Egypt's Hotel Rates Rise Despite Struggling Tourism Sector

Despite the tremendous drop in occupancy rates, revenues and tourist arrivals in the past few months, hotels across Egypt saw major rate increases during the Eid vacation.

The price hikes took place amid calls and promotional campaigns aimed to boost domestic tourism in the country to support the struggling sector. .

Tourism in Egypt, an important sector of the economy, was hit hard in the aftermath of a series of incidents during the past months, the most prominent of which was the downing of a Russian airliner last October that killed all 224 people on board. .

The number of incoming tourists in July 2016 dropped by 41.9 per cent compared to a year earlier, while according to a report by Moody's Investors Service, revenues of the tourism sector fell to $551 million in the first quarter of 2016 to record its lowest level since 1998. .

Despite the drop in occupancy rate and efforts done to revive the tourism sector, hotels increased their prices during the past period, according to domestic tourism director at Infinity Tourism Company Hadi Shehta. .

“The average rate of a double room in Sharm El-Sheikh increased from EGP 650 to EGP 850 per night, which marks around 30 per cent increase,” Shehta said. .

Shehta said that hotels justify raising their rates by the general increase in the prices of all products. “Hotels say that prices of food and services increased so they have to raise their rates too,” he added. .

He explained that in return the tourism companies raise their prices to keep their profit margins. This subsequently led to a decline in demand, despite the Eid El-Adha vacation being a high season for domestic tourism. .

“Bookings with our company saw a 40 per cent decline compared to the same period last year,” Shehta said, ascribing the decline to poor economic conditions and the start of the school year within few days. .

However, director of domestic tourism sector at American Express Tourism Company Ahmed Ali said that the demand is high despite the increase in prices. .

“Hotels are exploiting this period [Eid vacation] to compensate for the recession over the past months,” Ali said, explaining the reason behind the increase in prices. .

He tied the increase to supply and demand economics, saying that after the Eid hotels will return to operating at quarter of their capacity due to the decline of international tourism. .

“A room [at Ain al-Sokhna] used to cost EGP 700 during normal days, but on the first day of the Eid it costs EGP 1000. It reaches EGP 3000 starting from the third day of Eid,” Ali added. .

Reham Mahmoud, who is responsible for domestic tourism at Quick Group, ascribed the rise to the recent campaigns aiming to revive tourism, saying hotels are trying to target citizens who belong to certain social and economic classes. .

“Special offers aimed to revive tourism caused problems for hotels, leading them to increase their rates,” Mahmoud said. .

After Moscow suspended all flights to Egypt following the Russian plane crash and the UK halted all flights to and from Sharm el-Sheikh, the ministry of tourism launched a promotional domestic tourism campaign. .

EgyptAir, the country's state-owned airline company, has also launched a campaign in July to encourage Egyptians to support domestic tourism and spend their holidays inside the country. .

The company has reportedly offered four-day deals, inclusive of flights, in Sharm al-Sheikh, Hurghada and Luxor, with prices that start at EGP 990 in a three-star hotel, EGP 1095 at a four-star hotel, and EGP 1350 at a five-star hotel. .

Following these campaigns, a number of hotels complained over the behaviour of some of the Egyptian tourists, saying they dressed "inappropriately" on beaches and wasted large amounts of food at buffets. .

“Hotels decided to raise their prices to target a specific category,” she explained. .

Mahmoud said that despite the increase in prices, there are still some 3-star and 4-star hotels that offer bookings at moderate prices.