Luxury hotels carve a niche in Cairo

Destination's traditional emphasis on mass segment had left the top end of tourism market underserved.

A luxury hotel market is emerging in Cairo alongside the recovery of Egypt's tourism industry after the downturn, hoteliers and analysts say. The hotel company Kempinski opened a boutique property in Cairo this month, while Ritz-Carlton and Rocco Forte are renovating and rebranding existing hotels. Other brands heading to the city include a St Regis, being developed by Qatari Diar, and MGM Grand.

"Towards the end of 2008 and during the first nine months of 2009, Egypt witnessed a slowdown in tourist arrivals as a result of the global slowdown," said Ayman Sami, the head of Jones Lang LaSalle's Egypt advisory business. "At the beginning of 2009, the government realised this and reacted accordingly. This led to a quick recovery during the last quarter of 2009 to end the year with a very small decrease in tourist arrivals over the previous year and has since then showed signs of recovery."

Egypt had largely been positioned as a low-budget tourist destination, Mr Sami said. But some investors had identified a gap in the high-end segment, he said. "The reason that there weren't so many before was that the room rates were very low, and this would not encourage [investment] in the luxury segment." The recently opened Kempinski Nile Hotel advertises itself as the first branded luxury boutique property in Cairo.

"Egypt is now attracting a higher proportion of high-end visitors, whether these are tourists or businessmen, as a way to diversify the overall tourist mix," said Fuat Koroglu, the general manager of the Kempinski Nile, adding that the luxury segment was generally more resilient to economic cycles than the mass-tourism market. "The quality of Cairo's high-end hotel infrastructure also explains part of market dynamics. Although Cairo features a fair number of five-star hotels, a relatively large proportion is made of ageing properties trading on their global brand names but often in need of a facelift." About 12.5 million tourists visited Egypt last year, generating revenue of US$10.8 billion (Dh39.66bn), down from 12.8 million visitors and revenue of about $11bn in 2008, according to figures published by Reuters. More than 7 million tourists visited Egypt in the first half of this year, a 21 per cent increase onlast year's first half, with revenue up 17.6 per cent to $5.58bn, according to Reuters. "Given the importance of tourism revenue to Egypt's overall GDP, the government has been inspired to try and promote high-end tourism as a way to diversify revenue from the hospitality business," Mr Koroglu said.

The country had a unique opportunity to capitalise on its culture and history and combine this with luxury tourism offerings, such as upmarket hotels and golf courses, he said. Currency fluctuations were also playing a major role in the flow of visitors to the country, Mr Sami said. "We can say that the weakening of the Egyptian pound against the euro between 2006 and the third quarter of 2009 was one of the main drivers in attracting tourism from the euro zone."