Egypt, new dimensions, new frontiers

Mr. Ahmed El-Maghraby, Chairman of EFTC

Interview with:

Mr. Ahmed El-Maghraby

March 30th, 2000

8, El-Sad El-Aaly street, Dokki, Giza,
Tel: (202) 348 33 13
        (202) 360 84 87
Fax: (202) 361 42 86
Since it is the first time you are interviewed by Forbes Global Magazine, could you give our readers a brief historical background of ACCOR Egypt ?

Accor activities in Egypt has had two phases. The first phase was our acquisition of Wagon-Lit, the Belgian company. In that stage Accor had three or four hotel management contracts. In 1992, Accor acquired Wagon-Lit and this company had a operation in Egypt. That operation was inherited by virtue of the acquisition abroad of Wagon-Lit. In 1992, we came into partnership with Accor. It was thanks to their acquisition of Wagon-Lit that this partnership between Accor and the Maghraby family took place in Egypt.

Because you were involved in Wagon-Lit ?

As a matter of fact, not much earlier than when Accor purchased Wagon-Lit, we had also purchased the shares of the Egyptian partners in the Wagon-Lit operation in Egypt. So we both came from outside in 1992 to a local company and found that we were sitting across the table from each other, and that is how the partnership started with Accor. It was a pure coincidence.

With 3,200 hotels located in 140 countries, Accor is the European leader and a worlwide group in the world of travel, tourism and corporate services. Could you give us a few financial figures of Accor Egypt ?

The few jewels in the crown include the Cataract Hotel on the Nile in upper Egypt. Most people have heard about it and numerous famous people have stayed there. In the last years of his life Mr. Mitterrand came almost every year for at least one week and he requested to do one trip before he died, which touched us profoundly. Also, when Lady Diana came to Egypt, the entire programme was organized by the Embassy and she only had one request: that she want to spend one day on the terrace of the private suite in the Old Cataract. The rest of the program was organized for her, but she requested one day for herself one this particular suite of the Cataract.

The other jewel of the crown is the Winter Palace in Luxor. These hotels are over one hundred years old. These are the two palaces in upper Egypt.

We are quite pleased to be responsible for the management of the two palaces in upper Egypt. We cover just about any destination like Cairo, Sharm Al-Sheick, Hurghada, Alexandria, Minia, Ismailia, all the different touristic location in Egypt plus the restaurant boats. In Cairo, we are represented by three hotels, but for the moment we do not have a hotel in central Cairo. Our only operation in downtown Cairo is the restaurant-boat "Scarabée" in front of the Inter-Continental hotel. Our hotels in Cairo: one is in the Pyramids, one by the airport and one in Maadi.

We are working very hard trying to acquire one in downtown Cairo. For a five star hotel, you need a Nile location. It is not that easy. And the land is quite expensive. The meter on the Nile in the heart of Cairo is estimated at 15 000 US$. It's actually a prohibited price. 50 000 L.E. is a lot of money.

Is there some location in Cairo in which you could built a new hotel ?

Yes, there few locations if you are willing to pay that kind of money. But the price drops substantially when you move away from the Nile. If you go back one or two buildings away from the river, the prices are totally different. It is more than half or forty per cent of the figures I mentioned. But building a hotel on the Nile is one of our targets.

According to the presidency of Accor, your industry has enormous potential and no foreseeable limits especially in emerging countries. In a country in which tourism represents one of the most important resources or revenues, how aggressive is the growth strategy you are pursuing, and which local market are you targeting ?

For the group Accor, they have a very clear growth strategy which concentrates mainly on Cairo, Alexandria and Ibis program. At the present there is not a market in Egypt which would really cater to the Egyptian middle management travelling around the country. Basically people either stay in a luxury five stars hotel, or if you are lucky, in the suburb of Cairo you can find a four star hotel. Something that is clean and proper for thirty dollars is simply not available.

Finding a middle price hotel in Cairo is the problem for a lot of people coming from Alexandria on business to Cairo, coming from Cairo on business to Alexandria - that kind of hotels is not yet available in Egypt so that is probably going to be one of Accor's future target.

Do you think that the tourism is going to be more weighed on the business side or the leisure side ?

In fact, there is no comparison between size of business travel versus leisure and cultural travel. The majority of our tourists come either for cultural travel or leisure travel. And the business travel is also a very rapidly growing area. It is not yet at the same level as the two other activities. Most of the business travel is concentrated in Cairo, while the cultural and leisure tourism is concentrated in upper Egypt and on the sea shores.

Tourism is well separated: business in Cairo, sea shore in the other parts of Egypt.

But Cairo does cater for both: leisure and business. Because it is a capital in which are located the Pyramids, the Sphinx, the Cairo Museum, Saqqara site. You can spend a whole month in Cairo doing some leisure but quite a bit of cultural travel.

But the Ibis programme is not for tourism. For the most part there might be one major Ibis in the center of Cairo and that could also serve for tourism. But the programme itself it is mostly smaller hotels around the different regions of Egypt.

How does a family business adapt to the corporate way of doing business?

I must point out that the actual management of that company is under the direction of Accor France. They provide the systems and the management of the hotel operation or the tourism operation is part of the international management of the Accor group. For the Maghraby group itself, I think we are still in the infancy of becoming more corporate. That takes a little bit of time to accomplish but most of the second line management and some of the top line management are all professional.

Perhaps the Accor group has become more family oriented?
Actually, the Accord Group started by two friends who kept a very high control of that company. Until only three years ago when they brought someone from "Generale des Eaux" to manage the business, it was managed in a sense very autocratically as a family business until only four or five years ago.

What is the role of the Federation of Tourist Chambers for the development of tourism in Egypt?

