Mohamed, 24, studied tourism and graduated two years ago. The timing was unfortunate.
By February 2011 — during and immediately after the 25 January uprising — the number of tourist arrivals slumped to five times lower than its previous level, putting one of the most vital sectors of the economy in dire straits. An industry that is highly reflective of perceived political stability and security, its recovery has since fluctuated, a dynamic likely to continue in 2013.
Unable to find a job in his area of specialty, Mohamed had to change his career plans. Now a taxi driver in Cairo, he remains hopeful that someday he will find work in the once thriving sector.
“This is temporary. I hope I will be able to work in tourism soon,” he says.
Egypt is filled with similar stories as scores of tourism workers have been laid off in the past two years. Findings of a recent Tourism Ministry study show the sector has been losing US$267 million a week since the onset of the 25 January uprising, leading to sizable revenue losses for businesses that have had to downsize or halt operations.
Experts in the sector have repeatedly sounded the alarm on the deteriorating state of one of the economy’s main revenue earners, which directly employs 4 million Egyptians and indirectly impacts 14 million, according to the Tourism Ministry.
The current situation has former Tourism Minister Mounir Fakhry Abdel Nour deeply concerned. “The impact of the revolution has been dramatic on tourist inflow and on the level of prices,” he says.
Riad Kabil, public relations manager of the Egyptian Chamber of Tourism, agrees. “The situation is very bad. The whole industry has been losing money for two years.”
Fragile recovery
While the number of tourists visiting Egypt in 2011 and 2012 is down compared to 2010, the gap is starting to get smaller.
The Ministry of Tourism announced earlier this year that almost 12 million tourists would visit Egypt in 2012 — down from 14.7 million in 2010, but up from 9.8 million in 2011.
Looking at the total number of nights tourists spent in Egypt, the gap is even thinner. According to CAPMAS, 2012 is on the way to becoming the second highest year in terms of tourist nights, just 10 percent behind 2010 for the January-October period, and up 36 percent from 2011.
Still, recovery remains fragile. The number of tourists entering the country remains closely linked to the state of security. Political unrest following President Mohamed Morsy’s 22 November constitutional declaration had an immediate effect on the number of flights arriving to Egypt, and on occupancy rates.
Experts have also questioned the accuracy of those figures, as reported by the Oxford Business Group. The Tourism Ministry admitted that these figures include refugees from Libya and Gaza who were granted access into Egypt as tourists — but their arrival in Egypt is not exactly motivated by touristic purposes.
Abdel Nour explains the main issue is not the number of tourists, but price levels. “The tourism sector had to dramatically decrease prices to maintain a certain level of occupancy. As a result, the average daily spending of tourists has been decreasing over the last two years,” he says.
Average spending has gone from $85 per day in 2010 to less than $50 today, according to ministry data.
In other words, while hotels have seen at least a 10 percent decrease in reservations this year compared to 2010, their earnings have fallen by more than 40 percent from each tourist due to discounts they’ve had to offer.
The combined effect means hotels have incurred sales declines of almost 50 percent in 2012 compared to 2010. And these figures might still underestimate the sector’s actual losses.
A new customer base
Discounted prices and political unrest in the country have meant a change in the kind of tourist coming to Egypt.
Recent figures show Eastern Europeans and Middle Eastern tourists are increasingly taking the place of the traditional Western European clientele. Russian and Polish tourists represent the bulk of the newcomers.
“We have seen many more Russians since the revolution. They now account for 40 percent of our clientele, which is as much as all the other European countries,” says Mustafa Ali, marketing manager at a mid-range Hurghada resort.
The area has always been popular with Russians, but now even more so. A tourism expert told the Oxford Business Group that Russians tend to be the first to come back to Egypt after periods of political unrest.
Despite efforts from the government to promote Egypt at European tourism fairs, Kabil says Western Europeans are scared to come back, and are waiting for a more stable environment.
The change reflects a deeper trend. The development of beach tourism along the Red Sea in the last decade had allowed Egypt to reach new markets. The 2008 global economic crisis severely impacted Western Europe, the main tourist market for the country, and highlighted Egypt’s need to expand its customer base.
