History of Tourism in Egypt from 2010-2017, Challenges and Future Opportunities

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In this issue we discuss the following:

1. What is Egypt’s dollar resources?

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2. Tourism figures in Egypt before the revolution

3. Egypt’s position among World countries and form of competition in the region

4. Tourism figures in Egypt after the revolution

5. The results of the Russian Metrojet airliner crash in the Sinai Peninsula

6. The beginning of recovery and the return of hopes

7. Reasons for growth in numbers and revenues

8. Diversification of tourism income sources

9. The latest developments in the tourism sector in Egypt

Egypt’s Dollar resources

We mean by resources, foreign currencies (represented by the Dollar) revenues attained by an economy from its various sectors. The importance of revenues in foreign currency is that; it is used to repay foreign liabilities such as debt, bonds, deposits and grants, which are usually in foreign currency and not local currency. We also use these resources to import our main needs such as wheat, fuel, gas, production inputs, etc.  Since we cannot import in Egyptian pounds so it is necessary to have sources of income in foreign currency to carry out our dealings with foreign countries.

These resources for any country usually come from specific and semi-fixed sectors: national exports + foreign investments + expatriate remittances + tourism. In Egypt we have to add to the four previous sources: The Suez Canal revenues. With these five sources we can identify the dollars flow into Egypt, and from here we will tackle changes and developments experienced by the tourism sector as a predominant dollar resource for the Egyptian state.

First: The history of the revenues and statistics of tourism in Egypt and the world

According to the World Tourism Organization (WTO), the world’s countries are making $ 1.4 trillion from tourism annually.

Second: Tourism figures in Egypt before the revolution

Egypt’s share until 2010 (just before the revolution) was approximately $13.5 billion

In terms of numbers, global tourism is estimated at about 1.2 billion foreign tourists traveling around the globe

The share of Egypt until 2010 – just before the revolution was approaching 14 million tourists annually

Till 2010, there were about 45 million tourists visiting Africa annually. Egypt accounted for one-third of this figure alone, according to the World Tourism Organization (WTO) report at the time. With the North African countries, excluding Egypt, receiving 3 million tourists annually and Egypt receiving 14 million tourists annually.

The expected growth rate of the number of tourists in Egypt according to the organization before the outbreak of the revolution during the period from 1995 to 2020 was about 7.4%, exceeding the rate of growth in the Middle East and the world. Further more, Egypt was among the Top 20 tourist destinations in the world, ranking in 2010 was as follows:

1. France

2. USA

3. China

4. Spain

5. Italy

6. UK

7. Turkey

8. Germany

9. Malaysia

10. Mexico

11. Russia

12. Ukraine

13. Austria

14. Greece

15. Poland

16. Hong Kong

17. Thailand

18. Egypt

19. Canada

20. Saudi Arabia (Hajj and Umrah)

Third: Tourism figures in Egypt after the revolution

After January 25, the chaos began to spread throughout the country. Security forces withdrew accordingly security collapsed, companies were closed, and the streets were stripped out of the security elements, and the national committees spread out safeguarding their communities.

After reaching 14.7 million tourists with $13.5 billion of revenues in 2010, the figures fell to 9.5 million tourists with $9.3 billion of revenues after the revolution, a decline to about 70%, regarded as the worst tourism contraction in Egypt’s history and as if the state was at war, and we stayed with these figures almost until 2014, when figures shifted to 9.5 million tourists with $6.8 billion dollars of revenues.

There was great hope that the tourism sector would recover as political and security stability developed gradually. But the disaster of the Russian Metrojet airliner crash in the Sinai Peninsula came at the end of this disastrous year to kill hopes of a near recovery. Russia and England, two of the most important tourism markets for Egypt, announced thereafter their decision to ban flights to Egypt. Causing deterioration to the sector’s revenues. Up till 2016, the disappointing numbers continued, with figures dropping from 9.5 million tourists to less than 5.3 million. Revenue fell from $6.8 billion to less than $3.4 billion in Egypt’s second worst contraction that exceeded the 2011 contraction with a decline of almost 100% in the numbers and revenues.

The minimum amount of dollar income lost due to these disturbances from 2011 to 2017 is equivalent to $42 billion, which equivalent to 3.5 of the IMF loan.

