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The Tourism Sector in Egypt - August 2002

Tourism has experienced remarkable worldwide expansion over the last half century, despite a slight drop in 2001 due to a decrease in economic growth and the September 11th attack on the U.S.

Tourism in Egypt has witnessed rapid growth during the last decade. With a share of around 25% of the Middle East tourism market, Egypt has witnessed a tourism growth rate of 10%, higher than the world average (7%). In 2000, international tourist arrivals reached 5.5 million, a growth rate of 14.8% from 1999. This growth is reflected by an increase in international tourist nights, international tourist receipts, hotel occupancy levels, and hotel capacity, particularly in the Red Sea and South Sinai areas. However, this growth saw a decrease in 2001 because of the political conflict in the region and the September 11th attacks. Egypt attracts tourists for a range of purposes, mainly recreational, to a variety of destinations, and from a variety of countries, particularly from Europe.

The tourism sector makes a significant contribution to the Egyptian economy, representing around 4.4% of GDP and 7% of total employment if only the direct effect is considered. However, when secondary/indirect effects are taken into account, these percentages rise to 11.6% and 15%, respectively. Tourism is also the largest foreign exchange earner in the country, with receipts reaching a value of US$4.3 billion.

External factors affecting tourism growth include political instability, the impact of the euro/dollar relation on hotel prices (especially for Europeans), and foreign competition, including from other Mediterranean countries, such as Turkey. The GATS agreement will result in greater foreign competition, but also in a potential transfer of foreign technology and skills to Egypt enhancing service quality.

Internal factors that affect tourism growth include the institutions responsible for tourism development. Institutional obstacles include administrative complexity, financing limitations, and fees and taxes. Policies that impact on tourism growth are the exchange rate policy, tourism regulations, environmental policies, pricing policies, and marketing policies. Human resources, particularly education and training, and tourism-related services, including travel agencies, tourist guides, public tourist establishments, transportation, and infrastructure, are other important factors.

In 2000/2001 investment in tourism was worth L.E.99.3 million, representing a significant and growing share (7.3%) of total investment. Investment opportunities are presented by the TDA, specifically in the Red Sea, Aqaba Bay, Ain El-Sokhna, Ras Sudr, and Ras El-Hekma areas. In addition investment opportunities related to privatization, hotels, tourism-related services, and eco-tourism exist.

The tourism sector in Egypt is experiencing growth in both supply and demand, creating potential investment opportunities. Despite the recent decrease due to the September 11th attack and political conflict in the region, long-term expectations for tourism in Egypt remain optimistic.

After presenting an overview of the sector, this study presents recommendations regarding responses to GATS, institutional developments, fees and taxes, the reform of key tourism regulations, environmental development, marketing development, appropriate pricing strategies, human resources development, transportation, and some general suggestions.

Sector Highlights

• Tourism in Egypt attracted 4.65 million visitors and generated an estimated $3.8 billion in 2001.
  
  
• The greatest numbers of tourists visiting Egypt are from Europe, representing over two-thirds of all foreign visitors.
  
  
• Tourists visiting Egypt for leisure and entertainment outnumber those visiting for cultural and historical sightseeing.
  
  
• Cairo is the main tourist destination followed by the Red Sea and South Sinai.
  
  
• There are 21 existing and 19 planned national protectorates in Egypt.
  
  
• Tourism education in Egypt was initiated in 1962, with private sector participation in tourism and hotel education beginning in 1990.
  
  
• Aviation is the leading mode of transport used by international tourists.
  
  
• In addition to the creation of a website to market Egypt as a tourist destination, several information technology activities were initiated in 2001 to increase tourism growth in Egypt.
  
  
• The planned future growth in accommodation capacity coupled with increasing hotel privatization offers significant opportunities for hotel management companies.
  
  
• Foreign firms manage the majority of four and five star hotels in Egypt.
  
  
• The U.S. has the largest market share among foreign hotel management companies.

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