While Egypt has faced several challenges in recent years, tourism remains one of its leading foreign currency exchange providers and the sector is a key contributor to both GDP and job creation. The sector has historically played a central role in the economy, with its total contribution to GDP rising from 8.5% in 1988 to a high of 19.5% in 2007, according to the World Travel & Tourism Council (WTTC).
The country’s attractions are diverse – ranging from unique archaeological sites, to sandy beaches and cultural festivals, to desert trekking. This breadth in the tourism offering has helped the country develop into one of the most prominent destinations in the region, which is no small feat when one considers the competition. Egypt’s comparatively well-developed tourism infrastructure, including sizable bed capacity and direct international connections, has also helped the sector attract an increasing diverse range of visitors from Europe, Asia and the Middle East.
Challenges
Despite the strong position of the country, relative to its neighbours, and the long history of support for the tourism sector, it has not always been smooth sailing. The sector has had to navigate choppy waters in recent years, including post-revolution instability and terrorism threats.
The sector’s total contribution to GDP fell to 14.5% in 2011 and further to 12.4% in 2013, before staging a modest recovery in 2014 to 12.8%. In the aftermath of the downing of Metrojet 9268 in October 2015, the industry was hit hard again, and as of late November the government was forecasting declines for both sector revenues and tourist numbers of around 15% and 13%, respectively, for the year.
Despite challenging headwinds, the sector remains a vital part of the economy. In nominal dollar terms, the direct contribution of tourism to GDP has stagnated at between $30bn and $40bn a year (peaking at $38.5bn in 2012). Meanwhile, In nominal local currency terms, the sector’s contribution came to LE255bn ($34.8bn) in 2014. Direct and indirect employment from the sector has dropped from 19.5% of total employment in 2007 to 12.8% in 2014. Nevertheless, these jobs are vitally important in a country where official unemployment runs at 12.8%. Khaled Ramy, who served as minister of tourism between March and September 2015, said in early 2015 that the country was aiming to attract 20m visitors by 2020. Egypt is also trying to increase the average daily spend of its visitors by 30%.
Historical Destination
Although the country is facing a host of challenges, including several years of political and economic instability and a number of high-profile security incidents, Egypt’s tourism sector has proved relatively resilient in the face of difficulties in the past, and given time and the right conditions, it is likely to bounce back again.
Egypt has a long history of tourism, dating back to when the Greeks and Romans visited in ancient times. In the 19th century, Europeans flocked to the country and were especially attracted to Nile cruises. Contemporary reports indicate that 50,000 people came in the 1897-98 season. Egypt was known not only for its antiquities, but also for its healthy, dry climate. In the 20th century, tourism grew rapidly as the number of destinations in the country increased and travel became easier. Yet the sector was challenged repeatedly, first by the Second World War and then by events in mid-century that caused instability locally and altered relations with other nations: the political turmoil of the 1950s, the nationalisation of the Suez Canal and the conflicts with Israel. Egypt’s turn from the West towards the Soviet Union was especially problematic, as it distanced the country from the traditional source of tourists, Europe and the US.
Bounce Back
A terror incident in 1992 and the Temple of Hatshepsut attack in 1997 both challenged the sector. But following the latter tragedy, the government redoubled its efforts to fight extremism and committed to improving tourism.
One of the major focus areas was the development of human resources capacity. Under the Egypt Tourism Workforce Development Project, started in 2002 with support from the US Agency for International Development, the government and its partners worked to improve skills relevant to food service and safety, providing vocational training and developing facilities to educate and train potential management. Other elements of the initiative included the creation of qualifications programmes and the building of training centres that could improve employees’ skills and streamline hiring processes. The first phase of the programme trained around 10,000 people. The second phase started in 2005 with the aim of training 16,000 workers.
The results of these efforts was strong growth for the sector for over a decade – a new golden age for Egyptian tourism. Tourist arrivals rose from 50,000 a month in the mid-1980s to a high of nearly 1.5m a month in late 2010. The number of visitors was around 800,000 a month as of mid-2015.
