DTZ's report on the Cairo hospitality market, released today, assesses the respective hospitality markets in east and west Cairo, setting out key market drivers and trends.
Martin Cooper, DTZ's Head of Consulting MENA and author of the report commented:
'Overall, Cairo's hospitality sector remains relatively unaffected by the slowdown in global tourism. Its fundamentals can be characterised by diverse tourism assets; a large and growing domestic market; strong levels of regional and international demand and growing levels of business tourism demand.'
A robust tourism market
Cairo's robust tourism market is driving demand in the hospitality sector. According to the most recent Government statistics, nearly 13 million tourist nights were spent in Egypt in 2009. This represents a 55% increase from levels recorded just five years ago. Despite the marked slowdown in global tourism activity in 2009, tourism numbers in Egypt held their ground falling only 2.3% on the previous year's figures.
The European continent is expected to continue to account for the largest share of Egyptian tourism, making up some 78% of the market as of Q1 2010. This was followed by Middle East nationals (10%) and Asian nationals (5%). Tourist numbers from Eastern Europe had experienced the strongest growth in recent years, on the back of improved economic wealth and their relative proximity to Egypt. However, given the sharp market correction seen in most of these economies, visitor growth from this segment is likely to slow in 2010.
Looking ahead, the Egyptian tourism market will continue to strengthen its contribution to the Egyptian economy. We expect to see a return to growth in 2010, albeit at a slower pace than witnessed in the recent past.
East vs. west
The new districts of New Cairo and Sixth October District have been rapidly increasing their hospitality capacity.
According to estimates by DTZ, there are nearly 24,400 quality hotel rooms in the Cairo area, spread across more than 100 hotels. The central Cairo market accounts for 48% (11,600 rooms) of the sector. The new cities in east and west Cairo have both witnessed a significant number of new hotel developments in recent years, such as the Dusit Thani (151 rooms) in east Cairo and the Radisson Blu (427 rooms) in west Cairo. DTZ estimate there are currently 5,400 (22%) hotel rooms in east Cairo and 6,700 rooms (27%) in west Cairo.
An assessment of 4-star and 5-star equivalent hotels, in the two locations, show that average occupancy rates within east Cairo have remained relatively unchanged over the last six years at 70%, as new supply has continued to meet demand. However, occupancy rates within west Cairo have been gradually increasing over the same period to 83% for the first three months of 2010.
Despite the lower occupancy rates, hotels in east Cairo commanded a 61% premium on average daily room rates (ADRs) compared with hotels in west Cairo. ADR rates stood at EGP665 and EGP412 per night in east and west Cairo respectively for the first three months of 2010. Although growing strongly between 2004 and 2008 (at c.10% per annum), ADR's within the east Cairo hospitality market appear to have stabilised since January 2009. ADR growth in west Cairo has continued to be strong in 2010, albeit from a lower base. Average annual ADR rates have grown by nearly 50% in west Cairo since 2004.
ADR rates in both east and west Cairo remain relatively unaffected by the global tourism downturn between July 2008 and July 2009. RevPar rates, (revenue per available room) however, have declined as evidenced by the dramatic 60% reduction in both locations. Rates have however improved modestly in the first quarter of this year. RevPar rates are expected to continue to improve as occupancy levels increase on the back of growing tourism demand.
The hospitality pipeline for both east and west Cairo remains strong, despite the large number of hotels that have been completed in recent years in both locations. Much of the proposed pipeline is associated with large mixed-use master planned schemes such as SODIC's Eastown development, DAMAC's Park Avenue and Emaar Misr's New Cairo City all in east Cairo. In the west of Cairo, schemes such as Bahgat's Dreamland and SODIC's Westown and Allegria developments all include hospitality components. According to market estimates, there are more than 4,000 new hotel rooms planned to be delivered in the Cairo market over the next few years.
Cooper summed up by commenting:
"Looking ahead, prospects for the hospitality market across Cairo are broadly positive. International tourism demand is robust, despite the recent downturn, with key feeder markets starting to recover. Travel and tourism is expected to generate an additional US$27bn of GDP in Egypt in 2010."