Nation Waits for Tourism to Rebound – Wall Street Journal

May 21, 2012

By Farah Halime

GIZA, Egypt—Businesses relying on tourists visiting Egypt’s ancient sites are counting on the post-revolution presidential elections later this month to calm political turbulence, allowing their companies to return to something resembling normal after suffering their worst slump in three decades.

Until the revolution last year that toppled the long-standing regime of President Hosni Mubarak, tourism in the land of the Pharaohs was a major source of income, at one point accounting for 10% of gross domestic product.

Last year, however, tourism revenues dropped by nearly a third, amid the worst stint of political instability here since the assassination of President Anwar Sadat in 1981. More than a year after the Arab Spring, potential visitors have been deterred by the regular flare-ups of protests and sectarian violence as the country seeks a new political balance. The hope is that calm—and tourists—will return after the May 23-24 presidential elections, but this is by no means guaranteed.

The cruise ships that would travel up and down the Nile stopping at traditional tourist havens are largely tied up at docks. Those tourists who still come to Egypt bypass the Nile region in favor of the more modern beach resorts on the Red Sea at the southern tip of Egypt’s Sinai Peninsula.

Hisham Zazou, Egypt’s deputy minister of tourism, describes the Red Sea area as if it is another country; President Mubarak fled there as the protests in Cairo that led to his downfall escalated.

“Demonstrations in Cairo are one of the main challenges we’re facing because when the media transmit this type of image, it reflects negatively on efforts to promote Egypt as a destination,” Mr. Zazou says.

The Nile has lured tourists to Egypt for more than 100 years to board the storied cruises. The trip takes passengers on a leisurely seven-day passage to view the ancient monuments in Luxor and Aswan—a glimpse into an ancient world. For many, it is the epitome of genteel adventure, celebrated by artists and novelists. But where at least 300 boats once provided cruises along the world’s longest river, just 50 are still plying their trade today.

The collapse of Egyptian tourism has had wide-reaching implications. Thomas Cook Group TCG.LN +1.27%PLC, Europe’s second-largest tour operator, was badly hurt by the collapse of its North African business, especially in Egypt. A pullback in investment by tour operators contributed to foreign direct investment in the country falling to $2.2 billion in the fiscal year ending June 2011, from a high of $13.2 billion in 2008.

Thomas Cook’s larger rival, TUI Travel TT.LN -0.62%PLC, confirms it is seeing a recovery at the Red Sea resorts. But “Cairo remains weak,” a spokesperson says. Both companies serve the Red Sea resorts, and offer Nile cruises and tours to the traditional destinations.

The comparison between the Red Sea resorts and the inland destinations is stark. Hotel operators in resorts like Sharm El-Sheikh report occupancy rates of 80% to 90%, compared with rates of about 45% for hotels in Cairo.

Nahed Samir, vice president of operations and business for Sonesta Middle East, a luxury hotel chain, said the company’s cruise ships will take part in a new government initiative to try to boost Nile cruises by September, by which time presidential elections will be long finished and the industry hopes to be booming once more.

With an average capacity of 53 luxury suites costing between $300 and $450 a night, each of its five boats can generate as much as $2.5 million in revenue in a good year, Ms. Samir estimates. But it has been a difficult 18 months for the company, which had to lay up one of its cruise ships because of the lack of business. Occupancy on the four remaining boats has barely risen past 35% on average, Ms. Samir says.