Town assembling
Orascom Hotels and Developments’ (OHD) foundational project, El Gouna, was the world’s first entirely privately-created town. Setting the way for countless more models of this kind, El Gouna is a remarkable development that fully deserves to be the winner of the Bespoke Ultimate Living Award.
Many a time, plans for small projects have grown bigger than intended, yet the core vision has remained a constant. In the wise words of Thomas Edison, “The object of all work is production or accomplishment and to either of these ends, there must be forethought, system, planning, intelligence, and honest purpose, as well as perspiration.” With that being said, there is no doubt that both colossal production and accomplishment are Samih Sawiris’ backbone. The Chairman of Orascom Hotels & Development may not have intended to create a town out of the desert, but El Gouna is exactly that. A self-sustaining, private, year-round town situated on the Red Sea’s coast in Egypt offering up an enviable lifestyle.
“Initially every person just wanted a house and a place to put a boat. I was hoping to attract twenty people at that time. That was the critical size for me to make the project, and we ended up having sixty people wanting those houses. The government insisted that we have a hotel so we added one and that was supposed to be the project,” he told Bespoke exclusively. This is how small a vision he started with.
Fifteen years on and El Gouna is a town with just under 37 million square metres of land, of which almost 11 million have been developed to date. This land bank is one of the key long-term value drivers for OHD as a phased development strategy in which the mother company owns all the surrounding land means they can maximise the benefits from all aspects: real estate, hotels and town management.
The population today is around 15,000 inhabitants, with a constant flow of hotel guests throughout the year. As Sawiris explicitly defined when he spoke to Bespoke, “I believe it is fundamental for the success of a town to kill seasonality. You must give enough reasons for people to live here permanently. Seasonal employees are very harmful they don’t have a sense of belonging, they don’t create local culture or local citizenship.” With this coherent society, year-round sunshine, picturesque scenery and first-class amenities it is easy to see why tourists come throughout the year.
Currently over 2,200 villas and apartments have been sold and there are 15 hotels with 2,699 rooms, out of which 14 hotels with 2,533 rooms are controlled by OHD. There are two 6-star hotels under development, with a third one to follow soon with a total of 54 rooms. “We already said that enough is enough as [far as] volume of hotels. I think five thousand rooms should be more than enough,” Sawiris explained. The reason behind setting such strict limits, is for OHD not to fall a victim of its own success. Take Sharm El-Sheikh for example. “[It] was the jewel of the Red Sea, but because they were under so much pressure from investors to give them a piece of the action, they just over-supplied the market [with too many hotel rooms].” The effects of such growth as Sawiris explains, means that both service and quality suffer – and that is something he does not want to see happen with El Gouna.
But what is so special about the El Gouna project you might ask? “At the end of the day, no one can claim to have created a town. Solidere [Beirut Central District] is a downtown centre that has been catered for by the government, with a road network, sewage and water. But we do everything, all the way down to security. It is a different scale. Even Emaar which is a huge real estate developer cannot boast about having done one single integrated town that they created from A to Z,” Sawiris elucidates.
In essence, nothing was provided to OHD by the government. “We were on our own,” he states, adding that this was a primary condition, set early on. “But it is a win-win for any government. Governments’ prime concerns are unemployment and cash in the box. [In the case of El Gouna] we are providing them with the chance to tax everybody directly and indirectly and we’re taking care of some of the unemployment problem. All this without any investment from their end.”
The difficulties in town building must have been enormous. “Even before the first twenty people moved in, I felt the heat coming. I would think what about communication, what about groceries, what is something happens to someone. At the end of the day a town needs everyone to be happy not just the rich,” explained Sawiris. So OHD went ahead and kept adding to the original plan, fully committed to its long term sustainability. Education is available, all the way from kindergarten to university. An international curriculum is taught to all those enrolled at the school, then they can pursue their higher education at the American University of Cairo, which opened up a branch in El Gouna.
Moreover there is a private landing strip, two marinas with approximately 240 berths, an 18-hole championship golf course and a European-standard hospital complete with a hyperbaric chamber and facilities for dialysis treatment. Even the unthinkable is provided to residents and visitors, as Sawiris contested, “Name anything and I’ll tell you we have it. If you manage to think of something we do not have, I guarantee that we’ll have it before the next time you come.”
With that attitude in mind OHD has pledged to advance El Gouna’s conservational agenda. “We are doing something new, in that we wish for El Gouna to become a CO2 neutral entity, by making as much [clean energy] as we consume.”
But the road was not always a smooth one. And OHD came desperately close to losing El Gouna after the Luxor massacre of 1997. “We were not ready for the total withdrawal of every source of cash revenue overnight. We were in the middle of projects and we needed to continue, so we took on further leverage and in the end the interest on the interest on the interest almost put us out of business. Eventually I had some assets that I had to sacrifice. With that cash we fought our way back. So the lesson was when the shit hits the fan you better be sure there is enough substance and cash to survive. But when the storm does pass you will be rather alone in the market which gives you a huge opportunity. That is the upside to it.”
The outlay by OHD may be super-long term as far as recouping on investment but the value of the real estate properties appreciated by a staggering compounded annual growth rate of 29 per cent over the past seven years. Besides the capitalised value of OHD is ever growing, “If you look at our market cap we are close to four billion USD and it is not like I invested four billion USD. So the market has already given us the gratification of acknowledging there is value in this set-up and that is our profit.”
Without a doubt there is much value in the El Gouna set up as is evident from the number of towns OHD has been commissioned to build all over the world. There is Andermatt in the Swiss Alps, and in Egypt alone there is Taba Heights, Berenice, Amoun Island and El Fayoum Oasis. In the UAE there is the Cove project of Ras Al Khaimah. In Oman there is Jebel Sifah and Salalah Beach. In Jordan there is the Tala Bay project and in Morocco there is the Chbika, Sahara Atlantique development.
El Gouna’s significance on the world stage is that it represents the emergence of the private sector into areas previously deemed impenetrable. One day business schools across the world will study the El Gouna model, although if you believe Sawiris’ modesty, “It may be quite a boring course as they will say, ‘By coincidence he did this’ and ‘What was his strategy – nothing! He would follow anyone that wanted to build a town and he would do it.’” Take it with a grain of salt. El Gouna is fully deserving of the Bespoke Ultimate Living Award.
Who El Gouna by Orascom Hotels and Developments
Lead by Samih Sawiris
What A self-sustaining year-round town, offering its inhabitants the unthinkable
Where Red Sea coastline, Egypt
Why It is the first development of its kind, built from the ground up by a privately-owned company. It is so successful in fact, that the model is being replicated in various locations.
HYPERLINK "http://www.elgouna.com" www.elgouna.com