Along with the decline in the average wealth of incoming tourists came the emergence of more charter flights, as well as an influx of mid- to low-price hotels in Sinai and the Red Sea, a trend which has multiplied in the last two years as reflected by the slump in tourists’ daily spending.
The low- to mid-range paying tourists focus more on the quality-to-price ratio of vacation packages, contrary to higher income tourists.
Abdel Nour warns of the consequences of shifting to a purely budget travel destination. “Egypt could be trapped in a vicious circle [where] hotels earn less, so they invest less and their service levels decrease,” he says.
The country already ranked a weak 75 out of 139 countries in the 2011 Travel and Tourism Competitiveness Report by the World Economic Forum. The report points to security, tourism infrastructure and staff education and training as major flaws in the local industry.
Significant investments are required in hotel infrastructure, including educating the work force and attracting higher-income tourists. But this leads back to Egypt’s attractiveness as an investment destination.
Due to dwindling tourism revenues and foreign direct investments, foreign reserves have fallen to around $15 billion from $36 billion in 2010, as the Central Bank has used most of the cash to prop up the deteriorating Egyptian pound. According to Central Bank figures, investment in the tourism sector is down 3 percent in 2011/12.
Key destinations
Experts say that for Egypt to get out of the budget destination category, it has to up the quality of services, as well as diversify the products on offer and promote cultural tourism. “In Cairo, Luxor and Aswan, most hotels are suffering. They are almost empty,” says Kabil.
Head of the Egypt Tourism Federation Elhamy al-Zayat said in July that occupancy rates were between 20 and 25 percent in Luxor and Aswan. Only 10 out of 270 floating hotels were operating. The tumultuous events since November have only pushed those figures further down.
Ahmed Moussa, owner of the Nefertiti Hotel in Luxor, says he has not seen any improvement. “2012 was slightly worse than 2011 for us. While our hotel was almost full all year long before the revolution, we’ve had around 40 percent occupancy these past two years.”
To combat the slump, he resorted to laying off 40 percent of his staff, saying: “It was very difficult, but I had no other choice.”
But Moussa is not the worst off. Many of his friends’ hotels have been totally empty, while others have even closed in the last months.
Tourist inflow to Luxor represents 30 percent of what it was in 2010, he says. “There are no more flights from Italy, Spain or Belgium, and fewer from France and England.”
Beach tourism accounts for approximately 80 percent of the total market, according to the Tourism Ministry. The fate of the whole sector lies in the Red Sea and Sinai.
While Sinai has suffered from violent attacks in July and an ensuing increase in military operations, the Red Sea area has been calm since the uprising. Still, occupancy rates in Sharm El-Sheikh and Hurghada were 45 percent and 50 percent, respectively, according to the Tourism Federation.
Ali says the occupancy rate at his Hurghada hotel was 65 percent in 2012, up from 45 percent in 2011, but down from 90 percent in 2010. Meanwhile, his prices were down 30 percent in 2011 and 15 percent in 2012.
Typically a high season for tourists, cancellations were numerous during the Christmas and New Year’s holidays. “Normally, it is impossible to book a hotel room or a cruise months before Christmas and New Year’s,” says Kabil, “but this year, everything is empty.”
While Morsy had put tourism recovery at the top of his priorities for his first 100 days in office, his political maneuvers and the reactions they provoke have harmed the sector, says Abdel Nour. “I was optimistic when I left my position in July, but the catastrophic decisions Morsy has taken since then fired up the streets, and now tourists are scared to come to Egypt.”
However, he remains fully confident of Egyptian tourism’s long-term potential. “Egypt is a country that fascinates the West and the East. It is easy to sell worldwide. No other country has such cultural, historical and natural treasures,” he says.
And despite the tourism crisis in Luxor, Moussa is also optimistic. “Luxor is like a motor that could stall at any time, but it will never die,” he says.
This piece appears in Egypt Independent's weekly print edition.
