Egypt’s tourism chief said the industry looks set to ride out the shockwaves of the Israel-Hamas war as it focuses on a hotel-building spree to accommodate more visitors after a record influx earlier in 2023.

Even with conflict next door, the North African nation remains confident it can meet a previous target of 15 million arrivals this year, with the number likely rising further in 2024, Tourism Minister Ahmed Issa said in an interview. That’s spurring authorities to plan incentives including tax breaks to speed the construction of extra capacity.

“The No. 1 challenge that Egypt faces today is the number of hotel rooms,” Issa told Bloomberg in the nation’s new administrative capital. The country needs at least 25,000 additional rooms in 2024 and 40,000 the year after, he said.

Tourism income, long a pillar of Egypt’s economy along with Suez Canal transit fees and foreign remittances, is assuming ever-greater importance for the cash-strapped country as it wrestles with its worst fiscal crisis in decades. S&P Global Ratings warned Nov. 6 that the leisure industries in Egypt, Lebanon and Jordan were particularly exposed to the impact of the Israel-Hamas war that erupted a month before.

Air France-KLM said in late October that in addition to airlines halting flights to Israel, some travelers were also staying away from nearby countries like Egypt and Oman. EasyJet Plc on Tuesday said it expected the war to affect its early winter results, with flights to Israel and Jordan both paused.

The relative containment of the conflict may temper at least some of those concerns. And while three currency devaluations since early 2022 have halved the Egyptian pound’s value and fueled record inflation in the Arab nation of 105 million people, they’ve also made visiting its pyramids and Red Sea resorts a bargain for those with foreign exchange.

Egyptian tourism revenue hit a record $13.6 billion in the financial year that ended in July, according to state media. That’s been boosted by a focus on higher-spending tourists and solid visitor numbers from Germany and Russia, while new budget routes by the likes of Wizz Air Holdings Plc to Cairo are helping make it a more attractive destination for short city breaks, Issa said.

Chinese arrivals are still “far below what is possible” and Egypt is working on new airline routes and hotel investments to serve “this huge potential pent-up demand,” the minister said. He cited a target of 1 million Chinese tourists between now and 2028.

While Red Sea cities of Sharm El-Sheikh and Hurghada remain the focus for foreign vacationers, the northwestern Mediterranean coast — a location preferred by summering Egyptians that’s home to some of its largest golden-sand beaches — is gradually seeing more interest. Authorities are working to increase footfall at the region’s major airports, including at El Alamein, Issa said.

Issa said Egypt’s tourism and finance ministries are proposing two key incentives for hotel-builders: a rebate in Egyptian pounds for funding costs of projects that’ll be finished by the end of 2025, and allowing a tax holiday on as much as 55% of their capital expenditure.

“We’re going to seek the approval of the cabinet over the coming couple of weeks” and should be able to announce the incentives “before the end of December,” he said.

--With assistance from Leen Al-Rashdan.