Infrastructure problems may halt Red Sea boom


Downward-spiralling rates and a pressure on airport slots could halt the boom at Egypt's Red Sea resorts Russel Sharpe, a senior hotelier in Egypt has said.

Le Meridien Hotels has opened hotels at Makadi Bay and Sharm-El-Sheikh in the past year, but despite interest in the destination and good quality hotel development, this would not be enough to sustain the resorts in the long-term, said Sharpe, the group's senior vice president sales & marketing.

"In their eagerness to push tourism as a growth sector for the economy, the authorities have made mistakes by not ensuring that infrastructure development has accompanied room supply," he said.

"Developers have been given land and investment funds by the banks to fuel tourism growth, but this is not enough on its own - and now the ministry of tourism is acknowledging that mistakes have been made in areas such as Hurghada."

In a situation where the major brand names are pulling out of that resort, and big European operators are actually taking over the hotel stock in an effort to maintain standards and ensure continuity, Sharpe also warned of the dangers of such vertical integration which would prolong the depression in rates, with too few operators controlling large amounts of inventory.

"Hurghada is a good example of hotel room supply overtaking infrastructure development and this has deterred tourism, leading to soft rates and - in the longer term - deterioration of service levels and standards," he said.

Across the Red Sea in Sharm El-Sheikh, a similar situation of over-supply in the hotel sector is underway, with added problems in air access that precludes any easy solution to boost tourist arrivals.

The situation is worsened as each new hotel opens its doors, despite a wealth of brand names all launching what, elsewhere in the world, would be attractive 'must-stay' leisure resorts, he said

With established deluxe five-star properties selling out rooms at rates below $60 a night, the pressure is on the operators to fill at any price, begging the question of when and if developers will get a return on their investment.