VZCZCXYZ0000
RR RUEHWEB

DE RUEHEG #0077 0151406
ZNR UUUUU ZZH
R 151406Z JAN 09
FM AMEMBASSY CAIRO
TO RUEHC/SECSTATE WASHDC 1370
INFO RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS CAIRO 000077 
 
SIPDIS 
 
E.O. 12958:  N/A 
TAGS: ECON EFIN EINV PGOV PREL EG
SUBJECT: Egypt's Tourism Hurt by the Global Financial Crisis 
¶1.  (U) SUMMARY: Signs of a slowdown in the Egyptian tourism sector 
are beginning to emerge as a result of the global economic crisis 
and may have a significant impact on revenues, employment and growth 
 
in 2009.  Tourism in Egypt is the top foreign exchange earner and 
made up 19% of forex revenues in 2008. Tourism, particularly in the 
Red Sea beach resorts, is also being hurt by the crisis in Gaza. 
END SUMMARY. 
 
¶2.  (U) Tourism is Egypt's largest source of revenue. Over the last 
twenty five years, Egypt has significantly expanded its tourism 
infrastructure and diversified its offerings beyond Pharaonic 
antiquities to include five-star beach destinations and the breadth 
of Egypt's unique cultural heritage.  The sector has faced setbacks 
before, such as attacks on tourist targets in the 1990's, but it has 
recovered and continued growing.  Now, as tourism infrastructure 
continues to expand, the industry is being confronted by another 
significant challenge, the global financial crisis. 
 
¶3.  (U) On January 12, Minister of Tourism Mohamed Zoheir Garanah 
announced that 12.8 million tourists visited Egypt in 2008, up 15.3% 
from 2007.  They spent 129.2 million nights in Egypt, up 15.9%.  The 
sector generated revenues of $10.98 billion in 2008, compared to 
$9.5 billion in 2007.  Tourism accounts for 6.6% percent of GDP, and 
contributes indirectly to an additional 4.7%.  It also accounts for 
19.3% of foreign exchange revenues, 40% of total services exports, 
12.6% of employment, and 4% of total investment. 
 
¶4.  (U) Egypt's tourism industry is feeling the impact of the global 
economic slowdown.  This year, hotel bookings are down 30%, and the 
media reports that occupancy rates in hotels in the Red Sea and 
Aswan during the New Year's holiday dropped to 45% and 65% 
respectively. Recently, officials from South Sinai's tourism 
development office reported that some hotels in Taba and Nuweiba may 
be shut down as a result of falling demand, and others might be 
closed until the spring.  Some hotels and tourist villages in 
southern Sinai and some floating hotels in the Nile between Luxor 
and Aswan have had to lay off part-time seasonal workers as a result 
of a decline in the occupancy rate.  In Cairo, major hotels have 
reported to us that occupancy rates are about fifty percent, 
compared to a normal rate of 60-70 percent at this time of year. 
More recently, we have also heard accounts of cancellations related 
to the crisis in Gaza, particularly in the Red Sea beach resorts, 
which are popular with Israeli tourists. 
 
¶5.  (U) In 2008, the largest number of visitors to Egypt came from 
Russia, followed by Germany, the UK and Italy.  All four countries 
have recently gone into a recession, and their currencies have 
depreciated markedly (10-20%) against the Egyptian Pound over the 
last few months.  The Minister of Economic Development, Osman 
Mohammed Osman, told the Middle East News Agency that Egypt could 
lose between $5 billion and $6 billion in foreign revenue in 2009. 
Last year, Egypt posted real GDP growth of 7.2%, but declines in 
tourism will undoubtedly affect overall growth, which the World Bank 
now projects will be 4.5% in the 2008/09 fiscal year. 
 
¶6.  (U) In response, the Government of Egypt has implemented several 
measures to address the crisis, including increased marketing, 
particularly in new markets in Asia and eastern Europe; efforts to 
improve service quality; and incentives for low-cost air carriers 
and charter flights.  On January 12 the Ministry of Civil Aviation 
announced a six-month exemption from take-off and landing fees for 
charter flights landing at Luxor, Aswan and Abu Simbel airports, 
provided that companies operate flights three times a week. 
 
¶7.  (U) Comment:  A slowdown in tourism will have a substantial 
negative impact on the Egyptian economy and employment.  This, 
combined with declining Suez Canal revenues and projected declines 
in worker remittances from the Gulf (septel), spells even more 
trouble for the economy this year and will present significant 
challenges for the government.