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Egypt: Tourism industry making a comeback

Wednesday, 02 December 2009 20:31

Tourism_in_Egypt_-_Opportunities_for_investors

After a rocky start to the year, tourism, the Egyptian economy's biggest foreign currency earner, staged a comeback over the summer and fall, revealing that the global slowdown's impact on the sector has turned out to be relatively moderate.

The Ministry of Tourism announced in October that Egypt saw a 6.4% drop in tourism revenue in the first nine months of 2009. The number of tourist arrivals fell 5.4% in the same period, indicating that tourists had reduced their vacation spending during the crisis.

Though showing an overall decline, these figures do demonstrate a significant recovery from what was a difficult first quarter. In January, investment bank EFG-Hermes reported hotel occupancy rates of only 40-45% in Egypt, resulting in the widespread layoffs of workers. Its forecast that tourist arrivals would shrink 18% in 2009, however, has not proved true.

"We started the year down 17% and as we have been going along, the figures have lessened," said the minister of tourism, Zoheir Garranah. "I think we'll see full recovery by the third quarter of 2010." His prediction was right: in November, the ministry announced Egypt had received 10.9m tourists this year, only a 4.5% drop over the same period in 2008.

Low occupancy levels at the start of the year were partially attributable to the addition of 25,000 new hotel rooms to the market. By the second quarter however, figures had stabilised and hotel owners in beach hotspots Hurghada and Sharm El Sheikh reported 80% occupancy. At the end of the 2008/09 fiscal year in June, tourism receipts were $10.5bn, down a relatively mild 3.1% year-on-year, according to the Central Bank.

Growth of the tourism industry has been robust in recent years - in 2008, revenues grew 23% to $11.6bn, comprising 11% of Egypt's GDP. Tourist arrivals rose dramatically before the crisis to around 19% to 12.8m in 2008. The Ministry of Tourism targets 14m visitors by 2011, which looks possible as Egypt returns to its pre-crisis levels. In November, ministry spokeswoman Omayma El Husseini predicted that the total number of visitors for 2009 would drop around 4% to 12.3m.

The uptick in tourism in the third quarter corresponds with the economy's overall improvement. "We feel that the whole crisis is bottoming out. We have seen indicators in tourism, in the Suez Canal and otherwise to show that the last few months there is - although a small but very distinct - change of direction in all indicators," Prime Minister Ahmed Nazif said at the Reuters Middle East Investment Summit in October. He also predicted that following 4.7% growth in the 2008/09 fiscal year, the economy would return to its pre-crisis rate, 7%, within two years.

During the crisis, the government lent a helping hand to the tourism industry, which employs around a tenth of the population, by increasing the budgets of the Ministry of Tourism and the Egyptian Tourist Authority, which launched advertising campaigns aimed at strategic markets. With 70% of Egypt's tourists arriving from Europe, the tourism bodies have focused on marketing the country's closeness and affordability. Low-cost carrier Air Arabia announced the addition of Egypt as a third Middle Eastern hub by the end of 2009, which should bolster tourism numbers in the coming years.

The numbers are not in yet, but 2009 should see a change in the demographic make-up of tourists to Egypt. Travellers from Russia have surged in recent years, accounting for a quarter of visitors to Sharm El Sheikh in 2008, but their market was one of the most severely affected in the financial crisis due to the decline of the rouble. On the other hand, tourism from Arab countries has been on a steady ascent and, as a demographic, they spend more money on average on luxury hotels and restaurants. This activity in the high-end segment has become increasingly vital, offsetting the damages to the tourism industry seen at the start of the year.

The recovery of Egyptian tourism even before the end to the global crisis is a strong testament to the industry's long-term prospects. A restructuring of the demographic model may even prove beneficial, as Egypt positions itself as less of a budget destination and more of a high-end player.

Global Arab Network

This article is published in partnership with Oxford Business Group

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