Special Year End 2014 Feature:
Tourism sector workers and Ministry of Tourism officials believe several issues have affected the sector in the past year.
These include: the lifting of travel warnings imposed on Egypt; the devaluation of the rouble; deadline extension for payment of financial dues to the Ministry of Social Solidarity and banks to the end of 2014; the removal of energy subsidies; and labour.
Political events also affecting tourism, include the constitutional referendum and the presidential elections and their positive presentation of Egypt abroad, show the country walking on the right path.
According to the head of the Egyptian Federation of Chambers of Tourism, Elhamy El-Zayat, 2014 has passed with all the pros and cons. The situation remained unchanged from 2013 with travel warnings from the majority of European countries and the decline of inbound travel movement to Egypt compared to the peak in 2010, which he classifies as a year of basis.
El-Zayat believes the tourism sector still needs a long time to catch its breath, but that these signs will not appear before next October. This comes under the currency crisis in Russia, which lost more than 50% of its purchasing power.
The bombing of a tourist bus in mid-February near the Taba border port saw 15 European countries issue travel warnings to Egypt to their citizens, according to a Ministry of Tourism official.
The official said the bombings were a fatal blow to the flow of tourists, especially as the three months prior to February 2014 had witnessed a big recovery in tourist numbers. This was particularly in comparison to the months just after former president Mohamed Morsi’s ouster in June 2013.
The official, who requested anonymity, said: “After the bombing tourism revenues tumbled to $1.3bn in the first quarter [Q1], down 43% compared to the same period last year.” He added that the effect was too big after signs of recovery started to appear in the sector and the majority of countries had raised their warnings.
He also believes that the period following the Q1 of 2014 was good according to standards of the period since July 2013. He added that the Q3 of 2014 saw significant recovery and growth in arrivals, especially September.
Official figures show tourist numbers reached 2.7 million during the Q3, a growth of 69.7% compared to the same period of the year 2013. Growth was not limited to the number of tourists, but extended to a noticeable recovery in average spending of tourists, according to the Ministry of Tourism’s Head of the Sub-Accounts, Adelah Ragab.
The average spending at the end of 2013 ranged between $60 and $63.3 at the end of 2013, the average spending reached nearly $73 in the Q2 of 2014. It reached $80.1 in Q3 of 2014, according to the head of the unit.
However, El-Zayat disagrees, saying: “We have to measure apples with apples, meaning compare the purchasing value of the dollar at the moment with the same period in the US, then we will find that the purchasing power of the dollar has definitely decreased.”
Repayment of bank dues and insurance fund dues
The Central Bank of Egypt (CBE) launched an initiative to postpone the banks’ dues to the end of 2014, which was welcomed by workers in the sector hoping for activity recovering. However things did not go as planned according to the head of the Nuweiba-Taba Tourism Investors Association, Sami Suleiman.
The initiative was a “good” idea according to Suleiman, but the sector has not yet recovered.
Minister of Social Solidarity Ghada Wali signed an agreement with the Ministry of Tourism and the Egyptian Tourism Federation in mid-May, postponing arrears’ payment to the end of the year, while allowing instalments over five years.
Russian rouble collapse
Russia is major source of Egypt’s incoming tourism, according to Ministry of Tourism data over the last five years despite the political turbulence and Egypt. According to the anonymous official: “The numbers of Russian tourists approaches 3 million at the end of 2014, and the collapse of the Russian currency will affect arrivals to Egypt.”
Russian arrivals to Egypt represent 25 to 30% of the total foreign tourist movement in Egypt, according to statistics by the Ministry of Tourism. According to the Sub-Accounts Unit of the Ministry of Tourism, Russian tourists spend an average of about $55 per night. Tourist resorts and hotels on the coasts of the Red Sea and South Sinai are among the areas most visited by Russian arrivals, according to the prominent tourism official.
Tourism income lost about 40% in 2013 against 2012, to record $5.9bn at the end.
Energy and the lifting of subsidies
The government has cut energy subsidies allocations to EGP 100.3bn in the current fiscal year’s budget, while raising the prices of petroleum products, as well as the Ministry of Electricity’s plan to raise subsidy on electric within three years.
According to the official, the Ministry of Finance did not respond to the sector to finance an allocation of EGP 2bn. Instead, it allocated EGP 1.25bn to a fund under the Ministry of Environment to provide loans for hotels wishing to switch to clean energy.
According to Hisham Ali, head of the Tourism Investors Association in South Sinai, hotels under the current circumstances do not have the ability to save costs for the transition to clean energy. The General Authority for Tourism Development stipulated that energy consumed in new projects that have been allocated land should 25%.
Hotels and tourist transport used to get the litre of diesel for Pt 110 per litre, while now they receive it for PT 180 per litre. The hotel capacity in Egypt amounts for 225,000 rooms, with investments exceeding EGP 300bn, according to the Egyptian Chamber of Hotels.
The hotels most affected by the rise in diesel prices are the floating hotels in Luxor and Aswan, as they have suffered from an intense drop the past four years, according to Vice Head of the Tourism Investors Association, Abdulrahman Al-Anwar.
According to Al-Anwar, the number of floating hotels on the river between Luxor and Aswan is 286 hotels, only 10 of which are functioning, with occupancy rates of no more than 20%. Luxor and Aswan are amongst the areas most affected by the political turbulence of the past four years. This is despite their distance from the protests, according to the chairman of the South Valley Travel Agents Association.
Migration of active labour
According to the unit of sub-accounts of the Ministry of Tourism, 3.8 million persons work in tourism. However, Basem Halaqa, Head of the Independent Trade Union of Workers of Tourism and Hotels, said a large percentage of workers in the sector have abandoned it. This has been either willingly or forcibly, and driven by low revenues, making it increasingly harder to make a living.
Halaqa believes that the majority of those who abandoned the sector are trained labour.
According to Halaqa the total employment in the hotel sector is about 780,000.
Constitutional referendum and presidential elections
Workers in the sector expected good results from true constitutional referendum in the beginning of 2014, then the presidential election won by Al-Sisi, hoping to overcome a phase of instability that lasted more than three years.
According to Hani Al-Shaer, Deputy Chairman of the Egyptian Chamber of Hotels, the presidential election and referendum on the constitution sent a clear message to the European markets that Egypt is on the right track. It also enhanced the capacity of the Ministry of Tourism to lift the travel warnings.