Factors Affecting The Tourism Industry In Egypt Tourism Essay

Egypt is a country with historical and cultural treasures, as well as its symbol of pyramids. It’s very easy to see Egypt is a country that is so unique and popular for tourists. Egypt’s famous attractions include the Red Sea, The Nile River and some of the major cities like Luxor and the capital, Cairo.

Egypt has a stable economic in the Middle East and with the fast growth of economy, the average of 4% to 5% of GDP have maintained in the past quarter-century. And during past few years, Egypt has organized to achieve good macroeconomic outcomes. Since the government has conducted the economic reform process, the foreign earnings and investors have been the key issue. This was because of the implementation of the economic reforms that made by the government, which including the exchange rate system, the trade regime, the business sector as well as the growing domestic demand. The real GDP growth rate has increased from 4.1% (2004) to 7.1(2007). http://www.gafinet.org/SiteCollectionImages/GDP-Growth-Rate.gif

During the international economic downturn, the Egyptian has handled the crisis well, and achieving the reasonable economic conditions compared to other countries. This is because of the substantial macroeconomic, fiscal and economic reforms that helped Egypt gets through the crisis. Despite the ongoing reforms, the economic still struggles with the growing informal sector, which means the economic reforms which achieving higher growth in these years has made no significant changes on employment and standard of living, the official unemployment rate is ranged between 10% to 15%, and the level of youth unemployment even higher.

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Unemployment

Year

Unemployment rate (%)

2000

11.8

2001

11.5

2002

12

2003

12

2004

9.9

2005

10.9

2006

9.5

2007

10.3

2008

9.1

2009

8.4

Job creation is one of the most important challenges facing Egypt today. Egypt has a young population and a large number of young people are entering the job market each year to apply for jobs. Demand for the labor is a part of problem. Even with the high growth of economy. The job content of growth has not been strong enough to absorb the new entrants to the labor market. The education, training and skills between the jobs offered and the qualification of job seekers have also harmed on employment, especially among the youth.

Inflation rates history from 2003 to 2010

Year

Inflation rate (consumer prices)

Rank

Percent Change

Date of Information

2003

4.30 %

81

2002

2004

4.30 %

83

0.00 %

2003 est.

2005

9.50 %

188

120.93 %

2004 est.

2006

4.90 %

135

-48.42 %

2005 est.

2007

6.50 %

153

32.65 %

2006 est.

2008

9.50 %

188

46.15 %

2007 est.

2009

18.30 %

199

92.63 %

2008 est.

2010

11.90 %

204

-34.97 %

2009 est.

PESTEL analysis:

Political

The political situation in Egypt is likely to be stable since the president Hosni Mubarak was elected in 1981. However, there have been many examples of unrest in recent years. The current political situation is in the middle of an unstable transition period. And the presidential elections are scheduled for next year and it is unsure if President Hosni Mubarak will be a candidate for it. Also concerning the president’s health, Mubarak maybe no longer in power, and the military as well as the Muslim Brotherhood are other two forces which could emerge during an unstable period.

Egypt’s political system receives strong financial support from the U.S., which given a big challenge of the Egyptian state, but today, Egypt is also seeking to strengthen links with countries such as Russia and China.

Economical

Egypt’s geography is considered as a harsh fact of life, the country is largely covered by desert but it’s highly fertile Nile valley and delta, where we can see the most economic activities take place. And the economy of the former British colony (until 1952) was highly centralized but has opened up since 1980s economic change programme. From 2004 to 2008 there has increased more economic changes and improvements to attract foreign investment and its GDP growth were implemented, the average GDP is expected to keep 5% per annum. However, the global financial crisis has slowed down the Egyptian economic, but not stopped the reforms. The international economic crisis slowed down Egypt’s GDP to 4.7% in 2009, and mainly affecting country’s export sectors, including manufacturing industry and tourism industry. Fortunately, growth in domestic sectors, such as energy, transportation, telecommunications and construction kept economic growth and slightly stop falling further in the year of 2009.

