AHMED BALBAA President and CEO of Balbaa Group

P.M. Communications: Dr. Nazif's government has implemented a number of bold reforms in order to cut the red tape and attract more investors to Egypt. Being a prominent businessman in the tourism sector, how would you evaluate the current business environment in Egypt?

Mr. Balbaa: There are many improvements in the business environment in general and many changes have taken place. The government knows exactly what to do and the priorities are clear for everybody now.

Over the past couple of years the Egyptian government has been trying to attract foreigners to invest in Egypt and laws have been implemented to explain to investors why they should invest in Egypt. The current business environment in Egypt is nourishing and encouraging, not only for the foreigners but Egyptians themselves. Balbaa Group, for example, has 5 projects under development at the moment. This goes back to the current cabinet. Dr. Nazif's government was able to establish this reputation for Egypt and did in fact attract millions of dollars to be invested in Egypt in the coming years. I believe that the future of Egypt is promising and I envision Egypt prospering in the coming decade in all industries, especially in real estate and tourism.

P.M. Communications: What do you think are the main challenges that the government has to deal with as a priority in 2007 with regards to tourism?

Mr. Balbaa: They already have an agenda with targets to reach. The strategic planning for the country must be clear and centralized. Tourism is not only comprised of the hotels that provide accommodation and food, but it also consists of many other components, such as airports, transportation, nightlife activities, etc. Tourists cannot stay in a hotel for a week without going out, because they will get bored. The Ministry of Tourism should think about how to create tourism centers with hotels that are very close to each other and all the necessary activities.

I also think the government needs to concentrate on specific cities and specific areas. What I am seeing now is that there are developments in the North Coast all the way to the South of the Red Sea. The government needs to focus more on specific areas. If a developer wants to invest in a certain area, he should not be allowed to move to another region until he finishes what he has started. What we have now is many investors investing in different areas, in the South and North at the same time which causes a delay in both areas.

The weather in each area is different and even the clients are different. We have made a study on the North Coast and we realized that, due to the weather conditions, this area will work only 7 months a year. We can see this clearly in the neighboring countries on the Mediterranean, like Tunisia, Morocco and Turkey, which are working 6 months a year. Investors have to know that they will work 6 months and then have to close their hotels or work at a very low occupancy rate. We need to find other segments of clients to come during those 6 months of downtime and come up with something special, otherwise we will have to do our feasibility study on a six month basis, which is not worth it.

I have a project in the North Coast, in Marsa Matrouh, close to the airport. I have a very nice hotel with a beautiful, 10 km long natural lagoon at the front side, while the backside will be the open sea. We have no problem in the summer when everybody comes because of the fantastic weather, the white sand beaches, and the crystal water. The problem is during wintertime and I want to find a very special activity in order to cover the other six months. I might be luckier than other hotel owners because in winter I can transfer my staff to other hotels that I own. But what if I did not have other hotels in other locations?

P.M. Communications: Why did you choose Marsa Alam as a location back when it was not on the tourism map at all?

Mr. Balbaa: In 1997, I was the first to build a hotel in Marsa Alam and back then, everybody was saying: "What is this crazy man doing?!" I went to Marsa Alam and lived in a tent for 8 months. I am also an architect, so I designed my own hotels and manage them at the same time. Today I have 4 hotels in Marsa Alam and I put it on the map at my own expense by distributing 100,000 copies of a new map clearly showing Marsa Alam to all the tourism offices representing Egypt abroad.

I choose Marsa Alam because it is one of the best locations for diving. Today the diving business is one of the most important aspects of the tourism industry in Egypt. In Sharm El Sheikh there are many quiet diving spots with the exception of Ras Mohamed, one of the best diving spots in the world. A quiet diving spot means that the water is not very deep, it is safe and the visibility is good. But when you become addicted to diving and you want to have a real challenge, you have to go to the South of the Red Sea, to a very rich area for diving. There are organized safaris for diving where people arrive to the airport and directly take a boat for a one-week sea cruise. They do not go site seeing, they just stay on the boat and dive 3 or 4 times per day. There are thousands of these safari boats heading to the South and it is a big business.

One day I started thinking: why would tourists have to travel at least 14 hours to reach the first diving spot and to stay on a boat for the entire week?! That is a very long time and with the noise of the boat engine and the seasickness, the trip is not at all comfortable for many people. So I thought about providing them with the accommodation in the South. They could get to the hotel by car or by bus. Then, they could go diving every day if they want and afterwards come back to the beach and their hotel. It would be much more comfortable for many clients to make daily dives instead of a doing the whole week safari.

P.M. Communications: What kind of facilities do you offer in your hotels in Marsa Alam?

Mr. Balbaa: It is a big development with more than 1 million square meters and 1.5 km of beach front and so far I have built 4 hotels in Marsa Alam. One of them is a diving academy where instructors can teach you everything about diving up until you get your license. The other luxurious hotels are called Kahramana, Habiba Calimera and Amaraya club. The 4 hotels are connected with streets and it became like a small town where you can go walking, shopping, or go to a nice restaurant, etc. It is a very safe and closed town. We are also offering different sized chalets for sale and it is a very good investment for the buyer because he can ask the management team to rent it for him when he is not using it in certain periods.

