Economic Update

Published 22 Jun 2020

Having been hard hit by the coronavirus pandemic, Egypt’s tourism sector is hoping for a rebound as the country prepares for a gradual reopening on July 1.

Civil flights into and out of Egypt were suspended on March 19. Alongside the closure of restaurants, hotels and cafés, this has resulted in a near-complete shutdown of tourism-related activity.

With the sector indirectly accounting for 9.7% of all employment and contributing 9.3% of GDP in 2019, the government and private operators have been eager to find ways to accommodate visitors – despite continued growth in Covid-19 cases, which stood at 55,233 with 2193 fatalities as of June 21. 

Domestic tourism as a blueprint

In mid-May, domestic tourism was allowed to resume in certain regions and under strict conditions, with local tourists allowed to stay at hotels with valid certification and an occupancy rate below 25%.

The government relaxed the occupancy rate requirement to 50% in June, and approximately 155 resorts and hotels were able to receive local guests.

As of July 1 there will be 232 establishments open in the 13 governorates which have been approved to receive both foreign and domestic visitors.

Hossam Al Shaer, chairman of the Egyptian Travel Agents Association, told local media this month that the resumption of domestic tourism had been a success, and that the effective implementation of regulations would reassure international travellers.

Meanwhile, Ali El Manasterly, president of the Egyptian Travel Agents Association, announced that hotels expected 100% occupancy rates in Alexandria and along the North Coast in July and August.

Reassurances and incentives 

While Egypt is not the only country in the region looking to re-open to visitors, it is one of the few which is still experiencing an upward trend in new Covid-19 infections.

In order to encourage tourism while minimising public health risks, the government has taken a regional approach.

Areas such as Cairo and Qalyubia – which have had the highest number of cases – will remain under travel restrictions, while coastal regions, which have thus far recorded the lowest rates, will be opened immediately.

Further to this, visitors from countries where the pandemic is still spreading will be required to provide a PCR test indicating that they do not currently have the novel coronavirus.

Visitors will also be able to travel to a number of the most popular archaeological destinations, among them the Pyramids of Giza. There will initially be a limit of 25 people per trip, with a maximum of 200 people allowed inside large museums at one time.

Besides allaying coronavirus-related concerns, the government has provided a number of incentives aimed at attracting international visitors: tourist visas will not be required for people visiting the coastal governates; aviation fuel will be discounted by 10 cents per gallon; airlines will receive a 50% landing and boarding fee discount, and 20% ground services discount for direct flights to the coastal governates; and there will be a 20% discount on tickets for historical sites and museums, with further discounts for those using Egypt Air and Airco.

Despite these incentives, Egypt will likely face some demand-side constraints from a number of traditionally important source countries.

The UK Foreign Office, for instance, continues to advise against non-essential travel, and has imposed a two-week quarantine on returning travellers, with no timeline for a change in policy.

German travellers will only be allowed to return to Egypt as of September. However, Ukrainians could be allowed to visit by mid-August, Italian tourists might be arriving as early as July and the resort city of Hurghada on the Red Sea has confirmed that some visitors from Belarus will arrive on July 4.

Relief measures 

While these are positive indications, they may not entirely allay the concerns of tourism-related firms that have been suffering throughout the lockdown.

For example, national carrier EgyptAir has seen losses of LE3bn ($185.6m) per month since it was grounded. The airline has said it expects the lifting of civil aviation restrictions to result in a return to 20-30% operating capacity in July and 50% by the end of the year.

As of mid-June, the carrier was reportedly seeking a LE3bn ($185.6m) bailout in the form of a loan from Banque Misr and the National Bank of Egypt. The loan, expected to be concluded by July, would cover some of its losses and ensure that the airline could repay foreign loans taken out to finance the acquisition of new aircraft.

Meanwhile, a LE3bn ($185.6m) credit guarantee for Central Bank of Egypt (CBE) tourism financing was approved by the Ministry of Finance on June 17, with a view to ensuring that the industry is able to function effectively. 

The CBE administers a LE50bn ($3.1bn) tourism support initiative, LE3bn ($185.6m) of which is dedicated to paying maintenance costs and salaries, with the remainder reserved for renovation works.

In addition, soft loans to tourism companies seeking financing for maintenance and operation expenses will be offered at a decreasing interest rate of 5%.

In combination with such measures, the re-opening of Egypt’s borders to international tourists may suggest that the sector has weathered the worst of the coronavirus storm.