By Abdel Razek Shewkhy
Current conditions do not encourage tourism companies to list themselves on the stock market, according to Karim Helal, financial advisor of the Union for Tourism Chambers.
“Tourism activity has faced a real crisis during the past three years, which has exacerbated financial and organisational problems.”
The Egyptian tourism sector suffered losses of more than $8.6bn during the past three years, with 2013 seeing some of the worst declines, Halal said, noting that tourism revenue fell to $5.9bn, down 41 % from 2012.
Political instability since the 25 January Revolution has negatively affected the tourism sector. Its entities faced a real decrease in revenue, which has prevented them from meeting bank dues and continuing projects under construction. The Central Bank of Egypt, responding to their demands, decided to postpone the payment of debt due in January 2014 to January 2015.
“These difficult conditions prompted the sector to establish an investment fund worth $1bn to support stalled projects, and to continue the ones under construction,” Helal said.
He said he believes the IPOs in the stock market in the coming period may be a means for the investment fund to exit from the capital of the tourism company projects in the future.
There are 11 hotel companies listed on the Egyptian Stock Exchange.
The leading three-sector companies are: Orascom Hotels and Development (ODH), owned by Egyptian businessman Samih Sawiris; ‘Egyptian Resorts, owned by Mohamed Ibrahim Kamel; and Amer Group Company, owned by Mansour Amer.
Travco Group, owned by Egyptian businessman Hamid El Chiaty, confirmed after 25 January its intention to list its shares on the Egyptian Stock Exchange, but according to a company official: “This step has been deferred for the time being due to political conditions that have caused a real decrease in the company’s revenue”.
Travco owns over 50 hotels and tourist resorts, distributed between the floating hotels in Luxor and Aswan and fixed hotels in southern Sinai, the Red Sea, and the North Coast.
One of the obstacles that has postponed listing tourism companies in the stock market, Helal said, is that many tourism companies are family firms that lack knowledge of the “importance of offering IPOs as a source of funding”.
“There are few large tourism entities in Egypt, he said, and, excluding Travco and Blue Sky Travel and Tours, are “mostly restricted”.
Modi El Shaer, general manager of Bright Sky Group, a subsidiary of Blue Sky Travel and Tours, said: “We [aren’t heading to] the stock market in the meantime. The state must support the sector to reduce losses, especially in the current circumstances.”
Unfortunately, he said, tourism companies in Egypt depend on the personal aspect of contacts with foreign tour operators without any support from the government.
Tourism is one of the sectors most affected by economic and political turmoil, whether in Egypt or abroad, because of its proximity to the Arab-Israeli conflict, El Shaer said, which “makes IPOs a dangerous solution.“
For more on the IPOs conference coverage, please check:
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Current conditions unfavourable to head the stock exchange: Tourism companies
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