Egyptian Resorts Co., the second- biggest publicly traded Red Sea resort developer, expects a recovery in tourism to boost sales of land in its Sahl Hasheesh project in 2011, Chief Executive Officer Mohamed Kamel said.
“We’re basing our optimism on sales in 2011 on more hospitality business,” Kamel, 31, said in an interview at his office in Cairo yesterday. “What we are seeing is despite the sentiment on the residential market is that hospitality is not suffering as much. Tourism figures speak for themselves.”
Egypt recorded a 24 percent increase in tourism revenue in the first quarter of 2010 as the industry recovered from last year’s global financial crisis, tourism minister Zoheir Garranah said in an interview in April. Revenue rose to $2.7 billion as tourist arrivals advanced 29 percent to 3.46 million, he said.
“We were betting in early 2009 that the Egyptian tourism industry would not be as badly affected as everyone thought,” said Kamel. “Our theory was not that people would not go on holiday but that people will look for inexpensive destinations to go to. Egypt remains one of the least expensive destinations in the entire Mediterranean.”
The economy of Egypt, home to the Pyramids of Giza, depends on tourism, along with foreign direct investment and the Suez Canal, for foreign currency. Tourism, which accounts for more than 12 percent of jobs, generated $10.76 billion in 2009, according to the tourism ministry.
Egyptian Resorts, which owns a 41 million square meter plot of land 22 kilometres south of Hurghada on the Egyptian Red Sea coast, hasn’t sold a plot of land since 2008, Kamel said.
The company develops the land with infrastructure such as water, electricity and communication links, and sells it to sub- developers in the hospitality or in the second-home business. The Sahl Hasheesh project is expected to be fully completed by 2040, with at least 60,000 full-time residents, he said.
“We could have sold land in the past 18 months but we would have been hurting ourselves in the long term instead of helping the overall project,” he said. “We would have oversupplied the market with residential units and we would have been selling this land at a lower average price per square meter then what was achieved in 2008 which was $142.5.”
Egyptian Resorts is currently in talks with a number of sub-developers in the hospitality business, some of them who already own land in Sahl Hasheesh, to sell them plots as credit lines for these developers ease up, he said.
“Just 10 days ago, one more boutique hotel opened in Sahl Hasheesh,” he said. “That kind of activity proves that developers are more aggressive on the hospitality. The individual consumer’s appetite to acquire additional homes or homes for investment purposes is a bit on the conservative side.”
Orascom Development Holding AG, the biggest publicly traded resort developer in Egypt, is sub-developing a 2.5 million square meter plot that will encompass a marina in Sahl Hasheesh and sales for that project will start in the second quarter of 2011, Kamel said.
Egyptian Resorts, which bought the land in Sahl Hasheesh for $1 per square meter in 1995 from the government, is looking to expand its land bank in Egypt and is currently investigating a number of opportunities in the Cairo area that will be for mixed-use real-estate development, Kamel said.
“Right now our favourite approach is to look for privately owned land plots,” Kamel said. “ERC would provide a perfect vehicle for that whereby you would acquire them through a share swap transaction or something of the sort.”
Egyptian Resorts shares fell 1.5 percent to 1.92 Egyptian pounds at the 1:30 p.m. close in Cairo today, valuing the company at 2.02 billion pounds ($354 million). The company’s shares have gained 16 percent this year, compared with a 3.2 percent gain in the benchmark EGX30 Index.