Before the Arab Spring: From 2006 to 2009, the average daily rates and revenue per available room grew year on year. During this time occupancy rates fluctuated but were relatively strong, never falling below 70 percent.
After the Arab Spring: In 2011, occupancy levels in Cairo fell sharply to 38 percent, which were attributable to the national political uprising. The declining occupancy rate put downward pressure on the aggregate RevPAR performance which fell by 44 percent from EGP 503 to EGP 283. Although there has been a marginal recovery in 2012 for both occupancy and RevPAR rates, there is still a significant gap between pre- and post-crisis hotel performance.
Leisure Markets made a strong recovery in 2012, which was seen in Sharm El Sheikh which experienced a 27.1 percent increase in occupancy and 20.8 percent increase in RevPAR during this period. Alexandria, another prime leisure destination also exhibited strong performance indicators in 2012, with occupancy levels increasing by 17.9 percent and RevPAR rates increasing by 20.5 percent during this period.
PROFITABILITY: BEFORE AND AFTER THE UPRISING
Before the Arab Spring: In 2009 and 2010, Rooms departmental profitability was over 90 percent, F&B profitability was circa 50 percent and GOP profitability was circa 65 percent in the four and five star sectors in Cairo. These figures are indicative of lean streamlined hotel operations with little inefficiency.
After the Arab Spring: Although departmental profitability remained relatively constant between 2009-2010, this was not the case between 2010-2011. During this period rooms profitability fell by 8.1 percent and F&B profitability fell by 24.3 percent which had a knock on effect on overall GOP which fell by 8.9 percent.
From 2011 to 2012, rooms profitability fell marginally by 1.6 percent, and F&B profitability increased by 5.0 percent. Despite these positive indicators, GOP profitability slid a further 18.7 percent from the previous year during this period.
Although the profitability ratios have been declining since 2009, the current profitability ratios are still positive, with rooms profitability standing at circa 80 percent F&B profitability standing at circa 30 percent and GOP profitability at circa 40 percent which is indicative of a resilient business model.
Topic : Cairo, Egypt, Hotels
External Source : HospitalityNet
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