As most would attest, Egypt is a prime destination for holiday tourism, with nearly 2,500 kilometers of shoreline on the Red and Mediterranean seas and more than 3,000 years of recorded history. According to WP Travel, a tour operator, Egypt ranked between 14th and 21st on the list of most visited nations between 2020 and 2023.
The country’s diverse economy also makes it a destination for meetings, incentives, conferences, and exhibitions (MICE) in the Middle East and Africa. Mahmoud Kaoud, associate director of hotels and tourism at Colliers International, an investment firm, told local media in August that MICE tourism increased the North Coast’s high season by two months. It now starts in July and ends in October.
The government is betting those attractions could double the number of visitors to 30 million between 2023 and 2028. That would mean unprecedented opportunities for real estate developers targeting residents, businesses, retail, and visitors. At the October AmCham Real Estate Conference, Ayman Sami, country head of Jones Lang LaSalle, a specialized think tank, praised the government’s progress toward realizing that ambitious goal.
To capitalize, experts at the conference stressed the need to “create new destinations” in Egypt. That could prove “hard,” Abdallah Sallam, president and CEO of Madinet Masr, a local developer, told conference attendees. “We are doing a good job when we zoom in to the corporate level. But we need [more] private sector and government collaboration … such as the Ras El Hikma triangle project [a $35 billion mixed-use real estate development project on the North Coast] .”
Square one
As an international destination, Egypt starts from a low point. “We are nowhere close to [having the] infrastructure, policy, city readiness, and even culture,” Sallam said. “We can see a lot of unfavorable feedback from foreign tourists on social media.”
Sami noted Jones Lang LaSalle classifies Cairo as a “Dawning Destination, [characterized by] emerging tourism infrastructure, perhaps having placed less emphasis historically on their travel and tourism sector.” No other city in Egypt meets JLL’s classification criteria.
That classification is based on infrastructure; year-round congestion fluctuations; leisure and business attractions; environmental readiness; urban readiness, such as digital platforms and labor availability; safety; and effectiveness of government policies.
Government strategy
In 2014, the government launched its 2052 National Sustainable Development Strategy ”to improve the quality of life and ensure no one is left behind,” said Abdel Khalik Ibrahim, senior assistant to the minister of housing and urban development, at the conference.
The government allocated “$20 billion to overcome informal housing and improve the quality of the built environment and other social nonprofit projects,” Ibrahim said.
The strategy also focuses on building “new cities that meet international standards to [mainly] attract international property investors and buyers,” Ibrahim said. New developments would “connect to economic regions to create development corridors. Each zone would have its own economic function and unique attraction features.” A case in point is the Ras El Hikma development, with a target of 70% non-Egyptians, Ibrahim noted.
The project should get a head start from recent significant investments in services and infrastructure along the North Coast, which transformed it from “a destination that focused only on the local market to one that received over 105 nationalities … last summer,” Ibrahim noted.
The national strategy also aims to ensure that local private-sector developers can cater to foreigners by offering them “higher levels of quality and design,” Ibrahim said. He and other conference speakers agreed the benchmark would be the developments in Ras El Hikma.
Elevated risks
Despite Ras El Hikma’s headline-grabbing benefits — bringing an initial $35 billion into Egypt along with the prospect of becoming a year-round destination in this highly seasonal region—the project is a risk for local developers.
The UAE-backed project will likely make it more difficult for Egyptian developers to attract local and foreign buyers to existing and new projects along the North Coast. SODIC General Manager Ayman Amer was adamant that “Ras El Hikma will [ultimately] take a big part of the pie. If we can’t do something outstanding, if we can’t compete with what they offer, everyone will go there.”
“GCC investors [in Ras El Hikma] will bring new standards and quality design language that will create historical changes as [they] aim to attract their own citizens for the summer,” said Naguib Sawiras, executive chairman of Orascom Investment Holding.
Another challenge is the “horrendous high interest rates,” Sawiras said, which stand at 27.5%. That, plus the pound’s devaluation by more than 200% since 2020, has raised property prices considerably. “Buyers must not be shocked about the high prices, as they are a function of interest rates and devaluation,” he added.
Such noticeable price jumps come despite developers tightening profit margins to try to keep units affordable. “We made zero money from our Zed project in Sheikh Zayed,” said Sawiras. “All our projected net profits, which we calculated when we started, were eaten up by the high interest rate and devaluation.”
Other problems relate to the state. “The government lags the private sector in automation, delaying approvals and delivery of other services,” said Sawiris. They should “take weeks, not months or years. Also, the government needs to open up plots for Egyptian developers and treat us like they do foreign developers.”
Local laws are also problematic for developers. That was evident when the government declared the Ras El Hikma project’s land a free economic zone in April. “The [UAE investors] want to use Emirati laws, not Egyptian ones, because their laws get things done,” Ahmed Badrawy, CEO of Marakez, a commercial property developer, said at the conference. “The government needs to get out of our way, especially when it’s foreign investors … It should be a light, helping hand.”
Further deepening those challenges is the fact that the government and Central Bank have done little to curb construction costs and kept interest rates high, Sawiras noted.
He said large developers would be safe if they “finish and deliver projects quickly. They should also not start new projects until the older ones are sold out.” However, he warned that smaller developers may have “no option but to continue building [and selling] as they need installment payments from new projects to finance under-construction ones.”
Better cities
To improve Egypt’s status as a global destination, cities need to move up the JLL classification, said Sallam of Madinet Masr. The think tank’s report shows Cairo’s next step is to be an “Emerging Performer, [where] cities show rising tourism potential with new infrastructure, offering strategic development opportunities.” Those metropolises include Abu Dhabi, Cape Town and Istanbul.
The endgame is to reach steps three and four, Sallam said. The report defines the former as “Balanced Dynamics [where] these cities have solid tourism foundations and growth potential … balancing scale and concentration … such as Prague, Macau, and Beijing,” the JLL report said.
Step four classifies metropolises as “Mature Performers: These cities have robust travel dynamics and infrastructure [balancing] growth with potential pressures [on the city’s infrastructure] and diversification [of attractions],” the report explained. Examples are Dubai, Los Angeles, and Sydney.
The key to achieving that necessary progress is “not to reinvent the wheel,” Sallam said. “Sometimes we need to look back at successful examples and try replicating them.” He added, “We must not focus or prioritize one [piilar] over the others. Everything must happen at the same time.”
This story first appeared in November’s print edition of Business Monthly.
