The easing of travel restrictions was good news for Egypt’s hotel industry during the first quarter of the year, which saw rising occupancy rates even as the conflict in Ukraine prevented tourists from two of Egypt’s key markets from visiting the country from February, according to figures in Colliers International’s quarterly MENA hotels report (pdf). Occupancy rates in Cairo more than doubled y-o-y in 1Q as leisure and corporate tourists returned to the capital after covid-19 travel restrictions were relaxed. Egypt’s Red Sea resorts also benefited from the normalization, with hotels in Hurghada reporting a 84% rise in occupancy rates and Hurghada increasing 46%. The Mediterranean city of Alexandria saw rates fall 1%.

What drove the rebound? The government’s easing of travel restrictions “induced significant inbound leisure demand in 1Q 2022, positively impacting demand for hospitality products in the country,” Colliers said. Strengthened political ties between Egypt and some of the key tourist markets in MENA and Europe also backed the recovery, it added.

It has been a tough few years for Egyptian tourism: The suspension of travel triggered by the pandemic effectively shuttered the nation’s tourism ministry for three months back in 2020, causing revenues in the sector to plummet. Recovery has been gradual thanks to new covid variants and a slow global vaccine rollout but a rise in tourists during the second half of last year brought annual revenues back to pre-pandemic levels. The tourism industry is a crucial source of hard currency for Egypt and accounted for almost 9% of GDP prior to the pandemic.

The sector is now grappling with fallout from Russia’s invasion of Ukraine in late February: The war has all but shut out Ukrainian and Russian tourists from traveling abroad, depriving Egypt from two of its key markets. The two countries made up some 30-40% of all visitors to Egypt before the war broke out and were fixtures of the Red Sea package holiday trade. Egypt is still seeking alternatives to plug the Black-Sea-shaped hole, including new and resumed international flight routes, other European markets, and attracting little-tapped markets in Latin America and Asia in the long term.

Average daily rates (ADRs) in Egyptian cities may be “inflated given the devaluation of the EGP,” Colliers said, with Cairo and Sharm seeing the biggest increases because most tourists are charged in USD or EUR. The capital saw an ADR of 181% while Sharm saw an ADR of 54%. “When the local currency is used as the presentation currency, an unnatural y-o-y growth in ADR is observed due to exchange rates from USD/EUR to EGP, suggesting better performance than what is observed using USD-denominated performance indicators,” it added.

There’s a positive outlook to 2024, with overall supply in the market set to increase at a CAGR of 1% between 2022 and 2024, with some 4.2k keys set to enter the market. Hurghada alone will introduce over 2k keys to the supply by 2024, according to Colliers.