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Analyses

Cairo, performance and prospects

After years of decline, Egypt, and Cairo in particular, shows slow but certain signs of growth in the hotel sector. Performance, thanks to the gradual return of demand, is starting to improve. As the first destination in a series of analyses on North African cities, Cairo illustrates the renewal of the areas that have suffered a great deal over the past decade.

A key tourist destination for decades, Egypt welcomed nearly 15 million international visitors per year, before 2011. The Arab Spring, political unrest and multiple terrorist attacks then caused the tourism industry to crumble. In 2016, Egypt welcomed only 5.25 million visitors, about a third of the 2011 figure. This enormous drop in demand had a significant financial impact on the country. Tourism fell to 7.2% of GDP in 2016, compared with more than 12% in 2011.

Cairo, the Egyptian capital and main point of departure for visits to Giza and its pyramids, was particularly affected by the events of 2011 and their aftermath.

RevPAR thus experienced a spectacular decline between 2010 and 2013 (-62% over the period). This decline was caused by the drop in occupancy rates from more than 70%, down to 42%, due to political instability and the weakening of the power. Despite this major drop the RevPAR and occupancy rates started to improve in the following years.

 

 

This partial recovery is due to a rebound in occupancy rates, which returned to 67% in chain hotels in 2016 and 71% in the first 8 months of 2017. However, this rebound must be put into perspective. Prices fell for international visitors after the collapse of local currency in November 2016: its value relative to the euro, or the dollar, was halved. The sharp increase in prices (when expressed in local currency) has therefore not yet materialized when the prices are expressed in euros or dollars.

Overall performance is improving, which should encourage the return of major hotel groups that left abruptly in 2012. Major real estate projects and hotels nonetheless remain the spearhead of growth in the industry, whether they are public investments or private projects.

Hotel investment in Egypt seems to be a step in the right direction, if the tourism industry is to return to what it once was. The capital is regaining strength: most key tourism indicators have recorded a modest recovery from the lows of 2011 and 2012, despite the lingering difficulties of the local economy.

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