| With foreigners spooked by revolutions in the region, Egypt’s peak tourist season has become a valley, jeopardizing the livelihoods of millions. Domestic tourism can’t save the economy, but it might save some jobs. By Nadine El Sayed |
| If among all the revolution-related political, economic and human drama going on at the moment, you think tourism — or any form of leisure really — seems irrelevant, think again.An industry that employs over 2.8 million Egyptians, according to Adla Ragab, economic advisor to the minister of tourism, is losing an estimated $862 million monthly. These losses are in addition to the $1,160 billion it has already lost over the first month following January 28, when violence broke out and the police withdrew from the streets. This means that over 12.6 percent of the workforce might be kicked to the curb.Now taxi drivers who stood in Tahrir Square calling for their right to democracy are having trouble making their monthly car payments. Hotel housekeepers are in danger of being laid off. Stable owners near the Pyramids are contemplating selling their horses.
Ragab says 1.6 million employees work with the tourism sector indirectly, including taxi drivers, felluca owners, employees at coffee shops and restaurants and many more. Even tour guides, often freelancers employed by tour operators, rely mainly on tips for the bulk of their income. Many of these people are self-employed, meaning that even a relatively small drop in tourism can have tremendous financial impact.
According to Ragab, the driver of a horse-drawn carriage normally makes a net profit of around LE 20 per day. This amount has fallen drastically to a mere LE 4 per day after January 25, an amount that is no where near enough to feed a family of four.
While history says foreigners will return, analysts do not agree on when the industry will fully recover. Those in the tourism industry feel that a surge in domestic tourism can help this key sector — and the people it employs — weather the storm until the foreign tourists return. The irony is that few Egyptians take full advantage of the cultural, natural and leisure activities the nation has to offer; if we’re not on the same old North Coast or Sharm El-Sheikh beach, we’re probably jetting of to a more ‘exotic’ destination outside the country. The fault lies not just with us, insiders say, but with a system that offers few incentives to explore at home.
Trying to Stay Afloat
For those in the tourist industry, the political instability resulting from the revolution could not have come at a worse time. Winter is peak season for non-Arab tourists, culminating around March and April with Easter and school vacations.
In the weeks following January 28, the country emptied of tourists, with the Ministry of Tourism estimating that more than 1 million tourists fled the country. Those planning visits quickly changed their minds. Yehia Sherif, operations manager at a local travel agency, says that over 90 percent of his company’s reservations through December 2011 were cancelled. He requested that his company not be named as he was not authorized to speak to media.
The Pyramids, once bustling with dozens of nationalities, were deserted. The famous Khan El-Khalili bazaar was a ghost town, with early curfews keeping even the locals away. Hotels in Sharm El-Sheikh and Hurghada, normally packed with sun-loving tourists spending their winter break by the pristine beaches, were actually closed for most of February.
In 2010, Egypt hosted around 15 million tourists, generating $13.7 billion — accounting for about six percent of the GDP. Not two months into 2011, it was facing not only political unrest, but also a serious threat to one if its most vibrant sectors. Amr El Ezaby, chairman of the Ministry of Tourism’s Egyptian Tourist Authority (ETA), says that in February, tourism revenues fell 80 percent but started to pick up again in March.
Patrick Kamel, managing director of the President Hotel in Cairo and shareholder in TravcoTels’ Nile cruises and several other tourism agencies and hotels, describes the situation as disastrous. He explains that until February 11, every branch of his business — including hotels, pastry shops, Nile cruises and restaurants — was completely on hold.
The President Hotel, a private Egyptian-owned brand, incurred over LE 600,000 in losses for the month of February — a substantial figure for a small 150-room, three-star hotel.
“The occupancy of the hotel in Cairo was no more than 6 percent until March,” Kamel explains. “Now we are operating at a 40 percent occupancy while this time of the year we usually operate at 95 percent.” But the situation for his other hotels is worse: “We gave all our employees time off until now in Hurghada, and the Nile cruises are still not operating, [nor] are the floating hotels in Luxor and Aswan.”
Emad Farid, the regional director of sales and marketing of Pyramisa Resort and Hotels, says his company is facing a similar situation.
