Egypt’s tourism sector continues to lure private investors despite economic difficulties

In 2022, 11.7 million tourists visited Egypt, according to figures from the Ministry of Tourism and Antiquities. During the same period, tourism revenues amounted to $12.2 billion, data from the Central Bank of Egypt (CBE) show.

Tourism revenues reached an all-time high of $13 billion in 2019, when some 13 million tourists visited Egypt, yet receipts fell by almost 70% the following year due to the Covid-19 pandemic. The sector recovered quickly and by 2021 it was back to pre-pandemic levels, owing to mass vaccinations and the easing of travel restrictions.

The sector again took a major blow in 2022 with the Russian invasion of Ukraine, as citizens of the two countries together accounted for around 30 to 40% of all tourists visiting the country before the war. Arrivals of Russian visitors fell by as much as 40% and Ukrainians by as much as 80% during the first year of the war, according to the Ministry of Tourism and Antiquities.

The industry has since quickly rebounded again, this time mainly on the back of the fall of the Egyptian pound, which has lost half its value to the dollar, making the country an even cheaper destination, as well as the arrival of tourists from new markets and the resumption of regular flights with Russia.

The Ministry of Tourism and Antiquities is now targeting a new record 15 million foreign tourists this 2023, which would represent a 28% increase over last year.

The government has set two new major medium-term goals: to attract 30 million tourists by 2028 and to increase annual tourism revenues to $30 billion.

Minister of Tourism and Antiquities Ahmed Issa has stated that the appetite is there. According to a study they have commissioned, there are some 272 million potential tourists worldwide who want to visit Egypt.

The ministry’s strategy to achieve these goals revolves around five lines of action: provide greater access to Egypt, attract more investment, tap into new markets, increase the tourism offer, and improve the quality of services and experience.

The investment needs projected by the ministry to meet its targets amount to some $30 billion. Most of this amount is expected to come from the private sector, for which a key role is reserved in the government’s plans.

In January, the cabinet extended to the tourism sector a 150 billion Egyptian pound subsidized loan program (nearly $5 billion) previously reserved for agriculture and industry and mainly intended to bolster the working capital of companies.

The private sector is the main driver of investment in Egypt’s tourism industry, accounting for around 90% of the total in the last decade. In FY2021/2022, foreign direct investment in the sector amounted to $345 million, according to the CBE.

One of the ministry’s main priorities is to double the number of flights to Egypt, with special focus on low-cost flights. To encourage their arrival, the government has been subsidizing charter tourist flights, and wants to tap into new airports built in recent years, including two in Greater Cairo and another one on the Red Sea.

On May 16, one of these new airports, the Sphinx International Airport, located in western Cairo near the pyramids, received the first flight of the Kuwaiti low-cost airline Jazeera Airways, which is to operate four flights a week for now. Hungarian low-cost airline Wizz Air also announced in May that it will start operating four weekly flights to Italy from the same airport.

The second major goal of the authorities is for the private sector to increase the country’s hotel capacity to half a million rooms by building some 290,000 new units by 2028. There are currently about 213,000 rooms in Egypt.

The private sector has shown interest: major chains such as Accor, Marriott and IHG have thousands of rooms in the pipeline, and Hilton wants to nearly double its portfolio in Egypt over the next 3-5 years. Travco Group, one of the country’s leading tourism groups, plans to invest 7 billion Egyptian pounds (around $225 million) in 2023 to add hotel capacity.

There are currently nearly 25,000 rooms up for development in the pipeline of 103 hotels in Egypt, according to advisory firm W Hospitality Group. This represents 30% of Africa’s total pipeline in 2023 and is over three times that of the continent’s second largest country in number of rooms under development, Nigeria. 12% of the total are concentrated in the area of Greater Cairo, according to W Hospitality Group.

The government is also working on the sale of a yet unknown stake in a state-owned company with a portfolio of seven iconic five-star hotels in different cities across the country. The offer has reportedly drawn interest from Gulf investors.