Falling ruble keeps Russian tourists off Egypt's beaches

Deya Abaza , Dalia Farouq , Sunday 21 Dec 2014

Slide of Russian currency threatens recovery of Egyptian tourism sector as President El-Sisi calls for intervention

Egypt's Red Sea beaches draw many Russian tourists (Photo: Reuters)

The slide of the ruble is keeping Russian tourists away from Egyptian beaches and halting the nascent recovery of a tourism industry already suffering from three years of turmoil, industry insiders say.

The demand from Russian vacationers is down 40 percent this December compared with last year as spending a holiday in Egypt becomes more expensive, Ehab Wahdan, general manager of the Egypt office of Moscow-based tour operator Tez Tour, said of his company's business.

The worst hit places are Egypt’s Red Sea resorts, the most popular destination for Russian tourists, particularly in the winter months when Egypt offers a warm climate at relatively affordable prices.

Russians are the largest single tourist group in Egypt, making up about a fifth of foreign vacationers in the country in the past four years, as well as 60 percent of tourists to the Red Sea, according to official data. 

“Everyone in the business here is at breaking point,” said Aly Nouh, owner representative at Movenpick in Soma Bay near Hurghada, one of the biggest tourist spots on Egypt's Red Sea coast. “No other nationality can fill the shoes of the Russians; they constitute a clear majority of the tourists in Hurghada.”

The ruble lost more than 50 percent of its value this year on the back of declining oil prices and economic sanctions from the West. It currently trades at around 60 to the dollar.

Short-lived recovery

Egypt’s LE49 billion ($7 billion) tourism industry began recovering in 2014 after plummeting in the second half of 2013 due to the bloody violence that followed the ouster of president Mohamed Morsi.

The 2.7 million tourists who visited Egypt between July and September this year generated around $2 billion, a 70 percent increase over the same period last year which saw 1.6 million tourists generating $900 million.

Red Sea destinations in particular saw something of a comeback this summer as many European nations lifted warnings against travel to Sinai, imposed following a terrorist attack on a tourist bus in February 2014.

But Moscow's economic woes may handicap this recovery.

"Our occupancy is down to 25 percent now, if that, and we are charging as low as $32 per person per night," said Sayed Kassem, owner of two hotels in Hurghada. In September, when the ruble was trading between 37 and 39 to the dollar, Kassem says his hotels were still offering double rooms for $60-70 a night, with occupancy of up to 90 percent.

The Ministry of Tourism declined to provide Ahram Online with the breakdown of tourist figures in October and November. 

President Abdel Fattah El-Sisi, however, took note of the decline during his visit to Hurghada last week, and tasked the cabinet with finding a solution to encourage Russian tourists to return, Cairo-based daily Al-Masry Al-Youm reported.

One in seven Egyptians

Employing one in seven Egyptians, tourism is one of Egypt's main sources of foreign currency. According to Central Bank data, tourism generated $9.7 billion in the 2012/13 fiscal year -- almost double the revenues from the Suez Canal.

"The sector is dying," Kassem said, citing mounting costs of energy and food, as well as tax hikes on substances like alcohol.

Egypt’s government in July issued a spate of fuel and electricity price hikes, along with tax increases, in an attempt to shore up the state’s coffers and tackle a widening deficit.

"Our cost per customer is $18-20, and I have to pay over 24 taxes amounting to 22 percent of my profit," Kassem said. "The government is bleeding us dry just when we need the most help,"

Tez Tour's Wahdan sees no solution but to wait it out. “The ruble needs to stabilise, for people to adapt and make travel plans and budget accordingly.”

"Until then," says Wahdan, "all the sector can do is keep the rates low and hope for cold weather in Russia this winter."

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