Kingdom Hotels expands in Egypt

24 May 2002

The recently created hotel investment group of Saudi Arabia's Kingdom Holding Companyhas taken a stake in one Egyptian resort hotel, and is set to complete the acquisition of two more as part of an ambitious regional expansion drive. These deals will bring the number of Egyptian hotels in which the group has a stake to six (MEED 3:5:02, Construction).

Kingdom Hotel Investment Group (KHIG)chief executive officer Sarmad Zok says the acquisition of a 26.5 per cent stake in the El-Gouna Moevenpick has been completed. He says one other deal is to be announced soon, and the group is in advanced negotiations about a third acquisition in Egypt. The majority owner of the El-Gouna property is the local Orascom Hotel Holdings. An expansion of the 418-room hotel is under consideration, says Zok.

KHIG in early May opened its first Egyptian hotel, the Sharm el-Sheikh Four Seasons. The opening ceremony was attended by President Mubarak and Crown Prince Abdullah of Saudi Arabia, as well as Kingdom Holding chairman Prince Alwaleed bin Talal. KHIG has stakes in two other Egyptian hotels now under construction - the Nile Plaza in Cairo and the San Stefano in Alexandria. Both hotels will be managed by Canada's Four Seasons Hotels & Resorts, in which Kingdom Holding has a 25 per cent stake. The company also has stakes in Canada's Fairmont Hotels & Resortsand Swiss-based Moevenpick.

The three Egyptian acquisitions will bring KHIG's portfolio to 11.

'We are buying in Egypt on the basis of Egyptian-based market values, which have been depressed by devaluation and the impact of political events on tourism,' says Zok. 'We believe we are going in at the bottom of the cycle.'

KHIG is also looking at several other opportunities to buy or acquire stakes in hotels in Dubai, Morocco, Tunisia, Sudan and Yemen, says Zok. The hotels will not necessarily be managed by Four Seasons, Fairmont or Moevenpick. 'There is no exclusivity agreement in terms of the management companies,' says Zok.

KHIG was formed with the aim of consolidating the Kingdom Holding hotel assets, and bringing in fresh capital to help with the expansion programme. It has $211 million of paid-in capital, and controls assets in excess of $1,000 million. Zok says the company is working on the assumption that the region has a bright medium-term future for tourism, despite the present difficulties for the sector. 'When peace and stability comes to the region, we want to become one of the top five investment vehicles for international investors through our diversified portfolio of quality assets,' says Zok.

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