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FEATURE

an industry laid low

four years after an infamous “incident” tore the bottom out of egypt’s tourism industry, worldwide travel fears look set to do it again.

luxor resident mahmoud, who has worked in a small concession stand/restaurant outside of one of the area’s more impressive temples for six years, estimated on october 9 – two days into the american-led campaign in afghanistan – that the number of tourists had been halved. “people aren’t necessarily afraid of egypt,” he said. “people are afraid of flying.”

still, he added, the recent tourist exodus has not been as bad as that following what is referred to as 1997’s “luxor incident.” that time, virtually the entire tourist population flew out of luxor airport the next day. “then, we went seven months without any tourists,” he said.

the luxor massacre briefly tarnished the country’s image, but before september 11, egypt had regained its standing as the world’s most attractive tourist location. the whole world, however, was shaken in one way or another by the terrorist attacks on the united states, and in the wake of what americans are now referring to as “9/11,” cairo travel agencies said their business was severely affected, with widespread, across-the-board cancellations, and three luxury hotels said that occupancy rates were bottoming out at around 50 percent.

the month following the attack was marked mainly by the agonizing wait for inevitable us retaliation, during which the usual torrent of tourists entering egypt was reduced to a trickle.

“egyptian tourism is currently at its lowest ebb since the luxor massacre,” said a reservation manager at a five-star hotel, who asked not to be named. “after the terror attacks, we had a significant slump in reservations and received around 50 percent cancellations.”

a reservation manager at a luxury hotel in cairo had similar complaints. “a month after the terror attack, we are losing significant revenues and are still running at 30-40 percent occupancy rate. the majority of european bookings, which were reserving the majority of the hotel rooms, were canceled as well,” he said. europeans account for 75 to 80 percent of egypt’s tourists.

americans, who are world’s biggest-spending tourists but represent only 4 percent of foreign tourists to egypt, are particularly wary.

neal jones, director of sales & marketing at the new jw marriott hotel and golf resort in mirage city, attributed this to the fact that “global media coverage of this has been far more aggressive than that of luxor. the continuous bombardment is sure to affect sentiment regarding international travel, no matter where people are going.”

one american who had been planning a trip to egypt with his wife said they had delayed their trip until they “truly know the overall sentiment in egypt regarding the united states’ actions in the middle east and afghanistan. we don’t feel safe traveling there, knowing that the underlying radical islamic fringe that exists in egypt could explode at any moment.”

but, he added, a newly acquired fear of flying also had something to do with it. “i must admit that depending on air travel in and out of the region is not exactly my idea of fun the way it is currently operating.”

fear of flying – forgivable as it may be under the circumstances – is perhaps the most troublesome feature of the current goings-on for the tourism industry. as jones said, “when people aren’t flying, they usually aren’t staying in hotels, either.”

a peaked season

“many reservations were canceled and we are not receiving new reservations anymore,” said nashwa gemaly, vice president of emeco travel agency. “unfortunately, this period, from october till december, is the peak season for egypt’s winter high season, which seems likely to suffer as some cancellations have extended for months ahead.”

according to travel agents, airlines have seen falls between 30 percent and 50 percent in the number of passengers traveling to egypt since september 11. however, many were quick to point out that the problem was not confined only to egypt but that the hotel industry was hit worldwide, with some of the biggest luxury hotel groups recently issuing profit warnings.

“currently, our occupancy rate is almost 55 percent said philippe divyzcaya, general manager of sonesta cairo and nile cruises. “this is very bad since it is usually around 85 percent in october, which is the beginning of the high season.”

the cancellations of several international conferences and commercial exhibitions made matters worse, bringing severe losses to hotels in cairo. according to business daily al alam al youm, about 100 american companies apologized for not attending an egyptian tourism convention in september, while the conference for the paris-based international hotel & restaurant association was also canceled in light of events.

