CAIRO: All eyes have turned to Egypt’s North Coast as another hefty tourism development project goes on sale.
Once again, the government is shopping around for investors keen on reaping profits from the North Coast, the tourism industry’s newest cash cow.
This time, a $6.8 billion international tourism resort development project in Sidi Abdul Rahman in the North Coast is on sale, and three heavyweight tourism development companies – one foreign, two Egyptian – have bid for it.
Emaar Properties, the Dubai-based real estate mogul, alongside two major Egyptian development companies, Orascom Hotels and Development (OHD) and the Talaat Mustafa firm, are all competing for this revenue-churning venture.
Emaar Properties already has a vested interest in Egypt’s tourism industry, having revealed plans for a $4 billion development project in Cairo last year, according to the Minister of Tourism Zoheir Garrana.
However, OHD is not daunted by the competition. “We are not bidding to develop a bunch of hotels, says Tarek Danish, assistant to the chairman, at OHD. “We are bidding in order to develop a community, like Gouna and Taba Heights, in the sense that we plan to construct a city where people live year round, not just visit two months a year.
Mohamed Kamel, corporate vice president of strategy and governance of Kato Investment, the umbrella under which stands a conglomerate of companies, including Kato Real Estate Development (which owns Ghazala Bay in the North Coast) and International Airport Company (which owns Al Alamein International Airport), agrees.
“The North Coast has the capability to be developed as whole new cities, born year round, rather than just a number of hotels, he states. “We can have multiple Cairos within the area.
According to Danish, unlike its competitors, OHD’s edge lays in its main line of business, as the company is what Danish coins a land and community developer – not merely in construction, the main line of its competitors.
“Countries like Oman and Switzerland [where OHD have development projects in the works] have requested that we develop communities for them. That is evidence of our abilities, explains Danish.
This is the first time OHD has placed a bid for a project in the North Coast area. The reason for this, according to Danish, is because until now the company could not find a piece of land large enough for their plans.
According to Danish, the Tourist and Cinema Holding Company in Egypt, which is in charge of evaluating the bids and selecting the winner, has already viewed the technical bids of the three bidders. On August 2, 2006, the company will review the financial bids, how much each company is offering for the project.
The tourism industry is considered the bread and butter of the Egyptian economy. According to Kamel, a study conducted by the Middle East Economic Digest (MEED), a trillion dollars worth of investments between 2003-2009 will have been derived from real estate and related industries.
In Egypt, this industry, considered one of the largest markets in the world, ranked as the 28th biggest tourism destination, is the number one contributor to the country’s economy, amounting to 22.1 percent of the country’s foreign exchange earnings. Currently, it directly and indirectly employs 2.2 million people, amounting to a whopping 10 percent of the labor force.
At the end of 2006, the industry is expected to have garnered $7.2 billion, compared to the $6.4 billion it netted last year.
Tourists in Egypt are also forecasted to reach 9.6 million in 2006, in comparison to the 8.5 million who visited the country last year, up by six percent from 2004. The country is also planning to attract 16 million tourists in the next six years, said Minister of Investment Mahmoud Mohieddin at the last World Economic Forum on the Middle East held in Sharm El-Sheikh.
In order to do this, the government has set its sights on the North Coast, where land is rapidly being sold off to foreign investors and developers in order to increase FDI in the country.
“Most investors are regional, says Kamel, “and there are multiple reasons for this. Today, Gulf investors want to diversify the risks of their investments.
Furthermore, with oil prices skyrocketing and the Gulf reaping the profits, many countries within the region have a lot of liquidity just lying around, according to Kamel.
For example, Saudi Arabia is expecting an excess in their budget of around $300 billion, leading it to shop outside its neighborhood for investments.
Working with the domestic tourism market, the government is creating new initiatives to boost the industry.
“Initially, the North Coast was neglected as a tourism destination because the government was focusing on the Red Sea as the wheels to drive the growth in the industry, states Kamel. “It was a prioritization issue. Now, with the government placing the North Coast on their development agenda, it has caused foreign and regional investors to take a closer look.
In fact, ever since the government began its decent on the area in 2004, numerous tourism development projects have been set in motion.
In the past, the North Coast, a popular holiday spot for locals, was unknown amongst tourists due to its inaccessibility and lack of accommodations. “Aside from the inaccessibility to the area, infrastructure was poor. But now we have better infrastructure and a fully operational, international airport. Also, in the beginning, not many developers were willing to take the risk in investing in the area. Once that started, investments started to pour in. A fast second is better than a first mover, because (the second) has the ability to make better returns on their investments with less time and money, says Kamel.
With the recent launch of the Matrouh International Airport, the area has become more accessible to all tourists and has created greater prospects for inbound tourism year-round, which in turn is outfitting the North Coast to become the next “it destination in Egypt.
“You can look at the North Coast two ways: As North Africa or as southern Europe, because it’s a natural continuity of the Mediterranean coast, states Kamel. “This is partly why it’s attractive to foreign investors.
Also, due to the consistently good weather, the area is a solid year-round investment with a strong material base, according to Kamel.
However, while the government’s efforts must be applauded, in terms of growth, development in the area is moving far too slowly, says Kamel.
“We need to accelerate the rate of growth. It’s simply not fast enough, explains Kamel. “In the last five years, we have created less than 1,000 rooms. That’s just embarrassing.
According to Kamel, Egypt still lags far behind other bigwigs in the global tourism market. For example, Spain has more than 50 million tourists and Greece hosts 11 million tourists in comparison with the 11 million who live there. Egypt has less than nine.
“In the long term, our number of tourists must match our population, one for one, if we want to become a serious tourism destination, states Kamel. “And the more destinations we create, the more tourists will come.
