Egypt: Improving tourism prospects
Sunday، 24 September 2023 - 11:15 AM
Egypt’s tourism sector is one of the country’s main earners of foreign currency. After a downturn during the Covid-19 pandemic and early days of the Russian-Ukrainian war, the sector has been showing signs of recovery, and in the first seven months of 2023 the number of tourists visiting Egypt increased by 40 per cent compared to the corresponding period last year.
In a bid to promote the tourism sector, President Abdel-Fattah Al-Sisi, Prime Minister Mustafa Madbouli, and Minister of Tourism and Antiquities Ahmed Issa held a meeting at the end of August that tackled key objectives like fostering a favourable investment climate across tourist destinations, increasing the number of hotel rooms, and advancing the tourism industry more generally.
The meeting discussed means to bolster the growth of inbound tourism and support the country’s ambition to attract 30 million tourists annually by 2028. It aimed to encourage investment from local and foreign private sectors, particularly by streamlining facilities and provisions.
The discussion emphasised the integration of the tourism sector within the broader development agenda. Efforts will now continue in enhancing and modernising the quality of the Egyptian tourism sector to align it with the preferences of target markets and adhere to the highest international standards.
Vice President of the Red Sea Investors Association Sameh Howaidak, a professional group, said that Egypt could attract 30 million tourists a year if loans are made available for hotel construction at interest rates ranging between 10 and 11 per cent instead of the current 20 per cent.
Land designated for hotel investment is needed to allow for the swift construction of more hotels within two years of the date of acquiring licences. This would mean the addition of an extra 150,000 rooms within a span of three or four years, Howaidak said.
“We need land designated for tourism investments. There is not much land on offer from the Tourism Development Authority, which has been integrated into the Ministry of Housing,” he added.
Administrative improvements at airports, such as increasing the number of passport counters and visa outlets, are another important factor. Such improvements would enable the accommodation of a larger number of tourists, he noted.
Regarding licences, Howaidak highlighted numerous challenges. There are currently numerous obstacles and delays related to paperwork. But given the political will to address these, he proposed streamlining the bureaucracy through legislation mandating that anyone seeking to establish a hotel must submit all the required documents in full in one submission. If there is no response within 30 days, the licence should be considered valid.
“We are currently dealing with 27 different bureaucratic entities, and the timeline for completing licensing procedures within three or four years is impractical if we want to achieve the goal of attracting 30 million tourists within four years,” he said.
Howaidak pointed to Law 8/2022, which addresses hotel and tourism facilities and the establishment of a one-stop shop for investment. “But this single-window system does not exist in practice,” he said. “If an investor perceives that obtaining a licence will take three years, he will likely refrain from investing. This obstruction impedes the development of tourism and investment in Egypt’s tourism sector.”
Rami Fayez, vice president of the Marsa Alam Investors Association, said the state’s strategy to attract 30 million tourists and generate at least $30 billion in the next four years would mean a 100 per cent increase in current hotel capacity.
Egypt now has 216,000 hotel rooms capable of accommodating 15 to 16 million tourists. Thus, there is a pressing need to construct what was built over a span of 70 to 80 years within just four years to meet these ambitious targets, Fayez added.
Achieving these goals will require the creation of new initiatives by the Central Bank of Egypt (CBE) to support struggling hotels and open existing but currently closed ones, Fayez suggested.
He also stressed the importance of properly implementing the tourism law, particularly the section on investment in the sector. Doing so would benefit all the parties involved, including investors and the Ministry of Tourism.
It would streamline bureaucratic processes, with one of the most significant provisions being that the Ministry of Tourism would become the sole authority responsible for all hotel and tourist facilities. This would create a one-stop shop for investors and enhance the roles of the Chamber of Hotel Establishments and the Federation of Tourist Chambers.
PROGRESS: Mohamed Amer, in charge of hotels at the Ministry of Tourism, reported positive progress in this regard, with ongoing hotel construction in key tourist destinations like the Red Sea, South Sinai, Cairo, and Giza.
Specialised committees are currently assessing hotel capacity while identifying and addressing obstacles hindering investment. The aim, he said, was to overcome administrative challenges and understand the reasons for underutilisation.
“The committees have completed their assessment of hotel capacity in the Red Sea and South Sinai areas. We are currently working on evaluating hotel capacity in the remaining tourist destinations across Egypt to accommodate the expected influx of tourists,” Amer said.