P.M. Communications: You mentioned the importance of joining the forces. How did the arrival of other developers affect your business?

Mr. Balbaa: Initially, I choose this place because it is closer to the virgin diving spots; therefore I could attract a big segment of divers. When Kharafi Group came to Marsa Alam, they built the airport and many other developers came after them. They have managed to attract a lot of guests who are not only coming for diving. Today we have about 8,000 rooms, so the vision is different because we do not have that many divers to cover all these rooms. We have to move from the segment of diving to beach tourism.

The good thing is that now there are more people promoting Marsa Alam as a destination. When additional rooms are opened it means that the owner will be promoting his property and consequently, he will help promoting the whole destination. When I started my development, I was the only one promoting a city that did not even exist on the map! Back then, I had to promote the location first and then my hotel, whilst today I am mainly promoting my hotels. In the past, first I had to explain to the people where the location was and then they would ask about the name of the hotel.

Today Marsa Alam is attracting a lot of developers and I would prefer if the investors would concentrate on this area. This way we would be able to reach all the targets that the Ministry of Tourism has set. We can get the additional million tourists every year and build 15,000 additional rooms per year. We have the airport and the nice beaches; all the pre-requisites are there. So on one side we need more promotion for the investors to go South and at the same time we need to take care of the city itself and redesign it because it is very old.

There is another issue that I would like to mention and that is a road that exists between Edfu and Marsa Alam city. But until now it has not been opened. This road is very important, not only for my hotels but for the whole of Egypt. It could link the Nile cruises with the beaches and if we were smart businessmen, we could make a joint program between our historical heritage and the beach holiday with diving. There is no other country in the world that can offer this combination during the winter. You will not find this in Spain, Greece, Turkey or Tunisia. Unfortunately we can not make this program now because the road is not open. I call this 'the golden triangle' because we have Luxor, Aswan and Marsa Alam and if you draw lines between these cities you will get the form a triangle.

Tourists could go site seeing, visit temples and at the same time they will be able to go to the beach and relax. If the road was opened, the distance between the two destinations would only be two hours by bus. So you could go from the Karnak temple in Luxor to the beach in 2 hours. It is very intense to visit temple after temple on a Nile cruise, so it would be nice to relax and see the blue color of the sea for a change.

P.M. Communications: In Egypt there is a lack of qualified workforce on one side, and a high unemployment rate on the other. Could you tell us more about the human resources as a vital part to the tourism industry? How do you make sure your employees deliver the best possible quality of services reaching international standards?

Mr. Balbaa: The human resource is the number one factor in the hotel industry. So if the government wants to achieve the target of 15,000 rooms per year, they need to train about 20,000 additional employees in different departments each year. In my opinion this is very difficult because 15,000 rooms will mean about 50 new hotels each year. So we will need 50 new General Managers, 100 new Front Office Managers, 100 new Food and Beverage Managers, etc. And where do we get all these people from?!

Today we do not have that amount of people who are ready to manage. So we need to upgrade supervisors to become managers. However those supervisors do not have the experience to manage. The only way to overcome this problem is through a lot of training. In my group, we have a training department and we give intensive trainings for our staff. But there are other hotels that do not have a training department because it is very costly or because they have only one hotel.

We have a fund for training in the Hotels Association but it is not always easy to get the staff from these small hotels trained because their hotels are most of the time full and they cannot leave their places. It is a very serious problem to find qualified people. We need to upgrade our quality and standards for the future. It is not only the problem of the Ministry of Tourism, but a general problem. We need to make many changes to get a generation that is well trained and well educated.

The whole mentality has to be changed. For instance, in most of the places in Egypt because of the culture, people do not like working in hotels. The society is very conservative and the parents will not allow their girls to come and work in hotels in Sharm El Sheikh or Marsa Alam.

I was a board member in the Cairo University College of Tourism in Fayoum. I went to a graduation party and left some applications for work. Out of 1,500 graduates only two men applied for a job willing to work outside of Cairo! All the others just wanted to work in hotels in Cairo.

We also need girls to come and work in the hotels because we cannot only hire men. There are some lady guests who will want maids to come and help them in the bathroom for example. So we started hiring from abroad, from the Far East, Russia, Brazil, etc. All foreign people who work with us are happy; they earn good money and get good accommodations. We also have many foreigners who are buying flats and villas. I have many foreign friends who have been living here for a long time and their kids attend school here.

I remember when I went to invest in Sharm El Sheikh in 1998, my hotel "Kahramana" was the sixth one built in Sharm. Back then there were only 1,800 rooms but today there are 45,000 rooms and the city developed in a very short period of time. You will not see this happening in any other place in the world and this is the benefit of investing in Egypt. Sharm El Sheikh is promoted a lot from our side as hotels, by the government and by the President himself. The President lives there, he holds most of his meetings there and all the media goes to cover these meetings. Most of the presidents of the world have visited Sharm and Mr. Tony Blair bought his villa there too. So if we gave this kind of promotion to other destinations as well, it would definitely work.