The Federation of Tourist Chambers has four specialized chambers: the hotel, travel agent, restaurant and the handy crafts chamber. These specialised chambers specifically look after the interests of these particular businesses. However, all of these business finally relate to tourism. At the end of the day, if there are no tourists, there is no one to stay at the hotel, there is no one to visit the sites, and no one will eat at the restaurants... Although I am exaggerating, these four chambers are a federation which basically looks after the broader interest of the tourism interest by coordinating the demand and steps that need to be taken vis à vis international organisations, as well as playing a mediating role between these different disciplines if they conflict, which sometimes happens between hotels and tour operators, for example.
Is lobbying for tourism private sector one of your roles?

Definitely. An example is the airline business, which complains because they are not given route rights to Egypt. What we have done in this particular case is to contacted the WTO to do a study of the benefits and costs to free the airspace of Egypt to increase the availability of scheduled flights. The study showed that we could liberalise the rules and regulations limiting accessibility of Egypt by international carriers without doing harm to Egypt Air. This study was presented through the Minister of Tourism to the President of the country, and the recommendations were adopted. As such, right now we are in the final stages of opening the touristic airports, Sharm El-Sheikh, Hourghada, Luxor, Aswan and possibly Alexandria, in order to have an open sky policy where an international airline can run as many scheduled flights to these tourism destinations without giving up other flights to Cairo. Right now you have to wait for a charter flight, but in the future will be able to hop on the plane with much more flexibility.

Moreover, we only had one scheduled local carrier, which was Egypt Air. In the next few weeks, there will be several other scheduled local carriers which will allow tourists to travel with better service and more freedom. This is part of the lobbying efforts of the Federation.

The only recommendation that was not approved was the opening up of Cairo airport for unlimited scheduled flights to Cairo, but we are quite happy because it is coupled with the increase of regular service by companies other than Egypt Air, plus the direct scheduled service to other destinations.
You mentioned the possible conflicts of interests between tour operators and hotels... How can you increase cooperation for the promotion of tourism?

Through regional marketing, such as the coordination of promotion with hotels, restaurants from an area like Sharm El-Sheikh.

The Federation itself does not participate directly in tourism promotion; it is our members which participate in all the major fairs around the world. However, we participate with the government for general promotion of tourism to Egypt.

The promotion of Egypt falls within the responsibility of the government. The presidents of the two main chambers, along with myself, are members of the higher committee which decides how to promote the country. The funding mostly comes from government funds.

The second aspect is promotion by specific geographical area, or by type of activities like diving or golfing.

The final aspect is promotion for the individual establishment, like the Hilton Hotels of Egypt selling the destination of Egypt through its locations.

These are the four different levels of promotion.

Some people say that Egypt's economy is unstable, and they think that the country should mostly concentrate of the development of its core industries. What is your opinion of this?

I do not think that the development of Egypt should be limited to a few industries. Yes, we have a very good potential in tourism, but we also have a strong potential in agro-industry and in other businesses. However, two considerations should be taken in account.

First of all, we have a major problem of unemployment and population increase, and definitely priority should be given to industries which create jobs at minimum investments. Tourism is one of those industries.

Traditionally it was believed that 1.5 jobs was created per hotel room, and it was assumed that this was the total employment related to tourism, which translated to 120,000 to 150,000 jobs to the economy. Yet we recently conducted a study with the Egyptian Centre of Economic Study on the Economic impact of tourism, we found out that when you take in account the multiplier effect and the related industries, over 650,000 jobs relate to the 80,000 rooms in Egypt, because the industry is not only rooms but it is also transportation, handicrafts, suppliers, and everything else related to tourism. This figure of 9 to 12 jobs per room is on par with international standards. It also proved that tourism is probably create jobs with a minimum of investment, which is what Egypt needs because the country does not have a huge amount of capital available for new investments.

The same might apply for agro-industries, where investments are low and the number of jobs created is quite high.

Regarding tourism, it deals with important unemployment problems and we argue that it should have a corresponding budget allocation. In Spain tourism was used to modernise all aspects of the economy. It was the engine of the economy and it also helped to develop other industries. We hope that political decision-makers here in Egypt will understand that an investment in tourism will be for the benefit of all other industries in the country.

Do you also take in account certain mistakes of tourism promotion in Spain, like environmental conservation, for example?

Yes, of course. The planning today is much more modern, and people are aware of the value of natural resources, the capacity of our sites, so those elements have been incorporated. Luckily the size of our potential sites is so large that we do not have to worry about the density, and we are also open for nine months per year, as opposed to the Spanish tourism which has a high concentration during three or four months.

How do you see the tourism sector evolving in the future?

We had 4.8 million tourists in 1999. Our target is 10 million tourists between 207 and 2010, which means an additional 5 million tourists to Egypt. We believe that this target is realistic, yet a major part of that expansion will probably come from the leisure tourism, because our historic sites cannot handle that rapid expansion. The fastest expansion in Egypt is happening on beach areas, where Hourghada has already surpassed Cairo in terms of room occupancy, and we expect the major part of this expansion to be for leisure tourism.

European markets will continue to be our major suppliers, and we expect a rise from US markets, and we have not even fully tapped the regional Arab market, as well as the local Egyptian market. As per capital income rises, we expect local tourism to bring a substantial contribution to the market. We are also seeing tourism from new destinations such as the South American market, and this year Egypt will host the conference for COTAL, the Association of South American travel agents. It is the first time they are holding a conference outside a Spanish speaking country.

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© World INvestment NEws, 2000.
This is the electronic edition of the special country report on Egypt published in Forbes Global Magazine.
August 7th 2000 Issue.
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