Geopolitics Complicates the Hotel Business

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If you don't think the fortunes of the hotel industry can turn on a dime, check out the headlines from the past week as turmoil and uncertainty grow in Egypt. Long considered a safe nation for travel and real estate investment, Egypt appears on the edge of either change in government, at the least, or total collapse, at the worst. That's big trouble for a country in which tourism generates 11 percent of GDP and for U.S. and other hotel chains with properties in the country.

A check of websites shows five U.S. hotel companies—Marriott, Hilton, Starwood, IHG and Hyatt—with a combined 17 properties in Cairo and another 29 hotels throughout the country. Hilton is opening another property in Cairo on May 1 and a resort in Marsa Alam in the second quarter. Other scheduled openings include a Le Meridien at the Cairo Airport at the end of March. That's a lot of business and real estate at risk for who knows how long.

This kind of crisis shows the tenuous nature of operating nearly anywhere beyond the borders of North America (Scratch that; just the U.S. and Canada are solid, as Mexico remains toxic.). I got a chuckle from this headline today on the Wall Street Journal website: “Protests May Hurt Egypt Tourism.” That's an understatement if I ever heard one. Who in their right mind is planning a business or leisure trip to Egypt in the foreseeable future?

While all hotel companies with assets and personnel in Egypt are today working feverishly on plans to safeguard their management and staff first and property second, a bigger question is what about future development in a world where political and economic conditions can change in a moment. And ironically, a lot of talk from brand executives at last week's Americas Lodging Investment Summit centered on the promise of international development. To be fair, most of their focus is on countries such as China, India and Brazil, which everyone believes are secure. Of course, two weeks ago, that's what we all thought about Egypt.

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