Recent Rebound
Tourism dropped dramatically following the ouster of Hosni Mubarak in 2011. The fall continued with the rise of the Muslim Brotherhood and the subsequent removal of Mohamed Morsi as president in 2013. Several terrorist attacks in 2015 further dented already weak international sentiment and revenues at heritage sites in the country are down by 95% since the troubles began, according to local press. But throughout, the overall tourism market has held up relatively well under the circumstances. Local tourism and tourists from regional destinations remained strong. In 2014 domestic travel spending was responsible for 64.1% of all direct travel and tourism GDP, according to the WTTC, while the number of Arab tourists saw a notable increase in the first half of 2015 (see analysis).
Most of all, while the overall numbers were down, a steady stream of visitors continued to arrive and the market never shut down completely. The totals had retreated to 2005 levels, off their historic highs, but nevertheless they were still nearly twice the 1982-2015 average of 469,000 visitors a month. Sector participants say that it is important to keep the troubles in perspective.
“What is happening in the region is not a secret. We are facing significant challenges,” said Ayman Altaranissi, director-general of the Egyptian Tourism Federation (ETF). “However, the situation in Egypt is not that bad. In Egypt, it is actually quite better than in other surrounding areas.”
Competitiveness
Egypt offers a wide range of tourist attractions that make it competitive with destinations globally. It has sand and sea in two notable areas, the White Med and the Red Sea. The former offers resorts and fishing as well as cultural attractions, including Alexandria and some new archaeological finds, while the latter appeals more to those seeking a pure beach vacation. The vast expanse of the Western Desert has a number of oases, some with hot springs, mineral springs and salt lakes, and massive dune fields.
The strongest draw is the historical sites, mostly those concentrated in the Nile Valley. The valley includes such attractions as the rescued temples at Abu Simbel in Upper Egypt, the historic monument of Aswan, the many wonders of Luxor (including the tomb of Tutankhamun, the Valley of the Kings, the Valley of the Queens and the Mortuary Temple of Ramses III), and the Cairo area, with pyramids, the Great Sphinx, museums and markets. The country has an estimated total of 120 pyramids (depending on variations in how they are counted), and these structures remain a unique asset and a perpetual international draw. The Great Pyramid of Giza – also known as the Pyramid of Khufu – is the only one of the Seven Wonders of the World that remains intact.
Despite its wealth of antiquities and natural assets, Egypt ranks 83rd out of 141 countries on the World Economic Forum’s “World Travel & Tourism Competitiveness Report”, behind the Philippines, Kenya, Vietnam, Tunisia and Guatemala, and ahead of Azerbaijan, Kazakhstan, Laos and Mongolia. It has fallen from number 75 in 2011. Egypt’s low ranking in the report reflects a number of obvious problems. In terms of security, the country ranks 136, while in the ground and port infrastructure category it is at 103. What is surprising, according to the writers of the survey, is the low score that the country achieves in the oral and intangible heritage category (60), suggesting that the country has under-leveraged its cultural assets. Egypt also ranks unusually low in the international openness category (115).
Strengthening Measures
In light of the challenges it has been facing, Egypt has been working to improve the sector’s fundamentals. In September 2015 the Ministry of Tourism signed a $68m contract with J Walter Thompson, an advertising firm involved in Egypt’s marketing efforts prior to 2009. The plan is to run adverts in 27 markets around the world. The country wants not only to promote what it has to offer in terms of sites, antiquities and other attractions, but also to counter the negative image of Egypt being broadcast by the international press. Industry executives believe the situation has been distorted and exaggerated, and that the reality is far different to popular perception, with the international press choosing to focus on the few tragedies and missing the larger picture. “We do not colour things and make them rosy,” said Altaranissi. “We tell them what is really happening. But the media relates a distorted picture rather than the facts.”
The Ministry of Tourism is also working to further diversify the sector. It wants to develop other products and activities that could attract more people and offer visitors reasons to stay longer and spend more money. To support these capacity-building efforts, the government has been seeking investment support and partnership with tourism product developers. Some projects that are currently under development include those related to golf, sailing, shopping and wellness. Diversifying along the economic spectrum is another priority, with more three-star hotels being built to appeal to a wider range of customers. The hope is to attract everyone from the luxury traveller to the budget tourist.
