Egypt’s Hospitality Industry: Economic Revival and Tourism Growth

Updated 10/29/2024 8:00:00 AM

In today's interconnected world, the hospitality sector has become a cornerstone of economic development. Beyond lodging and dining services, this industry plays a pivotal role in driving economic growth, creating jobs, and supporting other sectors.

From bustling metropolises to serene coastal destinations, hotel businesses contribute significantly to local economies and global tourism.

For Egypt, attracting investments and promoting the hospitality sector is essential to meet increasing demand and contribute to sustainable economic development.

Hospitality Sector Drives Economic Sectors

Egypt’s economy grew by around 6.6% in fiscal year (FY) 2021/2022, compared to a growth rate of 3.3% in the preceding FY. Notably, the hotel sector achieved the highest growth rate at 45.5%.

The Egyptian hospitality market in Egypt is estimated at $3.78 billion in 2024 and is expected to grow to $4.65 billion by 2029. This marks a compound annual growth rate (CAGR) of 4.25% during the forecast period 2024-2029, according to Mordor Intelligence's Report entitled 'Egypt Hospitality Industry Size and Share Analysis - Growth Trends and Forecasts for 2024-2029'.

The surge in Egypt’s tourism has been striking, with a record 7.069 million tourists visiting in the first half (H1) of 2024, according to the Ministry of Tourism and Antiquities. This unprecedented influx of visitors translated into a record-high 70.2 million tourism nights, demonstrating Egypt’s growing popularity as a destination for both leisure and business travelers.

The hotel and restaurant sector has also shown a strong growth rate, with a 14.3% increase in value-added during the second quarter (Q2) of FY 2023/2024, reaching EGP 58.118 million compared to EGP 50.851 million in FY 2022/2023, as per data from the Central Agency for Public Mobilization and Statistics (CAPMAS).

The growth in the hospitality sector positively impacts other sectors. Hence, Nirmeen El Sayyad, a UN Women Project Manager at the American University in Cairo (AUC) and an economic expert, tells Arab Finance: “Tourism has around 70 feeder industries, including hospitality, aviation, transport, financial services, food, construction, commerce, and handicrafts.”

“These sectors are directly affected by the performance of the tourism sector. Flourishing tourism positively affects employment rates in both tourism and feeding industries,” El Sayyad adds.

Capitalizing on Hospitality Expansion

Egypt is developing its hotels and hospitality sector to attract further investments and meet the demand from its growing tourism industry. The number of hotel rooms planned for construction during 2024 has increased to 26,240 rooms, compared to about 24,944 rooms last year, according to a report issued by W Hospitality Group on hotel chains’ plans in Africa.

In 2023 alone, contracts for 5,200 rooms across about 19 hotels were signed, accounting for 28% of the hotel expansion plans in Africa, the report revealed.

This surge aligns with Egypt’s efforts to boost the number of hotels and rooms as tourism revived following the COVID-19 pandemic. Tourism and Hospitality Expert Emad Mahrous explains to Arab Finance, “With tourism resuming its normal level post-COVID, both the state and private investors have paid intensive attention to tourism investments.”

“In this regard, approximately 69 new hotels with a total of 12,000 new tourist rooms have been built to accommodate both foreigners and Egyptians. Accordingly, Egypt now hosts 1,175 hotels. The available investment opportunities have become represented in purchasing and establishing new hotels with different brands,” Mahrous elaborates.

Egypt is providing various investment opportunities in the hospitality sector. In June 2023, former Minister of Tourism Ahmed Issa said that Egypt needs to double its hotel capacity to 500,000 rooms within five years.

Diverse tourism offerings, including health and wellness, medical, cultural, and leisure travel, drive hotel operators to expand their businesses in Egypt. As more tourists seek specialized experiences, hotels are recognizing the opportunity to cater to these specific needs and increase their market share.

This diversification is not only stimulating the tourism sector but also creating a favorable environment for hotel operators to invest in new properties, upgrade existing facilities, and offer innovative services.

El Sayyad says, “According to the investment map developed by the Ministry of Investment, there are diverse opportunities across the Egyptian hotel industry, specifically building hotels in Cairo, Dakahlia, Damietta, Gharbia, Luxor, New Valley, Port Said, and Suez.”

With geopolitical unrest close to the Red Sea governorates, Egypt looks forward to developing the hotel and hospitality sector in different governorates. Mahrous points out, “Egypt is full of unique places, many of which are still untapped. There are five times more potential places than already developed in the South and Central Sinai, the Red Sea, the North Coast, especially Upper Egypt, Luxor, Aswan, and the oases.”

“Recently, the state and investors have shifted focus to other distinctive routes other than the Red Sea, such as the North Coast, Ras El Hekma, Sidi Hanish, and Marsa Matrouh,” Mahrous highlights.

As Egypt strengthens its position as a global tourism destination, the hospitality sector is poised to drive economic growth and create sustainable jobs. By capitalizing on its rich cultural heritage, diverse landscapes, and strategic location, Egypt can attract a wider range of tourists and boost demand for high-quality accommodation and services.

By Sarah Samir