Recently published research from Business Monitor International, "Egypt Tourism Report Q2 2014", is now available at Fast Market Research
PR-Inside.com: 2014-03-27 22:02:09
BMI's Egypt Tourism Report analyses the investment potential Egypt offers to large tourism-focused industries - particularly global hotel groups - as they seek to harness the growth opportunities being offered by the local market over the long term. However, over the short term, still-high political risk will continue to act as a clear suppressant to tourism demand.
In this context, the February 2014 suicide bomb attack on a tourist bus in Taba, in Sinai - which killed three South Korean tourists and the Egyptian bus driver - is clearly a worrying development and a clear threat to the country's already-struggling tourism sector. The Islamist militant group Ansar Beit al-Maqdis claimed responsibility for the attack, the first major terrorist incident against tourists since the April 2006 bomb attacks in the beach resort town of Dahab in South Sinai, which killed 23 people, mainly foreigners.
The Islamist group has already threatened to carry out more strikes against economic targets, with tourism now clearly identified by Islamists as a way of attacking the current interim government, which has been carrying out a nationwide crackdown on Islamist groups. The attack also raises unwelcome echoes of the prolonged Islamist insurgency of the late 1990s, which frequently targeted tourist buses and sites.
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For Egypt, the attack is clearly a significant blow to tourism, particularly as the insurgency in Sinai had appeared relatively contained. The tourism sector accounts for roughly 20% of the country's foreign exchange earnings and is about a tenth of the economy. 2013 was a very difficult year for the industry, with tourist arrivals down by almost 18% to 9.5mn and tourist receipts down by 41%, to US$5.9bn.
Against this challenging backdrop, and given the high likelihood of additional political tensions in the runup to presidential and parliamentary elections in H114, BMI retains a cautious outlook on the tourism sector in 2014. Pre-2011, Egypt saw more than 1mn tourists arrive each month; this level remains a long way off, and we do not expect a return to those figures for the foreseeable future. In fact, we are now targeting a further 5.0% fall in arrivals over 2014, to just under the 9mn mark, with risks very much to the downside if the domestic political and security situation continues to deteriorate. With regards to tourism receipts, we are slightly more optimistic, targeting slight growth (of just 1.9%), to around the US$6mn mark. This would reflect higher spending in the country, given the ongoing weakness of the Egyptian pound, coupled with special offers being promoted to attract tourists.
Given the continued uncertainty over the domestic political and economic situation, BMI has also become more negative on the outlook for the local hotel industry, where we are now forecasting a steady fall in the total number of hotels and accommodation establishments in the country over the newly extended forecast period to 2018. Although big hotel chains may still be looking to invest in Egypt given its long-term potential as a tourism market, smaller, independent hotels may be forced to close (either temporarily or permanently) as a result of the short-term challenges facing the industry.
If the significant security challenges facing Egypt can be overcome, then there are still reasons to be cautiously optimistic on the longer-term outlook for the tourism industry. The country boasts extensive tourist infrastructure and well-regarded resort destinations, with a weak outlook for the Egyptian currency also likely to see the country favoured as a 'low-cost' destination by tourists from the US and Europe.
* In December 2013, Starwood Hotels and Resorts opened the 349-room Le Meridien Cairo Airport. This property offers a range of business and leisure facilities, including seven function rooms and a business centre, as well as a range of dining options. * Starwood's corporate website also refers to three new planned openings for Egypt over the coming years: the 292-room St Regis Cairo (September 2015), the Westin Cairo Golf Resort & Spa (September 2015) and the W Cairo (January 2016). * Egypt-based Travco's Steigenberger Hotels subsidiary recently opened two new properties in Egypt. As of November 1 2013, the Jaz Makadi Bayview Hotel & Golf Resort in Madinat Makadi has been rebranded as the Steigenberger Makadi. In January 2014, Steigenberger opened the brand new Steigenberger Aqua Magic resort in Hurghada, which offers 707 rooms and suites. * BMI believes that the total value of Egypt's hotel and restaurant industry will continue to fall over 2014, by a further 15.4% to just US$2.3bn, reflecting the difficult operating environment. * Egypt remains in last place in BMI's Tourism Industry Risk/Rewards Ratings for the Middle East and North Africa region with a score of 36.16. The country's near-term prospects remain heavily clouded, and we would not expect Egypt to move back up the table any time soon given the ongoing political uncertainty.
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