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Red sea area: red hot for developement

The Red Sea area is commonly associated with Egypt and its resorts destinations such as Sharm el Sheikh, Hurghada and El Gouna, but the potential developments include other coastlines, from Saudi Arabia to Djibouti.

Drawn by the year-round favourable climate and phenomenal marine life, a major tourist industry has evolved on the coasts of the Red Sea. It is indeed now a worldwide must see destination, appearing on The New York Times list of “44 places to Go in 2009”. Instantly we think of Egypt, where the most extensive Red Sea tourism developments have taken place, with many major resort destinations such as Sharm el Sheikh, Hurghada and El Gouna spring to mind. However the Red Sea’s tourism boundaries span far further, to the shores of Jordan, Israel, the Kingdom of Saudi Arabia (KSA) and even Djibouti. All of which are currently in the process of developing their Red Sea infrastructure, namely hotels, apartments, roads and air accessibility, therefore boosting their tourism potential. With a coastline of about 1,840 km in length, accounting for 79% of the eastern seaboard of the Red Sea, KSA has one of the greatest potential for future developments.KSA’s minimal reliance on international mass tourism sectors however, particularly those most affected by the global financial downturn, such as the UK, Russia and the US, allowed it to maintain year-to-date positive indicators – two points OR increase, 7.7% ADR and in turn a rise in RevPAR of 10.8%.Currently, the greatest concentration of tourism development is in Jeddah, with 81 hotels and 9,600 rooms, making up 90% of the country’s total stock along the Red Sea. It is also the centre for apartments and resort complexes and the main gateway into the area because of its good road and air links.However, stretching from the Jordanian border to Yemen, the provinces of Tabuk, Madina, Jeddah, Aseer, and Jizan all have their own tourism development plans. General Commission for Tourism and Antiquities (GCTA) announced the organisation’s plan to establish mega tourism projects along the Red Sea coast, aiming to boost the Kingdom’s growing tourism sector. According to GCTA officials, plans have been prepared to establish new tourism projects worth over $40 billion along the Red Sea. The new resorts will be established in Arrayes in Yanbu, Ras Muhaisen in Makkah province, Haridha in Asir, Fursan in Jizan, and Ras Humaid, Sharma, Qayyal and Dhaffat Al-Wajh in Tabuk.Long term vision for the country's hospitality sector estimates visitor numbers will nearly double from 47 million in 2008 to 88 million by 2020, while the number of hotel rooms would rise from 117,097 to 254,310, apartment units would increase from 101,544 to 185,853 – and employment in the industry is set to grow from 1.1 million to 1.5 million. The Red Sea will be one of the biggest growth areas, with up to 21 new destinations.The Gulf of Aqaba, Jordan’s access to the Red Sea, is 180 km long and 5-26 km wide. Extensive tourist and urban developments are also planned here for the next 20 years. It is estimated that the Red Sea coast and the Gulf of Aqaba will attract over well one million tourists per year during the next few years.Egypt is of course the most developed Red Sea country. The total length of the coast is about 1,705 km. Of this, 760 km is Red Sea coast and 945 km is the coastline of the gulfs of Suez and Aqaba.World renowned Sharm el Sheikh is one of the most accessible and developed tourist resort communities on the Sinai Peninsula, due to its year-round potential, natural beauty and existing infrastructure. Of course Sharm el Sheikh’s international airport, with scheduled flights to Cairo, Hurghada, Luxor, Alexandria and five weekly flights to London, as well as charter service from all major feeder markets, has helped drive this growth.Land plans for Sharm show that the total area of Sharm El-Sheikh is expected to be about 42 km2, in the year 2017. This area is designed to include 8.4% tourism resort, 40.9% tourism facilities and 13.7% urban housing, among other areas.Recently, and with the opening of an international airport hosting direct charter flights from Europe, Taba has experienced a growth spring on its coastline and is now home to international leading hotel chains, becoming one of the most sought-after destinations in the Red Sea Riviera.Marsa Alam is also one of the fastest growing holiday resorts in Egypt, popular with water sports, divers, as well as for sun and sea. The construction of an