Social

Generally speaking, Egypt is like many other less developed countries, it has higher rate of population growth, and also like many developing countries, there is a big gap between the rich and the poor. The top ten percent of the people are living as standard but the majority of the population in urban areas has an extremely hard time meet their expectations. And that’s also the reason why even though Egypt has the high levels of economic growth, living conditions for the average Egyptian still remain poor. Another reason is due to the international economic crisis, Egypt is also affected by the increasing global food prices. There were several protests and strikes by government employees happened in Egypt in 2008 following by increased food prices and shortages. Besides, because of the financial crisis, the slowing down of economic activity in Egypt will reduce the country’s economic capacity to create jobs and consequently increase the unemployment rate.

Technology

ICT (Information Communication Technology) sector has been found by the government as the main component of national economy. As Egypt’s economy grew by 5.8% in the first quarter of 2010, and ICT industry was rapidly growing by 13%. Egypt communications technology is positively having a huge impact on overall economic growth of the country.

Environmental

Environmental issues are considered as the main challenges facing to hospitality and tourism industry, because as growing rate of tourism industry, Egypt has become one of the world’s popular attractions, the so called “Mass tourism” brought a lot of businesses but on the other hand it generated enormous environmental hazards. For instance, Red Sea is under the threat of water pollution, the dust, which causes air pollution, covers the cities. Fortunately, environmental awareness in Egypt is slowly increasing through government programs and policies. Although many of Egypt’s environmental programs are just beginning to gain positive results, the government’s awareness-raising programs are preparing Egyptians to tackle their environmental challenges.

SWOT analysis:

Strengths

Egypt has various natural resources and energy, such as oil, River Nile, and agriculture

Tourism is considered the largest sector of Egypt’s economy – earning the country US $11 billion last year. Egypt attracted a total of 12.8 million visitors in 2008.

Plans and Strategies would encourage international financial support, particularly US aid.

President Mubarak’s government controls over the key power of the country

The government is generally reform-minded to economic policy

Weakness:

Rise of illegal religious parties, e.g Muslim brotherhood upset political environment.

Challenge facing Egyptian economy is rising inflation rate, young population, high poverty levels, and high unemployment

Regional conflict with potential risk, Egypt has minor conflicts along religious lines between the Muslim majority and Christian minority

Opportunity:

Infrastructure investments are conducted by the government, including water treatment plants, highways, railways and power.

In 2011, Egypt aims to attract more than 16 million tourists, generating more than $14 billion in revenue

Threat:

Rising terrorism in Muslim countries would affect tourism industry. Acts of terrorism, including bombings in Red Sea resort and one of the biggest attacks affecting the hotel industry was at the Hilton hotel in Taba where 31 people were killed.

Environmental concerns are relatively new in Egypt. For example, Red Sea is under the threat of pollution. The main causes are the constant pouring wastes by the hotels near costal area, and also the tourism industry has done further harm by pumping chemicals and other waste products in the sea.

Analysis of Hotel Chains

Taj Hotels Resorts and Palaces:

Taj Hotels Resorts and Palaces is a famous chain of hotels and resorts all over the world. The Indian Hotels Company Limited and its subsidiaries are known as Taj Hotels Resorts and Palaces. As a part of the Tata Group, one of India’s largest business companies, Taj Hotels Resort and Palaces own and operate 76 hotels, 7 palaces, 6 private islands and 12 resorts and spas, spanning 52 destinations in 12 countries across 5 continents and employ over 13000 people. Besides India, Taj Hotels Resort and Palaces are located in the United States of America, England, Africa, the Middle East, Maldives, Mauritius, Malaysia, Bhutan, Sri Lanka and Australia.

