Key fact

The tourism industry supports 3 million jobs in North Africa

Source: World Travel and Tourism Council

Most people first learnt of the popular uprisings sweeping the Arab world when chaotic scenes of tourists clamouring to escape from Tunisia and Egypt appeared on their television screens.

Tourism was one of the first sectors to be impacted by the violent demonstrations and equally it will be one of the last to recover. The images of civil unrest being met by police brutality and the military vehicles rumbling past famous tourist sites will take a while to fade from the memory of would-be travellers.

They have to do what they can to recover cost and maintain a minimum trading profit

Peter Goddard, TRI Hospitality

With the exception of Libya, for which no official statistics are available, Tunisia has seen the sharpest drop-off in visitor numbers in the North Africa region. As the scene of the initial protests, the country was the first travel market to be impacted. Germans, British, French and Italians traditionally account for the majority of visitors to the country, but as governments advised against all but essential travel to Tunisia, holidaymakers abandoned their plans.

Slow recovery for tourism sector

Even though compared with events in Libya and Egypt, the Tunisian revolution, which began in mid-December and lasted almost a month, was much less violent, the tourism sector has yet to recover eight months later.

The number of visitors to Tunisia recorded during the first five months of 2011 is 41.6 per cent lower than for the same period in 2010. Although numbers are rising each month, arrivals in May totalled 358,000, compared with 612,000 in May 2010. Last year, nearly 7 million people visited Tunisia, but the figure for this year is expected to be less than 5 million.

Egypt occupancy rate, 2011
  (Percentage)
January 63
February 15.9
March 24.9
April 41
May 36.6
June 41
Source: STR Global

Inevitably, this will translate into a significant loss of revenue for the country. According to the Madrid-based UN World Tourism Organisation (UNWTO), under normal circumstances, tourism in Tunisia generates about $3bn a year, accounting for some 10 per cent of gross domestic product (GDP).

But the political turmoil of 2011 is unprecedented in recent times. North Africa’s largest tourism market, Egypt, has been similarly hit. An 18-day revolution swept long-serving President Hosni Mubarak from power on 11 February. The protests have continued sporadically since then, intensifying in July, as discontent with the interim authorities mounts. The average hotel occupancy rate in Egypt was 31.6 per cent in May, according to hospitality industry tracker STR Global. Despite the overhang from the global financial crisis, at the start of last summer, the average occupancy rate was about 70 per cent.

Morocco tourist arrivals and occupancy
  Thousand Percentage
January-June 2010 3,952 43
January-June 2011 4,202 41
Source: Tourism Ministry

In April 2011, the tourism ministry recorded 800,000 visitors to Egypt, 35.7 per cent fewer than the 1.2 million visitors received in April 2010. The authorities noted a sharp decrease in visitors from Eastern Europe in particular. In 2009, Europeans as a whole accounted for 67 per cent of travellers to Egypt. The number of Arabs, which typically represents 15 per cent of visitors, has also dropped significantly due to the regional turmoil.

Hotels readjust room rates

Hoteliers have responded to the slump in arrivals by cutting room rates in an attempt to lure guests. “They have to do what they can to recover cost and maintain a minimum trading profit,” says Peter Goddard, managing director of TRI Hospitality’s Dubai office. “They have had to drop rates, we have seen heavy discounting across the board.”

STR Global reported that in June, revenue per room in Egypt was down 32 per cent year-on-year to £E166.25 ($28). Again, the reduced visitor numbers will affect the country’s economy. According to the UNWTO, Egypt received 14 million tourists in 2010, generating $12.5bn in receipts.

But the impact will also be felt in other ways. The tourism sector is a major direct and indirect employer in the region. High unemployment and frustration over the lack of job opportunities are key reasons why hundreds of thousands of North Africans have taken to the streets in the past eight months calling for political and economic reform.

The severe disruption to the tourism sector has now put many livelihoods on the line and jobs are certain to be lost. According to the UK-based World Travel and Tourism Council, the industry supports 3 million jobs in North Africa, and in Egypt, one in eight workers depends on the sector for employment. Across the region, tourism is a major driver of the non-hydrocarbons economy.

In Algeria, the tourism industry is still underdeveloped, attracting just 1.9 million visitors a year. As a major gas exporting country, its importance to the economy is minimal, but it has been steadily growing over the past decade. Tourism accounted for 2.3 per cent of non-oil GDP in 2009, with receipts totalling $330m. Its main contribution is through job creation.

In 2008, 320,000 Algerians were employed in hotels, cafes and restaurants, equivalent to 1.8 per cent of the working population. This is a near four-fold increase from the 82,000 employed in 2000. Although Algeria has largely been untouched by the Arab uprisings and no current tourism statistics are available, arrival numbers will have dipped as the main visitors to the country traditionally are Tunisian and French nationals.

Bleak outlook for tourism

With demonstrations continuing in Egypt and Tunisia on an almost daily basis and with elections still to be held, the tourism sector is unlikely to fully rebound before the end of the year. Some analysts have an even gloomier prognosis.

“Tunisia is similar to Egypt in some ways and for both of them we are forecasting no improvement until 2013,” says Goddard. Occupancy rates in Egypt have, however, recovered significantly from a low of 15.9 per cent in February.

The two countries could do well to learn from Morocco. Despite experiencing small-scale demonstrations and a terrorist attack in April that killed more than 15 people in Djemaa el-Fna square, the main tourist site in Marrakesh, visitor numbers have consistently risen this year. Morocco recorded 4.2 million arrivals during the first six months of the year, up 6.3 per cent on the first half of 2010. Tourism receipts for the period totalled MD24.7bn ($3.2bn), a year-on-year rise of 9.1 per cent. The country has likely benefited from the turmoil in Tunisia and Egypt, but historically, Morocco has always been a resilient market. A series of terrorist attacks in Casablanca in May 2003, which killed 45, similarly did not dent numbers. “Historic data supports our observations that tourists are often more resilient than the market is expecting,” says Rob O’Hanlon, tourism, hotel and leisure partner at Deloitte Middle East.

Two key metrics betray an element of weakness in Morocco’s tourism industry: visitors are staying fewer nights and as a result occupancy rates are marginally down.

According to the tourism ministry, the average occupancy rate for the first six months of the year was 41 per cent, compared with 43 per cent for the first half of 2010. But this weakness is more likely a symptom of the ongoing global economic uncertainty causing travellers to be more frugal, rather than the regional political instability. France and Spain are the main feeder markets for the Morocco tourism sector and the latter in particular is suffering considerable economic hardship.

Contagion minimal

The positive news for the Middle East and North African tourism industry is that Morocco’s experience shows that for well-established tourism markets, the risks of contagion are minimal. Travellers are still interested in the region and stable markets can benefit from overspill demand from neighbouring countries.

Tunisia and Egypt have a long way to go before their political problems can be resolved. But once new governments are in place and order is restored, the rebound could be quite swift. “A combination of operator and hotel pricing incentives will often be enough to quickly restart tourism activity once areas have become safe following man-made and natural challenges,” says O’Hanlon.

Lebanon is a prime example. In the decade since its civil war ended, it has been one of the world’s fastest-growing tourism markets.