Egypt: The Russians are Coming

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Western European tourists have new competition for hotel rooms in Egypt. For the first time, Russians are expected to surpass other visitors, with 2m projected to arrive in 2008. The Egyptian tourism industry has benefited from the shift. According to a report by lastminute.com, an online travel and tourism agency, Russian tourists spend more money and have lower expectations about service than their German, British and American counterparts.

Increased Russian presence in Egypt is part of a larger global trend. According to the Russian Tourist Industry Association, Russia is the world's fast growing outbound market with 9.36m Russians travelling abroad in 2007, a 20.8% increase compared to the previous year. In 2007, 1.5m of these tourists chose to spend their vacation in Egypt.

Russians, along with other tourists, have boosted the Egyptian tourism industry. According to the ministry of tourism, there has been strong growth in the sector through the first six months of 2008. Despite competition from other Mediterranean locations, Egypt has tried to develop distinct offerings at affordable prices. This strategy has lead to a 25% increase in tourist arrivals from June 2007 to June 2008, with numbers growing from 9.8m to 12.3m, according to Tourism Minister Zoheir Garranah. This is a significant increase for a sector that already accounts for 11.3% of the country's Gross Domestic Product (GDP) and employs 13% of the total workforce.

Egypt has sought to diversify its tourism offerings to attract a broader range of visitors. "We now have a lot of people that don't come just for the historical side," Mohammed El Shabrawy, vice chairman & managing partner of American Express Travel Serves, told OBG. "They come for the diving, for the shopping and for the cruises."

And it is getting even easier for tourists to get to their chosen Egyptian destinations. Tourism has benefited from an increased number of charter flights from outbound markets such as Russia and Europe, making it simpler and more affordable to vacation in Egypt.

Although the sector is currently strengthening, the world economic downturn and the climbing local inflation may eventually affect tourist arrivals. Analysts believe that the global economic situation will have an uneven impact on the industry. Some lower-end travellers may decide to stay home, but it is anticipated that others will continue to visit Egypt. "We are still comparably low priced, so for the middle class tourist, Egypt is still a desirable and affordable destination," said El Shabrawy.

To capitalise on the recent growth and to avoid downturns, the Egyptian tourism operators will have to take proactive measures, said Garranah. "Increases in daily living and fuel costs, which impact airline prices, are a concern. The solution is not to raise ticket prices." He said that this strategy would likely fail, which would lead operators to start making special offers. If this happens, Egypt would become known as a discount destination, he told OBG in a recent interview.

Discount destination is a label Egypt is trying hard to avoid. Instead, to combat anticipated declines in arrivals from traditional markets, Egypt is working to expand its tourist bases, particularly into China and India. By the year 2020, China and India are expected to provide 150m tourists per year.

In addition to targeting burgeoning markets in Asia, Egyptian operators are trying to target less obvious markets, like Australia, El Shabrawy told OBG. To attract these customers, operators have developed a number of strategies and partnerships. They have joined with carriers like Alitalia and Singapore Airlines to offer free stopovers in Egypt, allowing visitors to have short stays as part of longer trips from Australia and Asia to Europe.

Given the rising costs that airlines bear and the influx of tourists to Egypt, this partnership is advantageous for both parties. "The airlines discovered that they cannot survive on their own. But if they partner with tour operators they can fill the seat, and the operators can sell the tours. They know they have to work together," said El Shabrawy.

Expanded collaboration might be the best protection for the Egyptian tourism industry against the global economic downturn. Product bundling would likely increase volumes and boost revenues. "When there is high demand, businesses tend to increase prices. But you have to give value for this increase. The more you give, the more you get," Garranah told OBG.

© Oxford Business Group 2008