Taj in Egypt:

Palm Hills Developments (PHD) has signed a memorandum of understanding (MoU) with The Indian Hotels Company Limited, which also known as Taj Hotels, Resorts and Palaces, to manage and organize three hotel investments in its developments on the North Coast, Ain El Sokhna on the Red Sea, also in the historic city of Aswan of Egypt

The hotels will be Taj’s first entry into the Egyptian market and bring with it the Indian chain’s renowned mixture of luxury, service and hospitality. The first deluxe boutique hotel is due to be opened in 2013, and is located in the North Coast Destination, Hacienda Bay. Key features of this 200-room boutique hotel will include a focus on luxury, including magnificent rooms and suites, exquisite dining experiences, a state-of-the-art spa and wellness center and exclusive beach management.

Sustainability Management Control

As hospitality industry has become more and more popular in Egypt, hotel chains have to be able to reach the sustainability requirement, the purpose of this study is to present an overview of a general picture for ecotourism resources management to understand how sustainability can be applied to different hotel sites and how resources can be managed properly as well as marketed effectively and efficiently in Egypt’s hotel industry. As a famous hotel chain, there are several steps that needs to take into consideration:

Taking the environmental measurements when conducting tourism product and implementing market activities.

Producing environmental friendly tourism products and services.

Implementing tourism activities with considering the environmental resources conservation.

Training tourism guides in the forms of ecotourism activities.

By developing the employee’s skills and raising the environmental awareness of resources

Designing a suitable information system for sustainability issues offered by hotel services and facilities.

Other concerns which may affect decision making

Terrorist attacks

It seemed that terrorism has become one of the issues of Egypt. Many hotels were suffered from bombings. The following attacks caused many innocent people dead by terrorist attacks.

The 2004 Sinai bombings were three bomb attacks targeting tourist hotels in the Sinai Peninsula, Egypt, on October 7, 2004.

The April 2005 attacks were three related incidents that took place in Cairo on 7 April and 30 April 2005

The Dahab bombings of 24 April 2006 were three bomb attacks on the Egyptian resort city of Dahab. The resorts are popular with Western tourists and Egyptians alike during the holiday season.

A car bomb explosion outside a church in the north Egyptian city of Alexandria

An attack that would have as perpetrator the terrorist group Al Qaeda, left 21 people dead and 79 injured. The bomb exploded outside a Christian church in the city of Alexandria.

Conclusion:

According to our research and report, we believe that investing in Egypt is a necessary move for the Taj hotel brand. Here are some facts and statics why we think Egypt is worth to invest:

Egypt is currently experiencing a huge boom in tourism industry, which is pushing this historic country to the first line of the developing tourism industry. Recent statistics on Euromonitor International indicates that in the past four years, tourism revenue has increased by 40 %. Furthermore, in order to increase national income from tourism industry, the country has directed part of the foreign investment to construct new hotels to accommodate the growing number of tourists. This trend is the driving force for IQPC’s Hotel Design and Construction Egypt, which took place from December 12-15, 2010.

When asked to describe the current market situation, Simon F. Cooper, president and chief operating officer of the Ritz-Carlton Hotel Company, commented that, “With the growth in tourism, the increasing strength of the Egyptian economy, the sustained development of the infrastructure required, and the investment support from within the Egyptian tourism and hospitality sector, we see expansion within Egypt to be an important future strategy.”

It appears not only leading hotel operators are looking to branch into this emerging market. HGBD Arabia’s Waleed Mohammed Abdel Saleem echoed Cooper’s sentiments. In a recent survey, the Design Divison manager gave his opinion on the Egyptian tourism market saying, “Egypt is a healthy and profitable market, there are lots of areas that need resorts and hotels”. Experts have indicated that there needs to be a level of sophistication in designing and constructing hotels to fit the demands of the increasing tourism boom.

With an ongoing industry, it is very important for industry leaders to stay up to date and transport the emerging tourism market in this country to a well- established and competent market. As mentioned, this region will hold a great potential for future construction projects in the hospitality industry, and there is no doubt that the demand is there.