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Arab nations aim to get tourists back

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Egypt’s tourism minister came to Dubai last week to persuade Arab tourists to lead the returning stream of visitors to his ancient land. Instead, he was reminded of the all too modern realities of regional politics.

Mounir Fakhry Abdel Nour aims to revive Egypt’s economic fortunes by bringing tourist numbers back to 2010 levels. He is organising cultural festivals during the summer to try to lure Gulf tourists, who since last year’s revolution have been choosing holidays in safer destinations such as Turkey and Dubai itself.

But Saudi Arabia over the previous weekend had closed its embassy in Cairo, after protests over the kingdom’s arrest of an Egyptian human rights lawyer in Jeddah.

At a press conference timed to coincide with tourism conferences in Dubai, Mr Abdel Nour referred to the “deep relations” between the two political heavyweights of the Arab world, calling for a legal solution to the case of “an individual”.

The incident highlights the problems facing Egypt as it seeks to rebuild confidence and revive tourist numbers to the 14.5m of 2010. Last year brought 9.8m and a 27 per cent drop in revenues.

The minister remains optimistic, saying strong demand last year from Russia and eastern Europe helped make up for some of the lost numbers, with a one-third rebound seen in the first quarter of this year.

Tour operators are booking more flights to Egypt, banking on the notoriously short memories of global travellers who have been scared off and returned to the country before, most vividly after the Luxor massacre of tourists by terrorists in 1997.

Rudi Jagersbacher, regional president of Hilton Worldwide, agrees that a revival is apparent at some of Hilton’s 18 Egyptian hotels, especially the 14 located outside Cairo. Occupancy rates have recovered to 70-90 per cent after slumping, together with the rest of the country, to as little as 20 per cent a year ago.

While Egypt hopes for a recovery, it is clear that Dubai has stormed back to health over the past year, thanks to its status as a regional haven.

Hotel occupancy surpassed 86 per cent, despite a surge in new supply, as 9.3m tourists took advantage of Dubai’s sun and shopping, placing the emirate on a par with Egypt’s historical wonders in terms of visitor numbers.

Other tourism victims of the Arab spring included Syria, Jordan, Lebanon and Bahrain.

Hotel revenue per available room last year declined 46 per cent in Egypt and Bahrain, according to data provider STR Global. Syria saw a decline of 62 per cent.

In Bahrain, where hotels enjoyed a boost from the recent and controversial Formula One Grand Prix, hoteliers link recovery to stability.

“The outlook is dim at the moment as events still unfold,” says Taras Ettl, vice-president for development, Middle East and Africa, for the InterContinental Hotels Group.

“For sustained demand to return to Bahrain there is no doubt the country requires political stability.”

Many are looking for growth from the strong fundamentals of neighbouring Saudi Arabia. Despite the lack of a viable leisure market in the kingdom, religious, domestic and corporate travel has remained strong and growing.

Hilton Worldwide, which is boosting its number of Saudi properties from six to 14, says other growth areas include northern Iraq and Africa.

Stephen Lari of Claremont Group, Hilton’s partner in the city of Irbil in northern Iraq, says returns on investment of 30 per cent are on offer there, where a mini-boom is creating opportunities for investors with a more holistic view of the market than “CNN’s Baghdad coverage”.

Hoteliers are looking at prospects in other “frontier” markets, such as Libya.

Corinthia Hotels, which has longstanding north African experience, gained publicity for providing accommodation for journalists and charity workers during Libya’s civil war.

The group is refurbishing another Libyan hotel, according to Paul Pisani, its senior vice-president for development.

“Right now, there isn’t even a government, and [there are] challenges over supplies on a day-to-day basis but our long term view is positive,” Mr Pisani says.

Difficult markets such as Libya are posing new questions. With the political landscape uncertain, the future direction of the industry remains far from clear.

Richard Barnett, of ILM hospitality advisers, says investors have to think hard about long-term investment decisions given potential problems surrounding nationalisation and repatriation of profits in changing regulatory environments.

Such issues are troubling those mulling the future of hospitality in Egypt, amid concerns that the rise of Islamist political forces could translate into damaging policies such as alcohol bans and gender segregation.

Egypt’s tourism minister challenges such assumptions. With 4m Egyptians – or one in six workers – reliant on the sector for employment, Mr Abdel Nour says no political party would dare disrupt the vital industry.

“I don’t think any official from any party can make a decision to damage the industry,” he says. “Public opinion is clear.”

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