By Omar Khedr
Changing perceptions and successfully rebounding an entire industry is generally a herculean challenge. Representing approximately 6.5% of Egypt’s total Gross Domestic Product (GDP) as well as being an important source of foreign exchange, Egypt’s travel and tourism industry forms a vital bedrock of her economy. The industry benefits from several competitive advantages. Endowed with eight UNESCO World Heritage sights and unparalleled historic landmarks such as the Great Pyramids of Giza, the Temple of Abu Simbel, and the great Luxor Temple Complex; Egypt is a magnet for visitors from across the world. The country also boasts a rich cultural diversity, hosting Al-Azhar University, Saint Catherine’s Monastery, as well as the recently restored Maimonides’ Synagogue – named after the Jewish court physician of Sultan Salahuddin Ayub. Egypt’s travel and tourism industry is further bolstered by the country’s location; positioned at a strategic crossroad between the Mediterranean, Africa and Asia.
Despite these favourable factors, since 2011, a heightened level of volatility due to a rapidly changing political and security climate has characterised Egypt’s travel and tourism industry. In the past three years, the number of international tourist visitors to Egypt has fallen from 14.7 million in 2010 to 9.1 million in 2013. Just as grim is the World Economic Forum’s study of global tourism destinations, which ranked Egypt an upsetting 85th overall and 10th among countries in the Middle East. However, Egypt is not the only country in the world to experience setbacks and a challenging operating environment while attempting to revitalise its tourism industry. By adopting certain best practices from countries that have successfully turned around their travel and tourism sectors, Egyptian policy makers can encourage new visitors. Furthermore, by taking a few additional measures, Egyptian business leaders and policy makers can more fully capitalise on the growing number of tourists coming from emerging markets and the GCC – opening a new avenue for growth.
Ranked 73rd overall in the World Economic Forum’s Travel and Tourism index, Peru experienced its own volatile period in the 1990s as the country faced a war on terrorism as well as undertaking a government transition in the early 2000s. Peru with competitive advantages that, like Egypt, include unrivalled historic sites such as Machu Picchu, the Nazca Lines and 11 UNESCO World Heritage sights – began marketing itself by building a unique brand. Policymakers and business leaders in Peru combined the country’s historic landmarks, its cultural roots, along with its unique physical geography that offers beach resorts along the coast, ski resorts along the Andes Mountains and hiking trails along the Amazonian rain forest in an attempt to entice a greater influx of visitors. While tourism has been a strategic objective of Egypt’s economic development, policy makers have not sufficiently prioritised linking the different clusters of Egypt’s tourism sector. According to Michael Rochat, the General Director of the Ecole Hôtelière de Lausanne – one of the world’s leading hospitality schools, hospitality has always been “a link between people and culture”. As Figure 1 illustrates, Egypt’s tourism infrastructure is currently ranked 90th globally, preventing tourists from connecting easily with Egypt’s cultural sites that are located far away from major airports in Cairo, Alexandria, and Sharm El-Sheikh. In comparison, Jordan is ranked at 69th and Lebanon at 27th in tourism infrastructure, highlighting the distance that needs to be addressed. By tackling the infrastructure issue and by building a unique brand that highlights and connects the diversity of Egypt’s cultural sites – Egyptian decision makers can enrich the cultural experience of international visitors as well as increase Egypt’s tourism percentage of GDP.
Based on data released by Egypt’s tourism related ministries, a significant portion of Egypt’s inbound tourists in 2012 originated from emerging markets. Cumulatively, the top five emerging markets represented 38.9% of total international visitors to Egypt in 2012. Russia, in particular, accounted for 21.7% of tourists with more than 2.5 million over that year. Furthermore, in recent years, tourists from emerging economies have been a source of positive growth for the sector. In the six years to 2013, tourists from emerging markets increased at an average annual rate of 8.0%. In comparison, during this same period, inbound tourists from all countries decreased at an annualised rate of 3.1%. Consequently, travellers from these rapidly growing markets can form an important avenue of stability and growth over the next few years.
Being increasingly vital for a rebound in Egypt’s travel and tourism industry, Egyptian policy leaders can take additional steps to fully capitalise on visitors from emerging markets. As Figure 2 illustrates, Egypt’s overall occupancy rates is at 44.5% much lower than peer countries, despite Egypt being ranked as the fourth most price competitive country in the world. The situation is worse in Luxor, were the occupancy rate has fallen by more than 15% since 2010, according to data provided by the Egyptian Hotels Federation. Policy makers must do more to stress the value proposition to tourist agencies in these rapidly developing countries. For instance, compared with countries that, like Egypt, host one of the new Wonders of the World – Egypt is the most affordable according to the hotel price index. Beyond promoting the affordability argument, Egyptian decision makers should also improve the tourism eco-system. One way to do so is to increase the number of ATMs across the country. Currently, Egypt has one of the lowest ATMs per capita globally. Increasing the amount of ATMs will provide tourists with greater accessibility to their funds, which will increase their economic activity within the country.
In a recent report on one of Egypt’s key industries, researchers at Harvard University’s Institute for Strategy and Competitiveness highlight that Egyptian policy makers must forge a clear vision for economic improvement that can be sustainable across political and business cycles. By prioritising the tourism sector and taking concrete action to encourage more international visitors, Egyptian decision makers can begin to turn around this important industry.
Omar Khedr is an analyst at IBISWorld, a graduate of New York University, and currently a member of the United Nations Association of Young Professionals.