Egyptian hoteliers warned 'do not discount'

Although timelines are uncertain, the industry is optimistic about recovery in Egypt — so hotels must rethink sales and marketing tactics before returns are damaged beyond repair.

At the time of writing, it had been just two weeks since former Egyptian president Hosni Mubarak was deposed on February 11 after an 18-day uprising that brought the world’s attention to Cairo’s now infamous Tahrir Square.

During the protests that lead to Mubarak’s overthrow - which also resulted in the deaths of 360 people (Reuters) - Egypt’s tourism and hospitality industry ground to an abrupt halt.

Governments around the world evacuated a total of one million citizens and imposed travel bans, causing hotel occupancies to plummet from peak season highs of 90% to lows of five or 10%.

Leading European tour operator TUI reported that the unrest in Egypt would amount to US $48.6 million in losses.

Dusit Thani Lake View Cairo managing director Jiri Kobos commented: “After the initial evacuations our occupancy dropped from 90% to 10%, which apart from the hotels in the city centre that had to close altogether, was the general level in almost all properties during this time”.

But for an industry that forms the backbone of Egypt’s economy — 12.5 million people holidayed in the Arab country in 2009, bringing revenues of $10.8 billion — standing still was not an option for long.

Despite protestors’ fears of a counter revolution ahead of parliamentary elections scheduled for six months’ time, hoteliers are focused on how to drive occupancies back up to their former levels.

This has sparked fears of a price war in the country, with leading sales and marketing experts in the region warning against discounting at all costs.

“The classic Egyptian strategy is cut the rates by half to make sure you are returning the volume back,” said Yigit Sezgin, global director of sales and marketing for The Rezidor Hotel Group. “But what we experience from a revenue perspective is there is not much room to cut the rates anymore in Egypt, so that’s very much a challenge for us.”

“Please, please don’t discount,” urged Kempinski regional director of sales Middle East Avsar Koc. “If somebody is not going to travel to Egypt they are just not going to travel to Egypt regardless of the price — you can give them the room for free but that’s not going to change their mind.

“Low rates don’t necessarily generate demand. If you lower the rates, which especially in a destination like Egypt has been done before as Yigit mentioned, once you lower it, it takes a decade or more to get back to where you were,” added Koc.

In Cairo, Kobos said that he had seen demand for reduced rates, but that Dusit “did not support a discounting strategy at all”.

“Our European and Asian market tour operators are starting to make enquiries, but the initial feedback is for an expectation of discounted rates,” said Kobos.

“First and foremost, we don’t need a travel trade seeking discounts as this is not the way to rebuild our tourism industry, but we are also committed to value adds to entice tourists back to Egypt.

“These may require some value-added offers in the short term, which is of course very disappointing when we had such a strong winter season and strong performances in November, December — and January was a great start to 2011.”

On a more positive note, Kobos added: “We are receiving ad hoc forward bookings and enquiries for March and April, including weddings and smaller domestic meetings, with forecasted occupancy growing to approximately 25% at the moment”.

Hotel Repositioning
Temporary value adds may well be a good short term solution to the current situation, but PKF The Consulting House director and head of consulting Sven Gade suggested some potential benefits of taking a more long term view.

“Tourism is a very important sector in Egypt and will most likely bounce back as one of the first segments, but maybe Egypt will now have a chance to genuinely address the long standing issue of moving from total volume tourism towards some more upmarket spend-oriented products,” said Gade.

“It is true that discounting is a weak option as it has a long term impact (especially in the tour operator segments) — but in the past this has been the typical reaction, not least because so many people directly depend on tourist arrivals.

“Hotels and projects that can afford it should grab the opportunity to reposition themselves into a slightly more upmarket and clearly defined segment to avoid that trap going forward,” he advised.

“That, however, requires the necessary resources to avoid discounted business and where appropriate, investing in improving or renovating facilities, which is not easy after a crisis,” Gade qualified.

He also suggested that, while the tourism ministry and authorities “take stock and determine the future”, interim solutions could involve creating “calm” areas — such as the North Coast, Luxor Nile Delta and areas around the historic sites — and promoting them as safe “havens” with some strong PR.

“There may even be an opportunity to increase rates for what business comes forward on the argument that creating these havens will require extra investment and expense,” said Gade.

Clever destination marketing was also advocated by Viability director Guy Wilkinson. “After the Taba attacks that took place in 2004, clever marketing saw the Sinai hotels promoted without mention of the country Egypt, and such ploys could be needed again,” asserted Wilkinson.

Peter Lilley, executive director of the Middle East & North Africa Travel Association (MENATA), agreed such tactics could work.

“The Red Sea riviera is seen as being very detached from the political turmoil. A lot of holidaymakers don’t even think of resorts like Sharm El Sheikh as being in Egypt,” reported Lilley.

Tourism Marketing
Whatever the strategy adopted by Egypt’s hotels to attract visitors, there is no doubt that most existing properties will rely heavily on support from tourism boards across the region - a joined up effort is vital.

But Lilley said tourism boards in the region were “burying their heads in the sand” when it came to communication on the situation.

“I have to say I’ve been disappointed at how some tourist offices (including Tunisia and Egypt) have appeared to bury their heads in the sand during recent events; declining to make any public comments.

“It comes across as rather spineless. When there is a crisis, what both trade and consumers seek is accurate information, reassurance and people being brave enough to show their faces; still talking - even in very difficult times. They don’t like people who hide themselves away and only reappear once the dust has settled.”

He said it was vital that tourism boards across the region invested in PR and advertising campaigns in order to get their message across and reassure potential visitors.

Lilley added that the entire MENA region tourism industry needs to work more closely to bring back the tourists turned away following the protests in the region.

“Everyone should be supporting each other and promoting the bigger picture — namely the attractions of the MENA region tourism industry as a whole, rather than companies being too insular and thinking entirely of their own tour operation,” concluded Lilley.