Egypt’s tourism troubles need more than a currency devaluation

A dancer lets a tourist practice the traditional tannoura dance at a cafe in the Red Sea resort of Sharm El Sheikh. Asmaa Waguih / Reuters

The devaluation of the Egyptian pound is unlikely to shore up the country’s tourism industry until security perceptions improve, say analysts and travel agents.

The 13 per cent devaluation of the pound against the dollar on Monday makes holidays in Egypt even cheaper for inbound tourists.

“For the real impact to be felt from this end, we still await the lifting of travel restrictions that are put in place by the UK and Russia, as both consti­tuted roughly 45 per cent to 50 per cent of tourism revenues prior to the [October 31] plane crash,” said Allen Sandeep, an analyst with Cairo-based Naeem Brokerage.

Meanwhile, Abu Dhabi’s Kanoo Group is taking a long-term view. It expects the devaluation to enhance its inbound travel business into the North African country.

“We are looking long term. I am not looking to pull money out. If it devalues, it becomes cheaper for us to invest back into Egypt,” said Mishal Kanoo, the chairman. “The fact that the government has devalued the currency is actually a positive thing for us in terms of travel because it makes it cheaper for people who want to go to Egypt.”

Kanoo Group has partnerships with travel agencies in Egypt and Kanoo Travel is one of the largest travel agencies in the UAE.

Industry insiders said that sec­urity perceptions rather than affordability was the main cause of the low tourist numbers in the country.

“Egypt as a destination is seen as not secure, especially in Europe, which was the top [source] market,” said Akram Adel, a director at Travco, one of the major Egyptian travel agencies in Dubai.

While there is a travel warning from the United Kingdom and Russia, there are no alerts for tourists from Italy, France and Germany.

“But even then there is no demand from these countries,” he said. “Hopefully by [next] winter, we will see more activity.” He expects Russia to resume flights to Egypt next month.

On March 31, Travco will run its scheduled charter flight to Egypt from Dubai with 142 seats for an all-inclusive Nile cruise from Aswan to Luxor for Dh3,300 per person.

“We have secured 70 per cent [load factor] and hope to have more by the end of the month,” Mr Adel said.

Cheaper holiday options in Egypt now are unlikely to trump security concerns from European tourists, and the tourist numbers are expected to improve only marginally, if at all, said Rashid Aboobacker, the associate director of TRI Consulting in Dubai.

“We do not expect the industry to bounce back and tourists to return until the security situation improves considerably and there is improved confidence among both travellers and operators about the safety of tourists, particularly in the Sinai peninsula,” Mr Aboobacker said.

Further devaluation of the Egyptian currency is not likely, said Allen Sandeep. “For the longer term, however, a lot would depend on improvements in [foreign direct investment] and revival of portfolio inflows through equities and debt, back into the economy,” he said. “Assuming overall that this would eventually result in the Central Bank of Egypt’s targeted forex reserve level to reach US$25 billion [by end of this year], we could then be nearing a full-fledged currency float.”

On October 31, a jetliner downed by terrorists crashed in Sinai, killing 224 Russian passengers and crew. Russia’s federal air transportation agency reacted by cancelling all flights to Egypt, from Nov­ember 6.

Russia’s flagship carrier Aeroflot also discontinued its services to Egypt until March 27 from December 1. The UK travel agency Thomas Cook extended the cancellation of all its flights to Sharm El Sheikh from last May. It reported revenues from the Egyptian sector were down by £13 million (Dh67.6m) so far this year compared with the same period last year.

Thomas Cook was not available for comments on resuming flights and tour packages. Last month, easyJet cancelled all flights to Sharm El Sheikh from the UK airports of Manchester, Luton and Gatwick until May 27. British Airways has cancelled services to Sharm el Sheikh until September 15.

* with additional reporting by Dania Saadi

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