Economy & Trade, Financial Crisis, Headlines, Middle East & North Africa

EGYPT: Pyramids may Rise Above the Recession

Cam McGrath

CAIRO, Mar 24 2009 (IPS) - When tourism officials met at the start of the year to discuss the impact of the global financial crisis on Egypt’s tourism industry, the prognosis looked bleak. But now, three months into 2009, a better picture is emerging – and some experts believe the battened-down sector can weather the storm.

“Everyone has taken up defensive positions by letting staff go and lowering prices,” said Mohamed Talaat, a Cairo-based travel consultant. “Tourism is definitely down. If the recession is short we will manage the losses, but if it lasts too long we could all be out of jobs.”

Tourism is crucial to the health of the Egyptian economy, accounting for about 7 percent of GDP and providing employment to 12.6 percent of the workforce. The sector experienced strong growth in 2008 with a record 12.8 billion tourist arrivals, a 15 percent increase over the previous year. As the financial meltdown weakened the economies and devalued the currencies of Egypt’s top inbound tourist markets – Russia, Britain, Germany and Italy – many feared the boom would soon turn to a bust.

“We were really worried,” said Ahmed El-Nahas, chairman of the Egyptian Tourism Federation (ETF), an umbrella organisation representing thousands of local tourism companies. “But it looks like our drop will not be as big as originally anticipated. We looked at the revenue figures between January and March and they’re down only about 12 percent below last year, which was an exceptional year.”

Hardest hit have been the Red Sea resort cities Hurghada and Sharm El- Shiekh, where hotels reported occupancy rates down by up to 40 percent in recent months, though improving in March. Hotels have reduced room rates or added pricing incentives, such as long-stay guests receive extra nights free. Many have also laid off temporary workers, who make up more than a quarter of the workforce.

Mohamed Mustafa, reservations supervisor at the Radisson SAS Resort in Sharm El-Sheikh, said the hotel trimmed its room prices after the occupancy rate fell 20 percent compared to last year. He argued that while a small price reduction could stimulate business, deep discounts would only result in a price war and long-term losses. “Some hotels have reduced rates by 50 percent, but in the end this is not a sustainable strategy,” he said. “Once you slash rates it is very difficult to bring them up, and it will be impossible for these hotels to return to their 2008 rates before 2011.”

Tourism officials have advised hoteliers against discounting. “We’re telling hotels not to drop their prices, as all that does is cost them money,” said ETF’s El-Nahas. “Instead they should offer better service and extra benefits – basically, pamper their guests. People are much happier to get proper service than a 10 percent discount on their room rate.”

Despite an improvement in Egypt’s tourist traffic in March, analysts warn that the financial crisis is far from over. The World Travel and Tourism Council (WTTC) predicts that the global tourism industry will suffer its sharpest contraction in decades this year with 10 million jobs at risk. It expects a 3.6 percent fall in worldwide tourism in 2009, and has warned tourism companies to be prepared for a sustained downturn.

The Egyptian government recently introduced measures aimed at mitigating the impact of the global recession on companies working in the tourism sector. The tourism ministry agreed to lower docking fees for floating hotels, and exempt hotels from tourist promotion fees. The civil aviation ministry reduced take-off and landing fees for charter flights. It also agreed to cover the cost of empty seats on charter flights feeding selected Egyptian destinations – an incentive it has used before successfully to encourage charter airlines to maintain operations during low tourism periods.

While the measures have helped tourism companies to preserve their operating capacity, Egypt’s location may be helping to offset losses in tourist volume. European travellers, who account for nearly 80 percent of Egypt’s tourist arrivals, are reportedly forgoing winter travel packages to Asian and African resorts in favour of more affordable destinations closer to home. “Egypt is just three hours (flying time) from most European capitals, compared to 10 to 15 hours to the Far East,” said El-Nahas. “The perception among Europeans is that Egypt is not an expensive destination, and we have warm weather during the winter, which is important to them.”

Hatem Khafagi of the West European division at Isis Travel, one of Egypt’s largest tour operators, said bookings from some west European countries are down about 30 percent, but the overall drop has not been as severe as anticipated. The most significant change as a result of the recession is in the way Europeans are planning their vacations. “There are no pre-bookings as usual. Instead, people are buying last-minute fares,” he said.

The real test for Egypt will come in the summer, when the recession has had time to dig in and the weather improves in rival markets such as Spain and Turkey. “We have no real competitors in the Mediterranean zone during the winter, but come summer we must compete with other leisure destinations,” said El-Nahas. “It could be a tough battle this year.”

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