Madinaty Master Plan - Talaat Moustafa Group

affect Four Seasons or its brand generally may result in a material adverse effect on TMG’s business and thefinancial condition and results of operations.TMG’s objectives may conflict from time to time with the objectives of the Four Seasons managementcompany, which may adversely impact the operation and profitability of a hotel.Four Seasons, the hotel management company that manages TMG’s operational hotel properties, and its affiliateshave non-exclusive arrangements with TMG and own and/or operate properties other than TMG’s properties,currently including one other Four Seasons-branded hotel in Egypt not owned by TMG. Although at presentManagement does not believe that the management of this hotel being Four Seasons is competitivelydisadvantageous to the Four Seasons hotels owned by TMG, in the future Four Seasons may have differentinterests than TMG with respect to short-term or long-term goals and objectives, including interests relating to theFour Seasons brand. Such differences may be significant depending upon many factors, including the remainingterm of its management agreements, trade area restrictions with respect to competition by the hotel managementcompany or its affiliates or differing policies, procedures or practices. Any of these factors may adversely impactthe operation and profitability of a hotel, which could harm TMG’s business and the financial condition and resultsof operations.The bankruptcy or insolvency of a hotel management company may adversely affect the operation of certainhotels and impact TMG’s ability to obtain revenue generated by those hotels.All revenue generated at TMG’s hotels, including credit card receivables, is deposited by the payors directly intoaccounts maintained and controlled by the operating company that owns the hotel. However, in the event of abankruptcy or insolvency involving a hotel management company, there is a risk that the payment of operating andother expenses for the relevant hotels and payment of revenue to these accounts may be delayed or otherwiseimpaired. In addition, many services such as international sales, maintenance of the centralised reservation systemand other similar items are performed for TMG’s hotel properties on a centralised basis by hotel managementcompanies. The bankruptcy or insolvency of a hotel management company may significantly impair its ability todeliver such centralised services, which could significantly affect the occupancy rates at the hotels managed by thehotel management company, and, in turn, result in a material adverse effect on TMG’s business and financialcondition and results of operations.Significant competition in Egypt and other markets in which TMG’s hotels may operate in the future mayhave a material adverse effect on its business, financial condition and results of operations.TMG’s hotels compete on the basis of location, room rates, quality of property, service and amenities, reputation,recognition and reservations systems, among many other factors. While currently in Egypt there is limited competitionin the first class and luxury hotel market segments in which TMG operates and proposes to operate, it is possible that inthe future competitors in the first class and luxury hotel market segments will emerge. In addition, the State hasrecently enacted legislation targeted at increasing the number of hotel rooms in Egypt and Egypt’s tourism revenuesgenerally, and as a result new first class and luxury hotels may be constructed in areas in which TMG’s properties arelocated, without corresponding increases in demand for hotel rooms in these locations. This competition and/or newsupply could reduce occupancy rates and ADR at TMG’s hotels, which would have a material adverse effect onTMG’s hotel business and financial condition and results of operations related thereto. Over-building in the hotelindustry and the possibility that governments may relax zoning and building ordinances may increase the number ofrooms available and may decrease occupancy and room rates. TMG also faces competition from properties that aremanaged by internationally recognised hotel brands with which TMG is not associated. New or existing competitorscould significantly lower rates or offer greater conveniences, services or amenities or significantly expand, improve orintroduce new facilities in markets in which TMG’s hotels compete. In addition, the Egyptian tourist industry alsofaces regional competition from Turkey, Greece, Cyprus and other similar destinations whose governments are aimingto increase levels of tourists visiting their countries. TMG’s performance in part depends on the performance of theEgyptian tourism industry generally vis-à-vis these other countries. See “Description of TMG — Competition”.TMG’s market position will depend on its ability to anticipate and respond to various competitive factors affectingthe industry, including new hotels and resorts, the offering of new amenities and services in its markets, pricingstrategies by competitors and changes in consumer demographics and preferences and economic, political andsocial conditions in Egypt or countries in which TMG may operate in the future. Any failure by TMG to competeeffectively could have a material adverse effect on TMG’s business and financial condition and results ofoperations.15