El Mersa is to be incorporated in Cairo as a shareholding company under investment law no. 8 with the objective of developing an Eco-Resort in the southern Red Sea coast of Egypt.  Based on the concept of Eco-tourism, which is “responsible travel to natural areas that conserves the environment and benefits the local people”, the eco-resort will be environmentally designed and built to reflect the cultural and natural settings of the area.  With a capacity of 20 bungalows and 60 upscale cottages, the eco-resort will have a scuba diving center, marina and private beach; a lounge, marketplace, health oriented restaurants, fruit bar, as well as an educational and research center that builds and installs artificial coral reefs.

El Mersa Eco-Resort will primarily target European environmental travelers known as eco-tourists.  This market niche widely exists in the European scuba diving community, which is estimated to posses around 3.5 million divers.  Research suggests that the majority of this target market is in the 31 – 45 age groups with white collar jobs and an average income of US$ 54,000.  We believe an opportunity exists in the eco-tourism industry for four main reasons:

o       The natural attractions of the southern Red Sea region.

o       Changing trends in the tourism industry

o       Unexploited niche in the Egyptian tourism market

o       Inefficiency of competitors

As a result of these conditions, there is a unique opportunity to provide high quality hospitality services with affordable prices to eco-tourists.

The resort will differentiate itself from competition by providing a comfortable yet environmental experience in a nature based setting for eco-tourists who are willing to pay a premium to satisfy their high environmental values and cultural curiosity. El Mersa’s services will go far beyond the ones offered by the competition. Existing competitors claim their environmental image without applying eco-tourism guidelines and therefore most of their customers are not real eco-tourists but price sensitive scuba divers and “sun and fun” vacationers looking for basic accommodation and diving services.  

To develop and communicate a unique brand image that differentiates us from competition, the resort will posses a set of resources and capabilities that fit together to create a differential advantage as explained hereunder: 


o       Environmental management:  by receiving an ISO 14001 certificate we will be the first in the Egyptian hospitality industry to be recognized by an international accreditation body as an environmental hotel.  This will give us credibility in our target market whose environmental conscience influences their accommodation decision.

o       The adapt a reef ball program: The resort will be the first in Egypt to provide the artificial coral reef installation experience, which sets the stage for paying back to Mother Nature.  This service will be highly valued by environment lovers and government agencies.  

o       The geographical location: of the resort is a sustainable competitive advantage.  The resort will be located in one of the few untouched diving sites of the world. In addition to the marine attractions, the area is approximate to the ancient cities of Luxor and Aswan, which is of great value for travelers who want to combine nature and historical tourism

o       The marketplace: will be the first amenity in an Egyptian hotel that reflects the Egyptian rural village in design, architecture and atmosphere. The market place will invite local artists to create and exhibit their arts and crafts; camel wool garments, clay products, and handmade rugs; local jewelry and accessories, traditional food and beverages.  The relaxed and genuine atmosphere will encourage contact between the Mersa Alam local community and the guest creating a unique vacation for the later while economically benefiting the former.

o       Service: Employees are another competitive advantage for El Mersa.  Only a few international hotel chains, which do not compete in the eco-tourism market, provide employees with training and motivation like El Mersa will do.  Unlike El Mersa, which will be managed by an independent professional management company, competing resorts are managed by their owners whose experience in hotel management is minimal.  Most of the owners are nature lovers who happen to bump into a business opportunity.

o       Environmental design and architecture: The authentic green design and construction of the resort will add value to our brand image. This is a sustainable advantage that existing resorts can never imitate unless they decide to demolish and reconstruct their buildings!

o       Cost management: “Doing more with less” by implementing the latest environmental designs and technologies will lower our breakeven point and provide the Resort a cost advantage that supports our operations during international crisis like September 11 attacks.

The total market size for eco-tourism in 1998 was 45 million international arrivals worldwide and is expected to reach 70 million arrivals by the year 2010.  In Egypt, nature related tourism in South Sinai and the Red Sea coast represented 38 percent of the 5.5 million tourist arrivals in Egypt from which 185,000 arrivals materialized in the new tourism destination of Mersa Alam.

In the business plan we have applied three scenarios in our sales forecasts – conservative, optimistic, and pessimistic with an average double room rate of 32 dollars.  According to the conservative scenario, the Resort’s Year 1 projected occupancy is 55 percent, with $880,000 in sales.  Sales will increase steadily afterward to reach $1 million in Year 2 and $1.4 million in Year 3.  This represents a conservative 1.07 percent market share of Mersa Alam projected arrivals.  The Resort’s break-even volume will be 10,000 nights, which will be achieved in the first year of operation under the three scenarios.  The Cost of Goods Sold/Sales is typically at a low level of 25% due the nature of the business. With these figures, the company can achieve a net profit of $200,000 in Year 1 and reach $500,000 by Year 3.

The conservative scenario, which is the most probable forecast, showed a 26 percent internal rate of return (IRR) and Net Present Value of $ 274,315.

Based on exhaustive research into the industry, the product and the market we believe that the company requires a start up cost of $1.2 million.  The company is planning to issue shares for $600,000 while the remaining amount will be attained from debt financing.