Fourth: the emergence of hope

We began to see light at the end of the tunnel when the Egyptian political leadership and the economic team took the most important decision in the history of the Egyptian economy to liberalize the exchange rate. The weakness of the local currency had its negative and positive impact. The Negative impact, lead to increased debt cost, import cost and prices. The Positive Impact, lead to Increase in tourism revenues, investment attractiveness and export incentives.

What is the relationship between the exchange rate and tourism revenues?

The equation is simple and consists of two parts

First: Egypt is one of the cheapest countries in the world in the cost and prices of goods and services in dollars. For example, Egypt is the second cheapest country in the world Big Mac index, which means measuring the price of buying a meal from McDonald’s in different countries of the world as per prices in these countries. Egypt is the second cheapest country in the world after Ukraine. The cost of a meal in Egypt, after the liberation of the exchange, is approximately $1.7, which is 66% cheaper than its price in the United States. So if you are a tourist using dollar or any currency of the 5 major currencies, you will find that Egypt is an ideal destination because you can enjoy quality services at a low price compared to other countries. For example, the same meal in Switzerland is worth $6.7, in the US $5.8, in the UAE $3.8 and in Turkey $3.00.

Second: Egypt’s move to liberalize the exchange rate to half the Egyptian pound’s value in the exchange market, it certainly became a great low cost tourist destination, as $1 is now buying 18 pounds instead of 8.8 pounds, with a quality for those looking for extravagance as well.

The geo-strategic situations and its impact on tourism

First: We have witnessed a few weeks ago the signing of the Palestinian reconciliation agreement in Cairo. It symbolized the Egyptian success that will have a profound impact on the imposition of greater stability and security in the North Sinai region and its continued negative impact on the image of Egypt as a whole. Therefore, the wise and intelligent move towards securing our borders and its security has a direct and substantial impact on the economy, especially tourism

Second: Turkey is one of our main competitors in the Middle East tourism market, since the outbreak of the Gulf crisis, the Turkish line-up with Qatar has paved the way for the emergence of Gulf calls for Ankara’s tourist boycott, and thus Egypt is likely to benefit from this Gulf-Turkish tension. Although it is to be noted that Israel has as well magnified its promotional campaigns to advocate its tourism sector. Yet, with the competitive edge of Egypt’s resources, Egypt has the potential to stand competition along the year.

Third: the return of the Italian ambassador to Egypt and the restoration of relations, paves the way for attracting more Italian tourism, which is considered one of the most important markets for Egypt.

Fourth: Egypt’s success in combatting Hepatitis C in an innovative manner, opened the way for medical tourism expansion, which has already started through the international marketing campaigns, and utilizing the low cost and entertainment equation in treatments making low cost packages of the treatment, accommodation, recreation, tourism and shopping compared to competitors in this the field.

Fifth: The Pope’s blessing for the Holy Family route through Egypt, greatly supports religious tourism to Egypt, and needs proper arrangements regarding tours setting and marketing.

Sixth: Bloomberg’s agency coverage to the opening of the Al-Futtaim Mall (Mall of Egypt) last March gives a signal that Egypt has started promoting itself as a destination for shopping tourism. Which is an important factor in utilizing our competitive pricing edge.

These projects ensure that we diversify sources of tourism revenue rather than rely solely on traditional tourism only, specially that Egypt is a touristic destination, holding the largest fraction of the world’s monuments, has extended beaches and a beautiful weather along the year.

There is strong expectations that the Egyptian tourism sector will recover due to the big push after the liberalization of the exchange rate, followed by targeting new markets other than our main ones, with a continued political stability.

The latest news that supports these expectations

1-Hilton International Hotel Group plans to expand in Egypt after signing several contracts recently in Port Said

2- Mövenpick Hotels International Group strengthens its presence in Egypt with an expansion plan in the northern coast

3- The World Tourism Organization puts Egypt in second place in its list of fastest growing tourist destinations this year

4- Tourism revenues for the first nine months in 2017 reached $5.3 billion, a growth rate of 211% over the same time last year, as revenues of 2016 in full reached $3.4 billion.

This was a comprehensive research and coverage of the last seven years of tourism, the challenges it faced, the opportunities it has and the prospects for the future.

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