By Ahmed Saad
Tourist facilities in Egypt have been informed of subsidy reductions in the new budget since January, according to Adla Rageb, economic advisor to Minister of Tourism Hisham Zaazou.
She added that the reduction will create a shock within the tourism sector when it is first applied, but conditions will stabilise by the start of the next winter season.
Rageb explained that it is a good opportunity to begin the restoration of Egyptian tourism. Slightly higher prices are expected due to fewer tourist destinations other than Egypt in the winter season.
She also noted that the postponement of tourism sector debts for electricity, insurance and water, will help facilities and tourist hotels pay costs of products and services with reduced subsidies. The Central Bank’s decision to postpone tourism debts to the end of 2014 could to aid the situation further, she added.
Reducing energy subsidies in the new budget is linked to rising prices for tourism services, which leads to a decline in restaurants and hotels for a short period of time.
The number of tourists in 2013 was 10.6 million, a reduction of 16.7% on 2012. The total number of nights spent by tourists also declined to a drop of 27.9% from the same period during 2013. Revenues fell by 37%, falling to $ 5.6bn in 2013.
However, Karim Helal, economic advisor to the Federation of Chambers of Tourism said that reducing subsidies in the new budget will not affect the sector significantly.Abdul Rahman Anwar, President of the Floating Hotels Investors Association, called for petroleum subsidies to be reduced in small amounts and over a period of time not less than five years.
He added that floating hotels have experienced a decline in revenue since January 2011 of about 90%, adding that the reduction in subsidies will lead to the closure of many tourist facilities.
Osama Al-Marakbi, a transport official for the Chambers of Tourism, said that there will be no economic harm done to the sector should subsidies be reduced in the new fiscal year’s budget.
Al-Marakbi mentioned that when tourism rates return to normal, subsidy reduction won’t be an obstacle or hindrance to tourism transportation companies.
He pointed out that it will be an obstacle in the beginning when first applied because of the current period’s low level of incoming tourism.
The tourism industry is highly important to the Egyptian economy. It contributes 11.3% of total GDP, 14.4% of income from foreign currency, 12.6% of the total Egyptian workforce, and 9.2% of the total investment in the services sector.