Egypt's tourism takes a hard knock

Cairo: Tourist buses line the street in front of the Egyptian Museum in downtown Cairo, and visitors cluster in groups around their guides as they prepare to enter the pink neoclassical building that houses the treasures of Tutankhamun and other world-famous pharaonic artefacts.

Despite the hustle and bustle in the courtyard, and the presence of hundreds of tourists, Walid Abdul Razeq, a salesman in one of the museum gift shops, laments what he says is a serious drop in the number of visitors.

"Tourism has been down for two months," he says.

Abdul Razeq reckons his shop is bringing in just about half the money it made last year. It is, he claims, the worst crisis to hit Egyptian tourism since 1997 when militants slaughtered dozens of foreign visitors during an attack in Luxor.

Tourism is an industry that is crucial to the health of the wider Egyptian economy, providing direct and indirect employment to 12.6 per cent of the workforce, according to official figures. After foreign direct investment, it is the country's largest source of foreign revenue, bringing in $10.8 billion (Dh39.6 billion) in 2007-08 and accounting for 6.5 per cent of gross domestic product.

Last year brought unprecedented growth, beating analysts' expectations. Tourist arrivals touched a record 12.8 million, according to the ministry of tourism, up 15 per cent on the year before. The sector, however, now faces the threat of a slowdown as a result of the global recession.

"There is a decline in tourist numbers in comparison to last year," says Adela Ragab, an adviser to the tourism minister. "Those who lost their jobs won't travel and neither will those who are anxious about job security. There will be a problem - but how severe and for how long no one can tell you right now."

Economic conditions have been deteriorating in most of the countries from which tourists come to Egypt. The top four - Russia, Britain, Germany and Italy - all have weakening economies and falling currencies.

EFG-Hermes, a Cairo-based investment bank, said in a report last month that it expects tourist arrivals to fall by 18 per cent in 2009, with most of the decline coming from markets in western and eastern Europe.

It says that the Egyptian tourism industry is already starting to retrench, with hotels in some leisure destinations laying off temporary workers, who make up 30 per cent of the labour force.

"The most affected areas are the beach resorts of the Red Sea and southern Sinai," says Wassim Mohieddin, the chairman of the Egyptian Hotel Association. "These two areas represent more than half of Egypt's hotel capacity."

Last year, the average occupancy rate in hotels in southern Sinai was 77 per cent and, by the Red Sea, it was 86 per cent, but occupancy in the two areas now is in the vicinity of 40-45 per cent, according to figures cited by EFG-Hermes.

One problem is the strength of the Egyptian pound. Furthermore Turkey, a strong regional competitor, has become more attractive after its currency was devalued by about a third.

"Turkey is our main competitor for the next summer season," Mohieddin says. "It has started advertising lower prices. Next summer they will have added 15,000 new rooms, and they are now advertising prices in keeping with the expanded capacity."

To maintain a competitive edge in a shrinking market, Egyptian hotels may have to reduce their already low prices even further. But the tourism ministry has been cautioning against discounting, arguing that experience has shown that it is difficult to restore prices to their previous levels later.

"We are telling them do not reduce prices, but offer better deals," Ragab says. "Maybe they should offer an extra incentive like children staying free. But we are raising awareness about reductions because they are a disaster for the whole sector. Last time it took six years for prices to get back to normal."