International Airport in 2001 has established Marsa Alam as an upcoming and exclusive holiday resort, able to easily combine packages to Upper Egypt (Luxor and Aswan). With a host of tourism projects planned for the near future, Marsa Alam is set to rival the popularity of established Egyptian resorts such as Hurghada and Sharm El Sheikh. Recently, Libra Holidays Group has announced plans to develop an ambitious five million square foot mixed use resort on Marsa Alam beach front. The project will provide Marsa Alam with further high quality hotel accommodation and diverse real estate developments. Also planned are a marina, sporting facilities, including a golf course and a spa, shopping piazzas, a water park and other entertainment.Although much potential for growth still exists along the entire Red Sea coast, the next major challenge for all countries will be sustainability and making sure the region’s rich natural resources are protected; that aspects of eco-tourism and environmental development are enhanced and balanced with the growing popularity of investment.Such rapid tourism development may lead to a serious threat to both the marine environment and the tourism industry itself, if not planned and developed on a sound environmental basis with the effective enforcement of environmental regulations.Steady performance 2008 proved to be the Red Sea’s best season ever. According to MKG Hospitality’s market monitoring database, Hotel CompSet, global chain hotel Occupancy Rate (OR) reached 79%, an almost five point increase compared to 2007. Average Daily Rate (ADR) also grew by over 12% to $96.2, allowing Revenue per Available Room to climb by over 19% to a record $76 ($63.7 in 2007).Egypt recorded the highest OR of all Red Sea countries, at 81.9%, a 5.5 point increase compared to 2007. This certainly verifies the country’s established Red Sea industry and mass tourism appeal, namely fuelled by excellent flight connections and existing hotel infrastructure in all categories.Meanwhile, KSA achieved the overall best RevPAR at $127.2 ($107.3 in 2007), driven by a healthy ADR of $174.6. No doubt KSA’s strong focus on niche tourism segments, such as business, cultural, eco-tourism, and most importantly religious tourism, has sustained this growth.Collectively, other Red Sea destinations, including Israel, Jordan and Djibouti recorded the largest RevPAR growth in 2008 (23.3%), reaching $109.2.These record results for the Red Sea region were always going to be difficult to match in 2009. As the global economic crisis begun to take its toll towards the end of 2008, most of the Red Sea experienced a clear drop in demand. “Undoubtedly the economic crisis has affected all business sectors and the leisure tourism sector was obviously one of the most affected by the situation. Q1 was sustaining the budgeted expectations while Q2 and Q3 saw a significant drop in demand. We anticipate a slight increase in Q4 because it is the high demand period and British Airways has announced a scheduled flight from London three times per week to the resort,” said Regional Director of Marketing – Egypt, Four Seasons, Cesare Rouchdy.When looking at July 2009 results compared to the previous year, global OR at the Red Sea decreased by 5.5 points, ADR dropped by a 3.6% and RevPAR dropped by more than 10%. Demand was worse affected in Egypt, declining by just 6 points. Together with a 4.6% decrease in ADR, RevPAR fell by 11.5%. Egypt’s somewhat oversupply of hotels and residential complexes would certainly not have helped the situation. It must be noted however that when comparing these results to 2008’s exceptional performances, the affects of the economic crisis seem to be a lot more dramatic.“We have had a drop in the Red Sea region, mostly in Hurghada where our turnover decreased by more than 30% due to two factors: drop in terms of visitors (OR’s are down), and drop of price and consumption. Hurghada is the most affected region, followed by Dahab. Sharm el Sheikh however is not doing too bad, considering the global environment,” explained Managing Director, Accor Hospitality, Thierry de Jaham.“We can confirm the trend, still expecting an average 10% decrease in numbers, only expecting a reversal of the trend by mid to end 2010. In general, there is an oversupply under the present market conditions, especially at the lower end of the star rating scale. However, we do see room for high quality, international 5-star hotels,” verified General Manager, Steigenberger Al Dau Beach Hotel, Lars Geweyer.

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