The government has been innovative in its efforts to increase interest in the country’s historical sites. In October 2015, the Egyptian Ministry of Antiquities, in cooperation with local and international academic institutions, initiated the Scan Pyramids Project. The goal is to use non-invasive techniques, such as thermal scanning, muon detectors, lasers, cameras and drones, to study four target pyramids: Bent and Red at Dahshur and Khufu and Khafre at Giza. The programme, which will run through 2016, quickly found some interesting anomalies. At Khufu, a number of stones were found to be hotter than others on the face, suggesting the possible existence of an undiscovered chamber within the site.
Industry Sustainability
One of the more salient aspects of the government’s efforts to improve the industry’s overall health is through increasing its sustainability and reducing visitor footprints ( sometimes quite literally) on attractions. The country is focusing its efforts on biodiversity, establishing sustainable waste disposal and reducing CO emissions. Because Egypt is home to so many antiquities, striking the right balance between allowing access to sites and preserving the country’s cultural heritage is vital if it is to make its sector sustainable.
The Red Sea has become a particular focus for preservation efforts. One of its major assets is its marine environment, which is also fragile and susceptible to damage. Coral, for instance, is especially vulnerable to risks posed by over-visitation. Some of the steps proposed to ensure the longevity and health of these assets are a land use plan, the creation of protected areas, the establishment of nature preserves, the installation of buoys to protect the coral, the introduction of environment management systems for resorts, the creation of a standard environmental impact assessment, the introduction of best practices and the development of an awareness campaign. Zoning and the improvement of relevant information, especially geographic information system mapping, are central to the strategy.
In early 2015 the Global Sustainable Tourism Council announced that Egypt’s Green Star Hotel programme had received “recognised” status from the organisation. Under the programme, which was developed with the assistance of Germany and is overseen by the Ministry of Tourism, 53 hotels have received certification for their environmental and social standards. In addition, Ramy managed the creation of a committee to oversee the development of green tourism in the country in April 2015. The committee will participate in conferences and seminars on sustainable tourism and initiate green tourism projects in cooperation with public and private entities. It will also provide legal, technical and administrative advice to those interested in pursuing projects related to sustainable tourism.
Infrastructure
Egypt is starting to turn its attention decisively towards infrastructure development. In late 2014, Hisham Zaazou, who served as minister of tourism until March 2015 and stepped back into the role in September 2015, said that a number of important tourism assets had fallen into disrepair since the events of 2011 and that the country would commit itself to their repair and rehabilitation. Hotels had fallen behind on maintenance and overall capacity was seen as too low given the future goals for expansion.
In terms of antiquities access and infrastructure, Egypt is working to attract people back to the country by increasing accessibility. In November 2015 it opened three new sites in Luxor: the tomb of Amenhotep Huy, viceroy of Kush under Tutankhamun; Tomb TT 277 of Amunemonet; and Tomb TT 278 of Amunemhab. In addition, the tomb of Nefertari, a wife of Ramesses II, was scheduled for reopening in late 2014, having been closed for eight years. The tomb, known as the “Sistine Chapel of Egypt”, had been opened previously, but concerns about the deterioration of the paintings had led to its closure.
In 2014 the government finished expanding Hurghada Airport on the Red Sea, doubling its capacity to 13m passengers a year. The project cost LE2.4bn ($327.1m). Other ongoing projects include a new sidewalk for the Al Arish Corniche and a new road in Khoweinat running from Qantara International Road to the antiquities market in the city.
There are several other major projects also in the works. A total of 4.5m sq metres are being placed on offer on a build-operate-transfer basis for the construction of the South Magawish Sports Tourism Compound. The compound is to be situated between Hurghada and Safaga on the Red Sea. The warm climate and nearby attractions are to be combined with additional unique facilities, including an international-standard car racing track, hotels, spas, a sports training centre, parks and an aquarium.
