Foreign Investors Gain from Losses in Egyptian Tourist Sector

After five years of operating losses in the Egyptian hotel market, many owners are now seeking to exit the sector, providing increased opportunities for foreign investors to bag a bargain.

Recent reports on Egypt's tourist sector reveal that a group of Egyptian and American investors bought three hotels in Sharm El-Sheikh with a total value exceeding $52m and a capacity of 300 rooms.

According to Daily News Egypt reports, an alliance of Gulf investors is in negotiations with owners of two resorts in Marsa Alam. The group is comprised of Saudi Arabian and Kuwaiti investors with an agenda to buy hotels and real estate assets in Egypt worth $500m in 2016.

Egyptian tourism has suffered over the past five years since the 2011 revolution, following which the number of tourists declined significantly. The income from tourism reached its lowest point in 2013, recording just $5.9bn. Additionally, the Ministry of Tourism disclosed that the Russian jet crash last October pushed income in 2015 down to $6.1bn compared to $7.3bn in 2014.

The current conditions of the Egyptian tourism sector may be a good opportunity for foreign investors, where many hotel owners seek to exit business after five years of losses, an official at the Ministry of Tourism said.

An official at the Tourism Development Authority (TDA) recently stated that foreign interest in Egyptian hotels, despite its positive effect, will reduce the potential for more investments to increase the current hotel capacity. Hotel capacity in Egypt stands at about 225,000 rooms, 65% of which are in the Red Sea and South Sinai region.

According to prominent tourism sources, foreign investors aim to refurbish hotels and then resell them when tourism recovers, rather than use them for their own operations.

In the face of financial volatility and declining oil prices, Egypt is now an attractive destination for Gulf investments in real estate - one of the most secure sectors for investment around.

In spite of the difficult conditions experienced by the tourism sector at the moment, investors expect an imminent recovery after the British company Control Risks issues its evaluation of security at airports.

The Egyptian cabinet appointed Control Risks to review security procedures at Egyptian airports. Tourism Minister Hisham Zaazou said the British company will begin its review mid-February 2016.