Another Egyptian brand, Pyramisa operates five-star hotels, casinos and cruises in Cairo, Luxor, Aswan, Sharm El-Sheikh, Hurghada and Sahl Hashish. Farid says the hotels were almost empty during the revolution; by mid-March business had picked up with the Red Sea hotels reaching about 20 percent occupancy.
With hotels operating at less than 40 percent capacity at best, it becomes a question of how much longer investors can tolerate the current situation. Kamel has already started tapping into last year’s profits just to pay his employees.
“I can sustain this situation for another 60 days at maximum,” he estimates. “After that, I won’t shut down, but I will start laying off employees, and then we will be facing a hunger revolution.” The President Hotel employs 200 people, and Kamel says he is trying to keep them all on payroll as long as possible.
“I don’t think bigger hotels can resist this another month,” Kamel speculates. “We will soon see bankruptcies, or the government will have to give them loans.
”Wish You Were Here
The question of when foreign tourists will come back is open for debate. Hassan Afifi, an institutional equity sales executive at Beltone Financial and a tourism expert, is rather optimistic. He predicts tourism will recover during the summer season, but with lower numbers; he believes the industry will see a full recovery by October. The rest of the winter season is a write-off, he feels, because of the drop in Russian arrivals, which accounted for almost 25 percent of European tourists in 2010. At press time, the country still had a warning up, discouraging its citizens from traveling to Egypt.
Afifi points to historical trends to support his theory: A year after the attacks on tourists in Luxor in 1997, tourists were back in greater numbers than before.
The ETA’s El Ezaby also believes the effect is only short term, predicting that 90 percent of tourists will be back by October and November. On the longer term, he explains, tourism will be even stronger than before. “There is a difference between going to visit a stable and democratic country that shares the same values [as the tourists’ home country] and [visiting] a dictatorship,” says El Ezaby.
Sherif shares the same long-term view but is not as optimistic about a summer boom. While leisure tourism might pick up after Ramadan, he notes that no Arabs are going to come before the curfew is lifted. “The curfew doesn’t really suit their, or many others’, lifestyle, and it will drive tourists away.
Within his travel agency, Sherif works with corporate tourism. He notes that this particular sector will take even longer to recover, since it is concentrated in Cairo where protests are still taking place.
The Tourism Ministry advisor Ragab notes that security is more important for tourists than political unrest, and they will not return until they feel it is safe. Kamel believes it is impossible for tourism to recover before at least a year, given the ongoing protests across Egypt and the unrest in the region in general.
Uncharted Gold Mine
For years, the Ministry of Tourism and the industry as a whole has focused almost entirely on foreigners, ignoring the 80 million potential tourists who call Egypt home.
According to Ragab, only about 23 percent of the population travel inside the country, with revenues from domestic tourism accounting for around 19 percent of total tourism.
Kamel explains that income coming from domestic tourism pales in comparison to that coming from foreigners: “In Cairo, Egyptians represent about 20 to 25 percent of the occupancy; one to five percent for the boats in Luxor and Aswan and about 10 to 15 percent in Hurghada.”
When Egyptians do travel, they spend less money. Ragab says that Egyptians spend on average less than $25 a night, compared to $85 per night spent by foreign tourists. Much of that difference can be accounted for by residency discounts at hotels and national tourist sites.
El Ezaby argues that domestic tourism isn’t weak, just seasonal and concentrated in certain areas, especially the North Coast and Marsa Matruh. Hotel receipts don’t reflect these figures, he adds, because most Egyptians traveling stay in homes they either own or rent for the summer. “In my opinion, domestic tourism this season will not be affected much by the crisis as it is mainly concentrated in summer,” he says, adding that he believes will have improve by then.
Even though Egyptians spend less on average than foreign tourists do, given how only 23 percent of the population does travel, the potential is large for a boom in that sector. If the tourism industry manages to attract only one tenth of the 65 million Egyptians who do not engage in local tourism, that would mean more than 6 million a year, enough to sustain the industry through the foreign tourist slump and keep people employed.
Given the volatility of inbound tourism, Egypt cannot afford to ignore domestic tourism. Political unrest is not the only reason foreigners stop traveling: vacations can also be curtailed because of economic recession; major terror attacks, even outside Egypt; and natural disasters (think volcanos or tsunamis). In the long term, if Egyptians get in the habit of spending their leisure dollars at home, the tourism sector has a buffer against international shocks.
