With political instability, security breaches and the recent loss of the EgyptAir flight, it’s been a turbulent few years for Egypt. Hotel News ME analyses the country’s infrastructure and upcoming hotel supply to unveil how the region will once again bounce back and restore its flourishing tourism industry to its former glory.
The once thriving tourism sector in Egypt has been hit in recent years by a combination of political unrest and terrorism since the 2011 revolution, decimating an industry crucial for job creation and the provision of foreign currency in a country that is heavily reliant on imports.
Tourism arrivals collapsed in the wake of the Metrojet disaster, when Russia, a major source market for tourism, halted all flights to and from Egyptian airports until it was satisfied improvements to security measures had been implemented.
But so far, Russian travellers to the region have not returned, nor have British travel companies, which were the next largest group to offer package holidays in the Sinai town of Sharm el-Sheikh, the country’s most popular beach resort.
Tourism arrivals in March 2016, the latest month for which official figures are available have dropped 42% compared with the same month last year, with a total of 440,700 visitors, the fifth consecutive month that tourism has declined.
Further adding the decline in tourist numbers to the region, the recent loss of EgyptAir Flight, MS804 over the Mediterranean in May 2016 marks another devastating blow to Egypt’s already struggling travel industry. A series of smaller safety incidents including an attack on a tour bus party near the Giza pyramids and an attack close to a hotel in the Red Sea resort of Hurghada all further contribute to the country’s declining tourist numbers.
Before the unfolding of recent events, Egyptian tourism officials had expressed hope that the sector might be on the brink of recovery, but in the first quarter of 2016, official reports from the tourism authority in Egypt detailed that 1.2 million tourists visited Egypt, down from 2.2 million in the same period last year and tourism revenues fell to $500m from $1.5bn. Yet the shortcomings haven’t stopped there, with many hotels in the region closing and reports stating that up to 50 Red Sea dive operators have also ceased business. Before the airline crash, London based consultancy firm, Capital Economics estimated that tourist’s revenue would drop by $3.5bn in 2016, yet with recent developments, that figure could well increase as pressure on the Egyptian pound mounts, the central bank will most likely need to devalue once again. With tourism receipts drying up and foreign investment stalling, the government has been battling to shore up the Egyptian pound, which has soared on the black market, promoting complains from importers and manufacturers unable to fund inputs from abroad. In March 2016, the central bank also devalued the currency by approximately 13% whilst the US dollar continues to rise.
Faced with the absence of western tourists, Egypt has been trying to attract new markets for business from countries as diverse as China, Malaysia and Georgia with the government spearheading active tourism campaigns in these countries to make up the shortfall.
Making a comeback
Egypt’s tourism market is well-established, as the country has long been a popular destination for travellers from European markets, particularly in the package holiday sector, and as a result, the hotel and accommodation industry is extremely well-developed in the Red Sea coastal areas and in the capital Cairo. As well as beach tourism, Egypt also offers an enormous range of historical and cultural attractions, with seven UNESCO World Heritage Sites, numerous museums and other cultural and religious sites. The many attractions, well-developed infrastructure and supportive government have all helped to create a highly resilient tourism industry, which has in previous years successfully returned to growth after periods of turmoil and decline.
When Egypt’s political situation begins to stabilise once more, and more countries relax travel restrictions to major tourist areas across the country, the region has the potential to once again return to a period of growth. Increasing consumer spending power in emerging markets such as Poland, combined with strong marketing promotions have re-energised key source markets such as the UAE, Kuwait and Turkey, leading to increased inbound arrivals and the corresponding increase in receipts. It must, however, be noted that Egypt’s recovery remains fragile; and any further political unrest or terrorist incident is likely to negatively affect this increase, leaving the industry a risky place for investment compared to more stable countries in the area. Transport services are anticipated to experience strong levels of growth between 2016 and 2019, reaching $0.7bn in 2019, up from $0.5bn in 2015 according to BMI Research.