“many international exhibitions and trade fairs were canceled or delayed,” said sahar ibrahim, sales & marketing director at acg-ite for trade fairs. “we were forced to postpone one of our exhibitions since it was mainly dependent on foreign clients, who would not have been able to attend the exhibition due to fear of flying worldwide.”

however, the crisis has also exacted a toll on companies specializing in nile cruises, and some operators have halted operations indefinitely. “things on the cruises are even worse than in hotels, because they depend mainly on foreign tourists – unlike hotels that partially depend on domestic tourism,” divyzcaya said.

on october 9, minister of tourism mamdouh el beltagui bravely gave the figures: during the period from september 11 to september 27, egypt received 125,736 foreign tourists, compared to 184,020 in the same period of last year, which represented a decline of 31.7 percent. he added that occupancy rates in egypt’s hotels have plunged 18 percent during the same period, while an october 11 report in the middle east economic digest (meed) quoted the tourism ministry as saying that reservations for the next three months heralded “an even more significant drop.”

airlines on the ropes

since september 11, us economic woes – especially in the aviation industry – have quickly spread to airlines worldwide, which are suffering unprecedented financial losses due to the dramatically lower demand for air travel. this sharp drop in travel has already caused airlines to cut many routes and jobs. us market leader american airlines has announced 20,000 job cuts.

delta airlines, the third-largest us carrier, said it would cut down 13,000 jobs, or 16 percent of its worldwide work force, and trim its operations by 15 percent. delta stopped its flights between cairo and new york, saying initially that flights would be resumed after october 4; however, this scheduled date was later extended. “we are suspending the direct flights between cairo and new york until march 15. currently, we are having a code share with air france, so flights to new york will be operated via paris,” said tim lees, delta’s commercial director.

the impending demise of twa, meanwhile, was hastened. in mid-september, the company suspended its operations and shut its offices in egypt, laying off 140 employees in the process.

with the onset of us-led strikes against afghanistan, several airlines re-routed their itineraries in the region, while others canceled their flights on the first day of the strikes. “we only canceled our flights on the day of the american strikes against afghanistan for security reasons, which led some people to believe we were canceling our regular schedules,” said sayed al sagoff, singapore airlines’ general manager for the mena region. however, he insisted, “we are operating normally and all flights are on schedule.”

national carrier egyptair, which contributes almost $190 million annually to the national economy and employs over 22,000, was immediately affected. “after the terror attacks, our passengers have fallen by 40 percent, forcing us to cut operations by 15 percent,” said an egyptair official who preferred not to be named.

the airline cut several of its scheduled flights, including flights to karachi, in pakistan, and the yemeni cities of sanaa and aden. its two weekly flights to los angeles have also been temporarily suspended. in an attempt to help the carrier, the government will help it out with its insurance premiums.

an indication of the severity of the situation, egyptair recently announced that it would not go ahead with its planned purchase of two boeing 777s, for which it had taken a loan of $160 million.

labor pains

the tourism industry has been clobbered the world over. the city of london reported cumulative losses of up to a billion dollars to date, resulting from the halt of us travelers alone. globally, the travel and tourism industry generates $4,494 billion or approximately 11 percent of global gdp. travel and tourism accounts for 8.2 percent of total world employment, or about 207.06 million jobs globally.

the harrowing implications for egypt, which depends more than any other arab nation on tourism income, can also be deduced from the figures: tourism accounts for 27 percent of foreign-currency revenues, making it roughly on par with suez canal receipts. tourism revenues reached $4 billion in 2000, accounting for 27 percent of foreign-currency earnings.

according to an october 12 meed report, the current crisis is likely to result in the loss of some $2 billion in current-account receipts over the next two years. “this is expected to be partially offset by a reduction in hard-currency outflows associated with egyptians traveling abroad, through a combination of devaluation and fear of being exposed to anti-arab racism in europe and the united states. these outflows have been running at about $1 billion a year,” the report stated.

according to mohammed sakr, economics professor and economic adviser to the tourism ministry, there are one million people who work directly in the tourism industry, and another 1.2 million who work indirectly in the sector. that’s 2.2 million people who represent 15 percent of the country’s labor force, so the implications in terms of unemployment could be catastrophic.