Organize a Trip, Help Your Economy
There was a time when company benefits meant more than financial bonuses and health insurance, assuming they existed at all. There was also a time when teaching students about the history of their country involved more than textbooks and classroom lectures.
“The first time I stayed at a hotel was on a trip with my father [that his work organized and subsidized],” recalls El Ezaby. He calls upon businesses, schools and universities to organize trips to different destinations in Egypt and to encourage people to actually check out the monuments the world is talking about.
El Ezaby also argues that institutions, companies and government entities need to go back to supporting people’s right to enjoy their free time, noting, “One of the most important principles the revolution is calling for are human rights, […] a part of this is [a citizen’s] leisure and his right to enjoy his free time.”
Sponsored recreational trips should be an important part of every company, institution and educational facility’s budget, experts believe. They do not necessarily need to involve five-stars facilities — there are plenty of moderately priced options in the tourism sector. Sponsored trips can help citizens take pride in their heritage, introduce them to new destinations and capitalize on the current wave of patriotism sweeping the country.
El Ezaby believes a consolidated media effort is needed to promote domestic tourism.
It is also essential to identify and develop the most popular domestic tourism spots, as well as open up other less-traveled areas. Ragab explains that even though cities like Port Said and Fayoum are similar to popular spots like Gamassa and Ras El-Bar (Mediterranean retreats near Damietta) people usually shy away from them due to the lack of affordable transportation and lodging. The destinations receive less than 3 percent of domestic tourism. She says it is now essential to give investors incentives to build affordable, simple and clean hotels and affordable transportation in those areas that cater to the lower and middle classes.
Experts believe the tourism industry also needs to consolidate its efforts, guided by the Ministry of Tourism, to promote better packages, and that includes the resilient airline companies. Kamel believes hotels can’t decrease their rates further, as that will affect their quality, but they can work with airlines to offer travel packages. “You can’t pay LE 500 for three nights in Hurghada and still have to pay LE 850 for the airline ticket, which was the original price before the revolution,” he argues. “Airlines have to lower their fares too.”
Sherif agrees, adding that the hotel quality is already suffering from the cost cutting and the smaller staff. The tourism analyst explains, “Domestic tourism didn’t pick up as we thought it would with the lower rates offered because flights are still expensive.”
Even though much of the police forces have started returning to work, there are still lingering fears about the security of the streets, to say nothing of the remote stretches of highways. Many Egyptians and foreign residents view flying as the only available secure option at the moment.
“We need security back to the streets and for people, in Egypt and abroad, to see that things are stable. We are all afraid to even go from Zamalek to Sixth of October now, let alone travel on the highways,” argues Kamel.
Farid agrees, adding that the provisional government cannot afford to delay measures to stabilize the situation and restore security.
Even if you postpone trips to more remote sites, there are still plenty of destinations ready to receive tourists, and there is no better time to go see them. Our national heritage and monuments, world-class resorts, pristine nature, and some of the best diving sites in world are tempting all on their own. The fact that you’ll be helping people keep their jobs and feed their families is an added bonus. et
BY THE NUMBERS
• 2.8 million people work directly or indirectly in tourism.
• 12.6 percent of the workforce is directly or indirectly employed in tourism.
• Egypt hosted over 14 million tourists in 2010.
• Tourism brought in over LE 104 billion in 2009.
• Domestic tourism brought in LE 13.4 billion in 2009.
• Domestic tourism accounts for 19 percent of total tourism revenues in Egypt.
SNAPSHOT OF DOMESTIC TOURISM
• Only 23 percent of Egyptians travel for leisure inside Egypt.
• Of those who travel, 50 percent do so to visit family and friends and about 15 percent do so for entertainment.
• Leisure expenditure in Egypt in 2009 represented only 1 percent of a family’s total income.
• Less than 30 percent travel by private cars and close to 1 percent by planes.
• Over 71 percent spend their leisure time at the beach, while less than 40 percent spend it visiting museums and cinemas.
WHERE DO WE GO?
1. Alexandria (receiving 36 percent of all domestic tourists)
2. Gamassa, Baltim and Ras El-Bar (26 percent)
3. Marsa Matruh and the North Coast (17 percent)
4. Fayed, Ismailia, Arish and Ras Sedr (10 percent)
5. Ain Sokhna, Hurghada and Sharm El-Sheikh (6 percent)
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