Other proposed projects include the Sixth of October Touristic City, at $1.1bn; Gamsha Tourist Centre ($1.2bn); Ras El Hejma Tourist Centre ($170m); Sharm El Foukary Tourist Centre ($170m); New Aswan Regional Touristic Centre ($315m); Emaar Misr Marassi Beach Resort ($1.7bn); Cairo Gate Mall ($820m); and Al Maza City Centre ($500m).
Hotels
At present, hotel capacity is not a problem. As of early 2015, the country had 225,000 hotel rooms available and 151,000 more being built. Egypt has accommodation to meet current and future demand if the 20m visitor target is reached, but what it does need is continued investment in restaurants, shops and other similar assets.
One of the most high-profile recent openings was that of the Nile Ritz-Carlton, which opened in late 2015. The international hotel group had signed an agreement in 2009 to refurbish what was then the Nile Hilton, and it expected to complete the project in 2011. However, as a result of the unrest in the country, the project fell several years behind schedule. It has been reconsidered several times and an adjusted target of a 2013 completion was also missed. The reopening was seen as highly symbolic, as the Nile Hilton, when it was inaugurated in 1959, was the first truly international hotel in Egypt (and all the Middle East), and the ground-breaking project was successfully completed after the country had faced significant troubles.
Diversifying Visitors
As Egypt works to sustain and improve its tourism market, it is looking to attract travellers from nearby countries. The goal is to have 35% of total visitors come from the Arab world. To help achieve this, in July 2015 the Egyptian Tourist Authority (ETA) opened an office in Abu Dhabi, its only such presence in the Arab region. Its slogan for GCC visitors is “Egypt is Close” and the campaign’s overall theme is titled “We Miss You”. The regional strategy has its limits. Iranian tourists are still not allowed to enter the country under the visa waiver programme due to security concerns, and Egypt recently closed its Istanbul tourist office.
According to the ETA, Arab tourists are especially interesting because they tend to stay twice as long in the country as other groups and spend more per day than Europeans. Anecdotally, the strategy seems to be working. During the Eid Al Fitr holidays in 2015, resorts along the Red Sea coast were reporting 100% occupancy. The available statistics also indicate a very rapid rise in the number of people coming from these countries. Arab tourist arrivals grew substantially in 2015, with the number of Arab tourists visiting Egypt in July up 39.5% year-on-year, according to statistics from the Ministry of Tourism and ETA. The number of Emiratis jumped by 65.6% in the first seven months of the year, while the number of Saudi tourists was up 53.1% in that period.
Egypt has also focused on Chinese tourists. It had attracted up to 109,000 people a year from China before the 2011 revolution, and a goal was set to raise that to 200,000 by 2015. In late 2014, during President Abdel Fattah El Sisi’s visit to Beijing, a tourism promotion event was held. Around that time, officials from the Ministry of Transportation held discussions with the Chinese authorities over private airline connections between the countries.
The numbers, however, have not reached the desired targets. According to ETA figures, 106,227 Chinese travellers visited in 2010 and the total has been steadily declining ever since. By 2014, only 61,697 Chinese visited the country. Japanese tourism has dropped off even more, declining from 126,393 in 2010 to 12,352 in 2014. In total, East Asian tourism has fallen 50% since 2010.
Visas
Egypt has benefitted from being a particularly easy market for foreign visitors to access, although in early 2015, there was a period in which visa rules became particularly confusing, and that may have taken a toll on overall numbers and the image of the country. It was announced in March 2015 that as of May, for security reasons, all visitors travelling independently would be required to apply for a visa from an Egyptian embassy overseas. Until that point, citizens from most Western countries had been allowed to buy a visa on arrival. Reports said that the policy would also apply to Sharm El Sheikh, a place where most people can enter without a visa. Tourists were put off by the possibility of having to deal with embassy lines and a potential 10-day wait for their paperwork to be processed.