“so far, we expect a decline in employment, because many tourism jobs will be lost,” sakr said. “we’ve lost 10 percent of total employment in the sector, and if the situation continues, we expect to lose another 15 percent.”

the government, meanwhile, is trying to convince businesses not to lay off their people en masse. “there will be financial incentives like interest-rate reductions on loans, tax breaks and exemptions, and deferred payments,” he said. “the government will compensate for losses incurred due to the situation. in return, businesses are expected to retain their work forces.”

on october 2, international rating agency standard & poor’s noted that egypt’s tourism industry was likely to suffer due to security concerns in the region. “exports to the eu and the us, which together amount to 79 percent of egyptian exports, will also suffer due to the economic slowdown,” according to an s&p statement. “faced with lower foreign-exchange earnings, a potentially more volatile region and lower growth expectations, pressure on the egyptian pound could increase and will test the flexibility of the exchange-rate regime.”

some observers are voicing concerns about the extent to which the entire economy is dependent on a single industry, and the risk of counting on one sector for a quarter of the country’s foreign-currency revenues. “cultural heritage and natural beauty make tourism normally generate 80 to 90 percent of the value of merchandise exports,” explained hala el saeed, associate professor of economics at cairo university. “since 1991, tourism has been the first source of income.”

to avoid dependence on volatile revenues, she said, “it is high time for policymakers in egypt to think about diversifying foreign-exchange sources, most important of which is export.” while the majority of egypt’s tourists come from europe, the pound is still pegged to the us dollar. “egypt should also consider pegging its currency to a basket of foreign currencies, weighted proportionally on the basis of trade relations – especially as europe is our first trading partner after the us,” el saeed said.

build-delay-operate-transfer

tourists aren’t the only ones whose numbers are set to go down. foreign investment projects too – especially those with a tourism angle – are expected to see their numbers dwindle.

on september 25, the kuwait-based al kharafi group announced its decision to postpone the opening of the marsa alam airport, which had been scheduled to open the first week of october, according to al alam al youm.

the airport was unique in that it was egypt’s first bot, or build-operate-transfer, airport, which had been conceived as only one element in a massive new tourist resort on the red sea.

in a statement, al kharafi said that the opening is subject to the regular movement of international flights, adding that all preparations and construction had been completed.

unlucky luxor

volatility is most dangerous in a one-industry town like luxor. wessam farah, in charge of guest relations at the winter palace, luxor’s swankiest hotel, cited figures of approximately 15 cancellations a day, mostly by american, british and french clients. “it’s not clear yet,” she said. “october won’t be affected because clients paid in advance.”

the full scope of the incident’s damage to the industry would be more apparent in november, she stressed. but as of mid-october, “we just don’t know.”

pamela purdy, a tourist from england, was staying in a one-star hotel in the center of luxor, where, according to the management, the occupancy rate had been hovering around 10 percent, when under normal circumstances it would be full to bursting. she had just returned from a nile cruise, the atmosphere on which she described as “au naturel,” despite the virtual absence of any americans and proportionally fewer britons.

in luxor, while there are no official figures, residents claim the local economy is “90 percent or more” based on tourism. seemingly unrelated industries are also feeling the bite, as reduced occupancy rates at the city’s multitude of five-star hotels means significantly less locally grown produce will be bought from farmers in outlying agricultural districts. “when there are tourists, everybody has money,” explained sayyed, a felucca captain.

even government employees, who are not paid enough to make ends meet, will often take evening, tourism-related jobs in order to supplement their salaries, said restaurant owner ashraf hameed.

hameed owns a small restaurant, which he recently converted into an internet café, in luxor’s midtown. since he got the internet access, he said, 95 percent of his clientele has been foreigners, mostly logging on to send e-mails home.

on the evening of october 9, as the allied bombardment of taliban positions in afghanistan entered its third night, 26 customers had logged on at hameed’s café. by the end of the next day, there had been just one. before september 11, hameed had been planning to rent the upstairs of his shop to a cairo-based company intending to set up an internet server. but in the current state of uncertainty, the deal was called off.

small businesses aren’t the only ones “waiting-and-seeing.” the meridien chain, which only just opened its gargantuan super-hotel in manyal, cairo (and which is currently utilizing only three of the building’s 40 floors), was also set to open a smaller hotel in luxor this month. that plan has been put on hold indefinitely.

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