In the Hotels Association we want better rules for the service that hotels are offering. For instance if you are a 5 star hotel then you must have a certain standard of service and hardware inside your hotel. If you do not have these standards and hardware then you might be relegated to a 4 star hotel.

P.M. Communications: The British are the largest non-Arab investors in Egypt and they were the number one tourists in Egypt in 2006. How important is the British market for your hotels?

Mr. Balbaa: It is a very important market for us. We have a contract with Thomas Cook and they are my exclusive British partner, which means that the only way to make a reservation in our hotels is through Thomas Cook. This was an exclusivity agreement we signed with them in order to promote them in Egypt. Thomas Cook is an excellent, trustworthy company with a good name and good services.

P.M. Communications: What would you say are the priorities of the British when they come to Egypt?

Mr. Balbaa: The first priority is the airport, starting from their arrival and the assistance they get with their luggage to the shuttle bus. This is the first impression that they get about the place they are staying in.

We have a schedule problem at Sharm El Sheikh Airport as most of the flights from the UK arrive on Thursdays. So we get around 120 flights coming in at the same time. Most of these flights are charter flights with different companies and it is not easy to suddenly change their schedules because we would have to sit with all these guys and make a plan for the next three years to start with.

There are lots of things going on behind the curtains, as this is a big industry. It needs good communication and it is also a very fragile industry at the same time. Anything affects the industry whether it is good or bad news. For instance, if something bad happens like a bomb, this will affect the number of arrivals coming to us. And if something good happens like Italy winning the World Cup, this will also affect the number of arrivals, as the Italians will prefer to see their national team playing at home rather than coming to Egypt.

But I can say that we are doing very well and the number of tourists coming to Egypt is increasing. We are attracting more British now and the figures show that we had over a million British tourists in 2006.

P.M. Communications: The new investment law has opened the door to investment opportunities for the foreigners looking to buy second homes in Egypt. Could you tell us more about your activities in this field?

Mr. Balbaa: A part of our group is investing in real estate in tourist places. We are selling apartments and beach cabins especially to the British market because they are the largest buyers of second properties in the whole world. We are dealing with one of the biggest companies in England and they are launching a campaign called "Think of Egypt". It is Ian March and he is helping us to promote our projects in Marsa Alam in the British market.

Our units have cheaper prices compared to other similar projects. For instance if we talk about Sharm El Sheikh, we sell a square meter for 500 British Pounds. A 70 m² flat would coast 35,000 British Pounds and it could be paid in installments over 4 years. At the same time there is a return on investment because you could rent your unit or sell it.

It is good to sell accommodations and be able to offer hotel facilities at the same time. All the beaches in Sharm El Sheikh are private beaches for the hotels, so if you buy an apartment in Sharm El Sheikh you will not have access to the beach. This was an important issue when we planned our real estate project. The service that we offer to our buyers will be the same service we offer to our clients in the hotels. This is a good opportunity because they will have a membership in the hotel and they will be able to use all the facilities if they buy any of our units.

There is another service that we could offer to our customers. Some of them will use their unit for only one month a year and we could rent it for them during the rest of the year. This way the customer would get his money back in 3 or 4 years and then they could continue renting it or sell it and double their investment.

There are two projects that we are currently working on for selling apartments and villas. The first one is in Sharm El Sheikh and it is called "Villa Vista". There we have 5 types of areas for each type of accommodation, i.e. apartments with 1 bedroom, apartments with 2 bedrooms, villas, townhouses and deluxe villas.

The second project is in Marsa Alam surrounded by our hotels "Kahramana", "Kalimera", "Habiba" and "Amaraya". In the middle of these hotels we have around 200 units of beach cabins with a sea view. The size of the cabins is around 70 to 100 m² each and the place is called "Shagara Residence".

The most important thing is that the buyer of any of our units will be able to use all the facilities of the hotels and get a discount on all services. It is a good investment that will pay off by itself.

P.M. Communications: Would you like to send a message of invitation to our readers who still are contemplating where to take a holiday in 2007?

Mr. Balbaa: I would like to tell your readers to come to Egypt to my hotel, because that is what I am accountable for. I also want to send a very important message to your readers: they have to choose the tour operator very carefully! It is a very important decision to make because the tour operator is the one responsible for everything that happens to you. A good operator will choose a good partner for the transfer business, accommodation business, excursion business, etc, and the clients will be safe.

For instance, today one of the conditions for hotels dealing with British tourists is the approval of 'Cristal Company'. This is a British company taking care of the hygiene in the hotels, including the food, water, etc. This company audits hotels every three months and submits a report to the management of the hotel and they send the same report to the tour operators. So we are now talking about quality in a very professional way. This kind of control is very important and most of the big tour operators in the UK are only dealing with hotels that have this kind of inspection.

Thomas Cook always asked me for this report and they made an issue out of it. So we signed the contract with Cristal Company and invested a lot to fulfill all their requirements. But at the end of the day we are very happy because we did the right thing and our clients can be assured the highest standards during their visit to one of our hotels.

P.M. Communications: Thank you very much for your comments.