Egyptian Resorts Considers Switching Its Focus to Real Estate

(Bloomberg) -- Egyptian Resorts Co. is considering refocusing its business on real estate as the nation’s tourism industry struggles to recover from years of terror attacks and political upheaval.

A plan under discussion would see the company for the first time develop land beyond its Sahl Hasheesh project in the Red Sea resort of Hurghada, beginning next year with small, high-end residential projects, Chief Executive Officer Wael El Hatow said in an interview. Real estate could account for 80 percent of the firm’s business in three to four years, he said, about double the current figure.

Egyptian Resorts has mainly relied on selling plots of land in Sahl Hasheesh to sub-developers of hotels and resorts, but this business has been hit by the drop-off in tourist arrivals since the 2011 uprising that toppled President Hosni Mubarak. Terror incidents have also kept holidaymakers away, such as the downing of a Russian passenger plane in 2015 that prompted a number of countries to ban flights to some of Egypt’s main tourism hubs.

“For Egypt to return to 2010 tourism figures, it will take years because the Egypt brand has been damaged by successive incidents,” El Hatow said at his Cairo office. “We are now highly concentrated in Sahl Hasheesh and exposed to tourism risks, which is dangerous for the company over the long term. Sahl Hasheesh will continue to be a major part of our business but we need to have other sources of revenue.”

There are tentative signs of recovery in Egypt’s tourism industry, with revenues almost tripling in the final quarter of the last fiscal year. Yet the industry faces other challenges, with visitors nowadays looking for more cultural experiences than the luxury vacations traditionally offered by the North African country, El Hatow said.

Tourism employed 2.9 percent of the nation’s workforce in 2016, according to the World Travel and Tourism Council, while the number of people who benefit indirectly from the industry is much higher.

“We aren’t reaching out to the youth segment,” El Hatow said. “We are only targeting older generations -- and these people won’t be there in 10 to 20 years.”

To contact the reporter on this story: Tamim Elyan in Cairo at telyan@bloomberg.net.

To contact the editors responsible for this story: Stefania Bianchi at sbianchi10@bloomberg.net, Paul Armstrong, Jon Menon