Egypt Tourism Report Q3 2008

Tourism Overview Last year witnessed the strongest growth rate in foreign tourist arrivals to Egypt since 2004, buoyed by the strength of economic growth in key source markets and the weakness of the Egyptian pound against the euro. Strong growth in arrivals was also attributed to successful marketing campaigns and the development of new tourism products. European visitors accounted for the majority of arrivals, with the relative importance of the region increasing to 74% (of the total) from 69% in the previous year. This was largely due to a surge in arrivals from Eastern Europe, particularly from Russia, Poland and Ukraine. In respect of Asia, the number of visitors from India and China were also up sharply year-on-year (y-o-y).

Bird Flu Update This quarter, there was a further increase in the number of deaths and the number of cases of human infection from the H5N1 bird flu virus in Egypt. The total number of human deaths from bird flu in the country is now 22 out of a total of 50 known human infections (up from 19 and 43 respectively in the previous quarter).

Forecast Scenario We remain comfortable with our outlook for economic growth of 6.7% this year, and a gradual slowdown thereafter. The pace of reform is slowing, and the global investment climate is not what it was.

BMI maintains its forecast that the growth in foreign tourist arrivals will slow in the short term, largely due to weaker economic conditions in key source markets, particularly the eurozone and the UK (our forecast growth rates for the UK economy and the eurozone remain unchanged this quarter). Moreover, the forecast strength of the Egyptian pound could erode some of the country's competitiveness as a tourist destination. Indeed, we see the Egyptian pound appreciating to EGP7.54/EUR (EGP5.20/US$) by the end of this year, from around EGP5.36/US$ at the time of writing, before continuing its gradual ascent to end the forecast period in 2012 at around EGP5.89/EUR (EGP4.60/US$). Indeed, at the current rate, the unit could reach our end-year target ahead of schedule, causing us to revise upwards our 2008 projection.

Mvenpick Following the launch of two luxury cruisers at the end of 2007 and the announcement in January this year of two hotel projects in Sharm El Sheikh, Mvenpick Hotels & Resorts continues its expansion programme in Egypt. In February 2008, the company opened a restored five-star hotel in Aswan and is due to open its fifth hotel on the Red Sea coast of Egypt in June 2008.