Region's marketers recoup to assess economic impact on 2011.
Marketers have been buffeted but not completely bowed by the recent social turmoil that swept through the MENA region during most of February.
The short to medium term cost of hard won social change however is becoming increasingly apparent.
The economic impact is still being assessed, but office closures, cancelled events - most notably the Formula One grand prix and GP2 Asia Championship, both in Bahrain - and a sharp drop in tourist arrivals, especially in Egypt and Tunisia, will dent profits for clients and agencies alike.
Egypt
Speaking from his office in Cairo, Medhat Amin, MD, Mindshare Egypt, tells GMR that a month of inactivity through intermittent office closures has forced a downward revision of 10 per cent for 2011 forecasts.
The Egyptian Tourist Authority - ETA - is a key Mindshare client.
"What's unknown yet is for how long clients would remain inactive," Amin says. "There are two scenarios. If the situation goes back to normal in the coming few weeks, we expect many clients would compensate for the inactive period.
"If not, we expect there will be a drop of at least 30 per cent versus what we had budgeted before the revolution."
"We have already started working on a strategy to bring tourism back to Egypt," he says.
"The revolution brought about a global scare to tourists intending to visit Egypt. However, the Ministry of Tourism is adamant about bringing back the tourists to a better Egypt."
"The decision to reconvene global campaigns as soon as possible had already been taken, however there is some caution as some countries' governments have issued travel warnings."
FP7 Cairo, meanwhile, closed for five days, reports GM, Lina Fateen.
"We cannot assess financial losses accurately yet as the situation is still vague with many clients - whose budget reflects hours at the end of the day - but for sure there will be a loss," she tells GMR, adding that it would be "huge in Q1," but hopefully pick up between Q2 and Q3.
"We're working on a few proactive campaigns in the meantime to get buy-in from clients to sponsor a call for action for productivity, tourism - postcard from Egypt - and change from within," she says.
Raja Trad, CEO, Leo Burnett MENA, whose Cairo office closed for nearly a fortnight, but had now resumed normal operations says that it was too soon to guage the impact on the network.
"Clients have reactivated communications requests and we believe that things will resume normalcy," he told GMR.
Leo Burnett does not have offices in Algeria, Tunisia, Bahrain, Yemen and Libya.
Bahrain
The economic impact on Bahrain - the venue for the 43rd IAA World Congress in March - is more easily estimated given the well-documented benefits of F1.
Martin Whitaker, former CEO of Bahrain International Circuit - home to the Sakir F1 track - said that the 2008 grand prix generated $600 million for the economy, as well as changing international perceptions of the Middle East.
The upfront investment is considerable, especially for hosting the season opener, traditionally the one to garner the highest global TV ratings. F1 chief Bernie Ecclestone, however, has since waived the $40 million race fee which mitigates some losses, but local sponsors are inevitably short-changed.
Public agency The Bahrain Economic Development Board - responsible for attracting FDI to the kingdom and the body behind the Business Friendly Bahrain global awareness campaign - declined to comment, but Gulf Air, the F1 title sponsor, told GMR, somewhat predictably: "We fully support the decision by the Kingdom's leadership to reschedule the race and we are looking forward to a new date being set and to welcoming the fans and teams later in the year."
Other brands are said to have paid around $2 million for smaller sponsorships.
Bahrain Duty Free, for example, will lose the $500k incremental income it normally derives from Race Week. Global and regional sponsors have traditionally used the arrivals and departures outlets as brand activation platform and dress the shops as F1 tracks. This has helped generate an increase of 40 per cent above the average spend per passenger throughout the year. Beverage giant Diageo - makers of Johnnie Walker whisky global sponsors of Mercedes McLaren GP - was lead merchandiser this year, others included Marlboro, HP and Ferrari.
"It's a crisis of course," said DDB Bahrain managing and creative director, Francois Bourgoin, "but I trust Bahrain as a community will do a great job of handling it constructively and as a consequence will emerge a winner, even if in the short- to medium-term this will undeniably affect some businesses and suggest a rethink of Bahrain's brand image."
Liam Farrell, founding partner and executive creative director of Bahrain-based creative consultancy, Unisono, said the F1 effect had been largely "overhyped".
"Few brands made much of the F1 year-by-year, except main sponsors Gulf Air or constructors like Toyota. Hotel brands including the Ritz and Gulf Hotel will suffer on fewer numbers for this one weekend, especially as they add a whopping F1 tax on all rooms." He added that the keenest effect would be felt in the entertainment sector as visitors for the F1 like to party.
"The island feels alive for one weekend so we will definitely miss it, but I feel most brands here fail to really make the most of the F1."
Founder of one of Bahrain's oldest agencies, Gulf Marcom, head of the local IAA chapter and the man who is bringing the IAA World Congress to the kingdom, Khamis Al Muqla remains cautiously optimistic.
At the time of writing he told GMR's sister title Communicate the grand prix cancellation would have an immediate impact on marketing activities, and let's not forget that GP2 Asia Championship was cancelled too.
"So this period, the first quarter, which is a very active period, will be affected," he said, adding that he was in contact with the IAA pending a board meeting this month when the situation would become clearer. "But let's be more optimistic," he concluded. Samir Ayoub, CEO Mindshare MENA, however, speaking about the cancellation is characteristically direct: "We expect many clients either to cease or reduce spend. Nothing is clear or predictable yet."
© Gulf Marketing Review 2011
