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Sunday, 30 May 2021

Hotel occupancy rates decline in 1Q2021, and you can thank the high base effect

Hotel occupancy rates fell in 1Q2021, with four of Egypt’s tourist hotspots seeing declining figures from the same period last year, according to a Colliers International report (pdf) on hotels in the MENA region.

Hotels in Red Sea resorts were the hardest hit: Occupancy rates in Sharm El Sheikh fell 33% y-o-y while Hurghada saw a 26% drop and Cairo 22%. Alexandria fared comparatively well, seeing a decline of only 1% on the back of the city’s growing popularity as a leisure destination, and buoyed by the North Coast resort market, Colliers said. Hotel occupancy nationwide averaged 40-45% during the first quarter of 2021, a Tourism Ministry official said last month.

But keep that in context: The comparable period — 1Q2020 — included more than two months of relatively normal tourism activity in January, February before the pandemic hit, forcing airspace to close and wiping out most of the month of March.

Revenues are also taking a hit: Average daily rates (ADRs) for hotels — a reflection of revenue calculated by splitting average revenue across the number of occupied rooms — also dropped 76% in Sharm El Sheikh during the quarter, with Cairo also recording a decline of 68%, while Hurghada saw losses of 59%, the report found. Revenues during the quarter were down almost 60% y-o-y compared to 2019’s record highs of USD 13 bn, with Egypt losing out on some USD 600 mn in revenues per month during the quarter, Tourism Minister Khaled El Enany said earlier this month.

But a bounceback is in the cards: Hotel occupancy for the full year is expected to reach 45% in Cairo, up 66% from 2020, and 37% in Sharm El Sheikh, up 58% from last year, Colliers forecast earlier this month. Occupancy is still limited by a 50% cap placed on hotels by the government to curb the spread of covid-19.

Could more UAE tourists help boost occupancy this summer? Emirati budget carrier Flydubai has announced it will begin operating three weekly flights to Sharm El Sheikh as of 15 June, making the Red Sea city the airline’s second destination in Egypt following Alexandria.

Egypt is targeting tourism revenues between USD 6-9 bn this year, El Enany said last week. The minister had previously said Egypt expects tourism to recover to its pre-pandemic levels in the second half of 2022, though S&P Global Ratings’ forecasts expect revenues will continue to lag below pre-pandemic levels until 2023.

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