ANALYSIS: New tourism figures offer a sliver of hope

Theodore May
8 Min Read

CAIRO: The tourism sector in Egypt may be emerging from its global recession-driven slump, new numbers released this week indicate.

Minister of Tourism Zoheir Garranah announced this week, according to Bloomberg, new numbers for the tourism industry for the first half of 2009.

While the first quarter of the year showed a troubling decline in tourism revenue, six-month numbers indicate something of a recovery.

After falling 17 percent in the first quarter of 2009, the tourism industry ended down only 9.5 percent cumulatively for the first two quarters. Though they still represent a six-month decline, the numbers show a rebound over the year’s second quarter.

The number of tourists arriving in the first half of 2009 fell by 8.7 percent – in comparison to 9.5 percent decline in overall revenue – suggesting that the average tourist that came to Egypt over that stretch spent less than they would have a year ago.

These numbers are a positive development in the face of previous predictions of a 9.9 percent overall decline for 2009 made by Cairo investment bank EFG-Hermes.

The tourism sector brought in 12.8 million visitors and $11 billion in revenue in 2008 and is Egypt’s largest source of foreign currency.

Tourism is a major source of employment in Egypt, with tourist receipts representing 40 percent of the country’s service exports.

The industry, according to the minister, began its comeback in April, when its numbers only sank by 2 percent, versus the same month a year earlier, bringing in $931 million that month.

According to investment bank Beltone Financial, which crunched Garranah’s numbers to infer broader trends in the sector, tourism revenue for the 2008/2009 fiscal year-which ended June 30-fell only 3.1 percent versus the previous fiscal year.

Revenue from tourism is likely to stand at $10.48 billion for fiscal year 2008/2009, according to Beltone’s report. The numbers also indicate that the number of tourists arriving in fiscal year 2008/2009 was actually up 0.1 percent over the previous fiscal year.

Garranah’s comments, wrote Beltone senior economist in the statement, “also imply revenues and arrivals of $2.6 billion and $2.9 million in fourth quarter of 08/09, respectively, compared to $2.6 billion and $3.2 million in fourth quarter of 07/08. Assuming their accuracy, these figures are very positive as they indicate that tourism is recovering quickly from the slump experienced after November 2008.

Evidence that the industry is emerging from its slump will come as welcome news to the government. When it announced its most recent budget, the government said it would be expanding the budget deficit to weather the challenging economic conditions.

The government had also come to rely more heavily than ever on the tourism industry. Last year, prior to the economic meltdown, Ministry of Tourism officials said that it planned to boost the number of tourists visiting Egypt by a staggering 2 million per year by 2011.

This announcement represented a significant shift for the Egyptian economy, which would have to change to accommodate an influx of foreigners and the facilities they demand. It meant repairing infrastructure, building hotels and improving transportation, to name a few.

And just as the government began making some of these critical shifts, January 2009 numbers came out illustrating a troubling shrinkage in the size of the industry.

The number of hotel bookings for January, typically a strong tourist month, was down 30 percent.

Seventy percent of the tourists that visit Egypt are European, and signs indicated that Europe was hitting the worst of the recession in January, forecasting more bad news for one of Egypt’s most important industries.

Egypt received 1.8 million Russian tourists in 2008. Germany, the UK, Italy were among the top 10 countries in terms of arrivals, followed by Poland, France, Ukraine, Libya, Saudi Arabia and the United States.

Also troubling was how dramatically the trend in tourism growth was broken, according to, Reham ElDesoki, senior economist at Cairo-based investment bank Beltone Financial.

“Revenues, arrivals and occupancy rates had all fallen towards the end of the fourth quarter of 2008, as the effect of the tourists’ reluctance to pay cancellation fees wore off. Tourism growth had contracted by 7.8 percent and 6.1 percent in the second quarter of 08/09 and third quarter of 08/09, compared to positive growth of 38.8 percent and 12.7 percent in second quarter of 07/08 and third quarter of 07/08, according to GDP figures released by the Ministry of Economic Development, wrote ElDesoki.

But the ministry fought back against the decline that threatened not only the industry, but the whole Egyptian economy. It began to bill Egypt as a budget destination, fit for times when the purse strings are tight. It also let hotels and airlines off the hook for fees they had to pay to tourism promotion authorities.

Because of these efforts and a general belief that the global economy may have finally hit bottom, tourism in the second quarter of 2009 has begun to rebound. It is expected, though, that when the official numbers for the 2008/2009 fiscal year are released, the industry will have shrunk relative to GDP.

According to Beltone, tourism accounted for 6.6 percent of GDP for the 2007/2008 fiscal year, and it’s expected to account for only 5.6 percent of GDP for the last 12 months.

That the recovery of the industry has come slowly will surely take a back seat to the fact that it’s happening at all. But ElDesoki wrote that she believes that these optimistic figures for the last quarter do not negate the fact that numbers from the summer months will highlight the slow pace of recovery.

“We continue to believe though that the summer season will not see a strong recovery, given the increased competition from neighboring countries and the EU, and which anecdotal evidence indicates have been reducing prices to attract business, as well as the shorter period of time available for GCC tourists to travel before Ramadan (starts late August). Tourists from the GCC, the EU and the US account for 19 percent, 70 percent and 4 percent of total arrivals, respectively, she wrote. -Additional reporting by Kate Dannies

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