(Al-Borsa News Photo)
The General Authority for Tourism needs restructuring, and tourism sector employee numbers do not match current tourist numbers, according to Chairman of the Egyptian Federation of Chambers of Tourism Elhamy El-Zayat.
Speaking to the Daily News Egypt, El-Zayat said the General Authority for Tourism needs private sector professionals to observe and evaluate its performance.This would benefit the economy, minimise costs and raise revenues simultaneously in the sector.
How do you evaluate the recent performance of the General Authority for Tourism?
First, we must admit that the last three years were hard on Egyptian tourism, and that the crisis is expected to persist this year.
The current conditions dominating the tourism sector must be discussed with full disclosure and frankness. The General Authority for Tourism requires restructuring and must be operated by [those with] solid experience who will work according to the data, numbers, and special studies of the market, which are not currently available within the framework of the Authority’s work.
But how can restructuring take place? Will employees be laid off?
The employees at the Authority are civil servants who cannot be abandoned. Nevertheless, there must be an evaluation of each employee’s performance for him or her to continue their duties, which will be implemented through extensive training to build their skills from the very beginning.
Are you afraid that there might be a conflict of interest between the work of the new committee and its members who own tourism companies?
This is a good question and as always, the devil is in the details, as they say. I don’t think there would be a conflict of interest between those who own private tourism enterprises and are sitting on the committee, with their new task of overseeing the Authority.
There are conflicting interests between the companies [of those sitting on the committee] themselves, so I don’t think members will allow for others to profiteer or exploit their presence on the committee for the benefit of their own business.
Do you think that the Authority must create a plan to bring in tourism from major exporting markets?
Yes, of course. The Authority must work on re-examining its marketing plans in key markets. It isn’t important that a large number of tourists [come to Egypt]. What must be done now – and quickly – is finding ways to attract high-spenders to visit Egypt again, as it was in the 1990s. At that time, the average tourist spent $140 a night in Egypt – as compared to $60 now, and $85 in January 2011. We cannot continue to attract low-spending tourists. The average income of a hotel is $35 per capita… This is very meagre in the face of rising operational costs. In addition to all of this, the various offices of the Authority cannot continue to exact large expenses without real results on the ground. The Authority has already made progress on this account, having closed 3 offices in Japan, Switzerland, and Canada.
What about the impact of low spending on the quality of service?
This is definitely a big problem in Egyptian tourism right now, which is in its fourth year of crisis. The inability to spend affects the quality of the service, in the end affecting the hotel’s capabilities to spend on maintenance and renovations. Now the tourist expects an all-inclusive experience for $25 a night. All of this effects the reputation and final revenues of Egyptian tourism.
How do you see the Arab market at the moment?
The Arab market is important to the tourism industry in Egypt, as Arabs tend to stay longer, spend more, and visit the country repeatedly. Work must be done on intensifying the presence of this market here after Ramadan.
In terms of the high costs of operation and inability to spend, what is the effect of the price hike in petroleum and new taxes on the sector?
New taxes on alcoholic beverages have contributed to the rising price of champagne and wine by about 18%, while Saqqara beer prices have been raised by about 36%.
In terms of the real estate tax, an agreement with the Ministry of Finance is yet to be reached in order to determine how the tax will financially affect the market value of the building, hotel, or products in question.
For instance, the historic Marriott hotel in Cairo that overlooks the Nile will have to pay EGP 7m in taxes per year, as opposed to EGP 600,000.
As for the rise in petroleum prices, it must be emphasised that the tourism sector does not deserve government subsidies on those products.
We asked state officials to raise the price of petroleum gradually, so as not to shock the private sector, which is already facing a crisis.
Tourism companies and hotels in Egypt, in their contracts with foreign companies, did not state that new taxes would be imposed. Therefore, the Egyptian companies bear the brunt of the financial burden resulting from the rise in the price of petroleum products. The companies should have stipulated that the government is planning on raising prices through the current period in their contracts.
What about cruises in terms of the diesel fuel issue?
Cruises have been the most affected since the 25 January Revolution, even until now. The rise in diesel fuel prices is a big problem, but “we have to choose between what is better – the small damage caused to cruises or the bigger damage to the state, which will be harmed if the policy of subsidies remains in place and the deficit grows annually.”
Recently, there have been many power outages throughout the country. How does this affect hotels?
Hotels have generators, but are still working to decrease electricity consumption, in the context of a campaign launched by the Ministry of Electricity – which seeks to reduce consumption by 20%.
There have been reports which indicate that programs to support charter flights are currently being evaluated – do you have any details on this?
Aviation accounts for about 95% of arrivals to Egypt annually, and charter flights represent an important stimulus for global tourism companies to come to Egypt.
We’ve turned to foreign experts to help us determine whether to continue the current system of keeping vacant seats, introduce a new system in which all seats are filled, or work with both and apply whatever system will work best with each separate market and help tourism grow again in Egypt.
The ministry is coordinating with the Egyptian Federation of Chambers of Tourism through the economic advisor to the Minister of Tourism, Adala Ragab, who is a Professor of Economics at the University of Cairo.
Do you have an opposing view to developing land for tourism right now?
We are not “opposed” in the strict sense of the word, but there’s no need for hotel investments and adding new hotel rooms in light of the drop in incoming tourists to Egypt.
There are 225,000 rooms that did not exceed the average occupancy last year, while there are 208,000 rooms currently under construction.
Building new hotels will not help the policy of supply and demand and will destroy tourism. If there is a great supply of tourist services with very little demand, prices on those services will drop. Hotels will face many losses in turn. No longer will they be able to work long-term, and the quality of service, as we mentioned before, will be lowered as well.
But the Egyptian General Authority for Tourism Development plans to offer 20m metres of land to investors throughout August.
There is no problem in offering new land to investors, because recreational and commercial investments must be expanded to serve the Egyptian tourism product and increase [consumer] spending.
Tourists spend the day on the beach and want to stay up all night, but can’t find places for this or for entertainment. “There has to be a trend for this type of investment until Egypt’s tourism industry recovers.”
A tourism investment fund was recently established to support ailing companies in the sector – when will the fund start work?
A meeting was held recently with Ibrahim Ashmawy, the investment advisor to the Minister of Tourism, to determine how the fund will function and which body will represent the Minister in the fund’s membership. The Ministry of Tourism helped establish the Fund by providing EGP 50m, and it is up to the Minister of Tourism Hisham Zaazou to authorise the Egyptian General Authority for Tourism Development, the Tourism Fund, or the General Authority for Tourism to act as his representatives within the Tourism Investment Fund.
The fund has two specific portfolios for how to deal with the crisis. The first, for which EGP 8m has been allocated, will deal with troubled companies in South Sinai, while the second has been allocated EGP 42m for projects in the rest of Egypt. These portfolios have been established to overcome the problems of land ownership laws in South Sinai, which prevent foreign ownership of land.
Promotion for the fund will take place in the Gulf States in August, in order to collect contributions for the first phase of the project, valued at $250m.
What is the role of the Egyptian Federation of Chambers of Tourism in the fund?
The Federation will play an important role. It will study cases of troubled companies and make recommendations on how to proceed with them. A bid was made for the Federation to monitor the performance of the fund and 4 companies at the moment.
There are indications that 40% of skilled labour has abandoned the sector. They’ve probably done so in the last three and a half years due to a drop in income, demobilization and a preference for working in another sector or activity that would provide more income. It will take another 4-5 years, after tourism returns, to restore that skilled labour again.
