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Foreign tourism depression continues but hope for growth pinned to domestic, regional market - Daily News Egypt

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Foreign tourism depression continues but hope for growth pinned to domestic, regional market

Report details the changing market trends in the hospitality market in Cairo, Alexandria, Hurghada, and Sharm El-Sheikh, which comprise the four biggest centres of tourism and development


The current depression in the tourism market continues to inform investor concerns about increased future investment following the October 2015 Metrojet Flight 9268 crash that killed all 224 onboard, many of whom were tourists returning to Russia, and the most recent downing of EgyptAir flight MS804, which was travelling from Paris to Cairo.
There are some positive speculative factors fuelling future growth of the industry; however, issues such as decreased tourism from abroad demands a change in market strategy.

A report published by Colliers International, which advises investors in the hospitality industry of market trends in the Middle East and North Africa (MENA) region, details the future prospects for growth in Cairo, Alexandria, Hurghada, and Sharm El-Sheikh. Policy prescriptions and market trends point to an increase in demand from the domestic and regional market and investor’s desire for stability and certainty.

As a result of changing generational tastes and market trends, modern midscale properties have begun to eclipse the needs for large luxury hotels. Midscale hotels target increasing demand from both the domestic market and the more price conscious travellers who now make up the bulk of tourism in Egypt. Midscale hotels are also less affected by shocks in the tourism industry, such as terrorism, which has negatively affected growth since the downing of the Russian plane.

According to the report, domestic demand makes up 20% of the Cairo market. Increases in corporate demand from Libya and the Gulf have continued and are expected to increase in 2016. Regional hotel brands are also expected to penetrate the market as demand from GCC countries remains strong and is expected to increase with the increase in oil prices.

Five-star old-fashioned hotels no longer reflect the demand of an increasingly youthful domestic market, which since the collapse in tourism has become the main engine of growth. ­­

Like Cairo, domestic demand is now the main factor of growth in both Sharm El-Sheikh and Hurghada and the hospitality market is expecting a rebound after Ramadan and into the summer season.

Egyptian internal tourism also makes up the bulk of Sharm El-Sheikh and Hurghada and this will continue to drive changes in those respective markets. Sharm is offering lower prices to attract Egyptians for the summer season after Ramadan.
foreign tourism report

 

Issues in the Sharm El-Sheikh market are more compounded and investor decisions are mostly based on over-supply and the current evisceration of demand as a result of travel advisory concerns from western European and Russian markets.

No new international chains have been approved and are expected to be delayed until the market rebounds some time in 2017. Hurghada faces a similar issue where contracts for new hotels have been put on permanent hold and no new contracts have been addressed. However, the entry of new chains such as Hilton and Fairmont is expected to herald a full recovery of the industry at large.

As a result of the new market realities, luxury hotels have considered shifting operations to targeting the domestic and business markets in the short term.

Large-scale operators have the option of converting hotels into holiday homes in order to attract the post-Ramadan domestic market. Holiday homes have the duel benefit of lower operating costs and lower risks and will help international chains weather the tourist drought.

 

tourism report

While a resumption of tourism from Europe and Russia will not come in the near future and domestic tourism alone will not be enough to stimulate an economic recovery in the short term, there are a few indicators that tourism will rebound in the mid- to long-term

Luxury hotels in Hurghada and Sharm El-Sheikh have also started to shift their operations to target the business class by providing infrastructure for the meetings, incentives, conventions, and exhibitions (MICE) market.

Alexandria is primed to take the lion’s share of this market as the city has been the business hub for Africa and the Gulf since the Libyan Civil War and has the infrastructure to take full advantage of the developments in this market.

It is for this reason that Alexandria will be least affected with the drop in tourism owing to its business facilities and year-round tourism as opposed to the seasonal tourism markets of Sharm El-Sheikh and Hurghada.

Alexandria is closely connected to the GCC market and experts see the price of oil as a heavy indicator of the boom in business tourism.
tourism

Oil prices have steadily increased. Since bottoming at $20 a barrel, prices have rebounded to $50 a barrel and have continued to rise. Many economic forecasts indicate that prices will steadily rise and will stimulate the markets in the Gulf.

According to the report, corporate tourism from the Gulf makes up a large portion of tourism profits and may galvanise a greater recovery in the tourism sector.

Another compound effect may be the 2030 Saudi development plan, which will see a large increase in investors travelling to the region.

Likely, Egypt’s tourism sectors in Hurghada, Alexandria, and Sharm El-Sheikh will be utilised for its conference infrastructure

Political and economic recovery in Libya will also help to keep the tourism sector on life support as Egypt is becoming the main hub for African business to Europe and Asian business to North Africa.

The orientation change of Egypt’s tourism market will serve it well as investors flock to the region to offset global depression in investment and take advantage of changes in the regional market.

What may, in the end, bring tourism back to pre-uprising levels could be the beginning of production from the giant Zohr Liquefied Natural Gas (LGN) field, discovered last year, which is set to begin production in 2017 as part of a rapid development agreement between the Italian gas firm Eni and the Egyptian government.

This will help bring in European investors to the country and will set Egypt as the regional leader in LNG, as Israel and Cyprus have been slow in the development of the gas fields off their respective coasts. LNG is set to become one of the most important commodities for investment in the near future, according to BP and Goldman Sachs, due to its low volatility and lack of intense competition.

Tourism has been under attack as Egypt’s place as a “frontline state” against the threat of Islamic State (IS), which has declared its intention to target Egypt’s tourism sector in the hopes of a political and economic collapse of the Al-Sisi regime.

Threats of attacks on tourism landmarks, such as the Pyramids and the Egyptian Museum, as well as continuing insurgency in Sinai, which culminated in the attack on the Russian passenger aeroplane, has diverted UK and European tourism from North Africa to Portugal, Turkey, and Spain. This trend is likely to continue after EgyptAir flight MS804 crashed in the Mediterranean on Thursday.

Terrorism and political turmoil, not just domestically but in the region as a whole, has influenced tourism levels in Egypt to make it very unstable and prone to period shocks.

tourism

 

Between 1991 and 1997, since the outbreak of the Persian Gulf War and the increasing level of domestic terrorist attacks from groups such as Al-Gama’a Islamiya and Islamic Jihad, Egypt lost between $4-6bn in revenue annually and nearly 5 million people lost their jobs.

Similar shocks took place after the 11 September 2001 attack on the United States, the 2005 Sharm El-Sheikh attacks, and the 2006 bombing in Dahab and a dramatic fall in tourism in 2009 as a result of regional instability, including the kidnapping of 19 tourists in Sudan.

Tourism reached its zenith in 2010 only to bottom out again in 2011 and 2013 as a result of political uprisings and instability.

In 2010, it was estimated that tourism employed 12% of the labour force, accumulated 12.5bn in revenue, contributed 11% of GDP, and made up 14.5% of foreign currency reserves it made a prime target for terrorist groups who directly target the tourism sector to threaten the economy and the regime.

 

 

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https://dailynewssegypt.com/2016/05/22/foreign-tourism-depression-continues-hope-growth-pinned-domestic-regional-market/
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