Highlighting the responsiveness of the government, the decision was reversed the following month and the earlier policy reinstated. Egypt said that it would soon be instituting an electronic visa system, similar to that which Turkey introduced in 2014. The system would accept identification cards from some countries, thus helping people without passports visit. The expectation was that the e-visa would increase tourist traffic by approximately 20%.
Charters
Charter tourism accounts for a significant percentage of Egypt’s inbound visitors. The Ministry of Tourism subsidises charter flights, but in a bid to reduce expenditures in light of budgetary pressures, it has been discussing cutting back.
Subsidies have been major part of the country’s tourism strategy for some time. In 2011 an incentive was offered worth about $5 per seat, because of the unrest in the country, and in November 2014 the ministry started offering a payment of $30-40 per filled seat for flights coming into airports in South Sinai, the Red Sea, Luxor, Aswan, North Coast and Marsa Alam. According to the ETA, it was also considering expanding the subsidy so that it would be available to airlines coming from more distant destinations, such as East Asia. The payments are seen by the government as a good investment. For every dollar spent on stimulus programmes at Hurghada and Sharm El Sheikh, a total of $26 was generated, according to comments in the local press by Zaazou.
However, in early 2015, Ramy said that the hope was to reduce the subsidy as the markets were picking up, with Hurghada and Sharm El Sheikh subsidies ending by November 2015. Ramy added money saved would be poured back into marketing. The proposal met with resistance from charter companies, such as TUI and Germany’s FTI, which agreed that traffic was on the rise, but added that the international tourism market was competitive and that Egypt was still in the development phase and in need of help to maintain and grow traffic.
Metrojet
In late October 2015 Metrojet flight 9268 from Sharm El Sheikh to St Petersburg crashed. The reactions from foreign governments included a spate of travel advisories and flight cancellations. Before the cause of the accident was known, the UK banned flights to Sharm El Sheikh, while Russia later banned Egypt Air from flying to Moscow. Russia’s Federal Security Service announced in mid-November that a bomb was responsible for the downing of the plane and deemed it a terrorist attack.
Russians have been major contributors to Egypt’s tourism market in recent years, with more visitors coming from that country than from anywhere else. A total of 3.13m tourists visited in 2014, up from 2.8m in 2010. According to press reports, Zaazou had indicated that the flight bans could cost Egypt $280m per month. This is expected to have a significant impact on the sector, particularly given that the Russian market was already weakening in late 2014 and early 2015, due to the depreciation of the rouble and the slowdown in the Russian economy.
After the downing of Metrojet flight 9268, campaigns were mounted to support visitors who still wanted to come to Sharm El Sheikh. Local tourism directors called for Egyptians to head to the Red Sea resort to help cushion the sudden downturn, while “I’m going to Sharm” messages of support started showing up on the internet (see analysis).
Outlook
The Egyptian tourism sector has performed well over the long term, and recent declines in terms of numbers employed and share of GDP are not characteristic of the sector’s performance. Tourism still contributes greatly to the economy and it has considerable potential. Some areas have significant room for development, such as parts of the White Mediterannean, while even the more established sites can be better utilised through additional investing and improved marketing campaigns.
Overall, the country can enhance its tourism competitiveness internationally by improving infrastructure and by being more welcoming to foreign visitors. Ultimately, Egypt can get much more out of its natural and historical assets than is currently the case. It can also get ahead of the trend by developing what it has in a sustainable and eco-friendly way, thus guaranteeing that tourism will continue to contribute to the economy over the long term.
Addressing the recent concerns about stability and security is not expected to be easy, but the country is currently making tremendous efforts to assure the world that travel there is safe, and it is committed to keeping tourists safe, investing a size-able marketing budget to overcome the negative impressions of the country. However, it may take time to win back some potential visitors, as many international tourists will want to see a period of stability before committing to a trip to Egypt.
Over the long term, investors in the country are confident in its prospects. They are using this current slowdown to develop new markets, such as those for domestic and regional travellers, as well as investing in infrastructure and training for staff. When international visitor numbers begin to rise again, the operators expect that they will be well placed to take advantage of the increase in traffic, and they see this period as a time for consolidation.
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