He added that “challenges to increasing the number of hotel rooms include licences, and issues related to required documents or approvals have been identified and resolved.”
Stakeholders in Egypt’s tourism and hotels sector are cooperating to resolve various problems, he added.
Amer said that some hotel licences have been suspended due to legal reasons. Once the underlying issues have been addressed and rectified, these facilities can be reopened and re-licensed. Other hotels temporarily ceased operations during the Covid-19 pandemic. A substantial number of these hotels have since reopened, he noted.
Regarding incentives to attract investment from the local and foreign private sectors, Amer said these included customs exemptions on imported equipment. He said that Egypt’s tax rates are relatively low compared to other countries.
Furthermore, Law 8/2022 has facilitated procedures through the Ministry of Tourism’s one-stop shop, which offers a convenient incentive for investors by enabling them to deal with a single entity rather than navigating various government authorities.
A comprehensive guide has been issued detailing requirements and fees. Amer said there were other potential incentives awaiting approval by the prime minister, pending consideration in the context of the tourism laws.
Amer said the new law has introduced fresh trends. Licences have been introduced for Dahabiya-type cruise ships operating on the Nile, for example, and the law encompasses mountain safari activities and eco-hotels, which now have environmental specifications.
These developments, particularly the inclusion of previously unregulated eco-hotels in areas like Siwa and other Oases in the Western Desert and the New Valley, are poised to encourage investment and expand hotel capacity.
“My primary concern is to ensure that all hotels meet the necessary health, tourism, and civil-protection standards, which are crucial for the safety and security of guests,” Amer said.
Tourism expert Sameh Saad noted that in the 1980s and 1990s, there was a significant increase in the number of hotel rooms in Egypt. Administrative complications were also less. However, in the late 1990s and early 2000s, multiple government agencies began intervening, imposing administrative decisions and fees and leading to complications and lengthy procedures that made potential investors hesitant to invest in tourism projects.
Despite Egypt’s favourable exchange rate and abundant tourism assets, such cumbersome bureaucratic processes became a significant deterrent to investment, he added.
Saad believes that the solution lies not only in providing investment incentives and tax deductions, but also in simultaneously eliminating routine obstacles that hinder progress. Building a hotel may take between six months to a year, but obtaining the required permits and approvals often takes two years due to administrative hurdles and paperwork, he said.
To attract investors, it is imperative to remove obstacles and simplify procedures. It is also important for the Ministry of Tourism to bring together specialists from the Tourism Development Authority (currently under the Ministry of Housing), investors, and all other involved parties responsible for granting establishment permits.
The ministry should define procedures and standardise requirements under a single umbrella, Saad said. For instance, if a particular document is requested by both the Ministry of the Environment and other ministries, submitting it to one central body should significantly reduce the time required to obtain approvals.
“Egypt boasts advantages such as its moderate climate, proximity to Europe, high tourist flow, and unique offerings not found in other countries. However, other nations often provide more facilities that attract investors,” Saad said.
“To address this, Egypt could learn from similar countries in the Mediterranean, like Tunisia and Algeria, as well as from destinations like Dubai. By studying their procedures and laws and adopting practices that suit Egypt’s needs, unnecessary complexity can be eliminated.”
It is also crucial to recognise that tourism investment differs from real-estate investment. A hotel operation typically spans 20 years or more, attracting tourists, generating hard currency, and providing employment opportunities. In contrast, real-estate investments typically involve building units that may not have the same economic impacts as tourism ventures, he added.
Saad referred to the emergence of new tourist destinations in Egypt, such as the North Coast and Alamein, which represent a fresh style of tourism that particularly appeals to Arab tourists. These destinations cater to recreational tourism, offering opportunities for nightlife and diverse dining experiences.
This attraction is reflected in the spending habits of Arab tourists in these areas, who often spend between $500 to $1,000 per day. They typically stay for approximately two weeks, contributing directly to state revenues.
But hotels and accommodation in these destinations are often limited. They also primarily operate seasonally, typically for two or three months a year, Saad pointed out.
In the past, Arab tourists used to visit Cairo multiple times a year, especially during the summer. They would attend concerts, events, and theatrical performances. However, with the recent increases in taxes, the frequency of these visits has declined, and many have shifted their attentions to Dubai instead.