BMI's Executive Summary

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Tourism Overview

Although data are incomplete, various sources suggest that Egypt is set to have recorded strong growth in foreign tourist arrivals in 2007. After reports of robust growth in the tourism sector in the first four months of 2007 (with very strong growth in arrivals from Europe), official sources indicate that foreign arrivals were up a very strong 20% year-on-year (y-o-y) in July 2007. In line with these data, BMI has edged up its growth estimate this quarter, for foreign visitor arrivals to Egypt in 2007, to 8% y-o-y equating to a total of 9.8mn. This would represent the strongest growth rate since 2004. BMI, however, expects growth in arrivals to slow somewhat in 2008 and 2009, particularly as economic growth weakens in key European economies over the next few years.

Forecast Scenario

Momentum remains in place for a very impressive economic growth performance in Egypt throughout the forecast period, although inflation is a risk. Our forecasts remain largely unchanged as we move into 2008, although we have slightly revised up our projection for that year, from 5.3% to 5.9%. We see a small cyclical slowdown thereafter, due to base effects, taking real GDP growth to 4.9% in 2009, 4.7% in 2010, 3.8% in 2011 and 3.4% in 2012. Consumption and investment will remain the primary drivers, with inflation and political instability the main risks to this outlook.

Recent forecasts of a further slowdown in demand in key European economies underpin slightly weaker growth in visitor arrivals to Egypt over the next few years. Although growth in the UK economy is estimated to have been unchanged in 2007 at 2.8%, BMI's latest view is that real GDP growth will slow to 2.4% in 2008. Moreover, in its pre-budget statement, the UK government forecast real GDP growth standing above long-term trend levels at 2.5-3.0% in 2009 and 2010, which we believe is perhaps a little on the optimistic side. With the tax burden rising, and the ruling Labour Party facing accusations that it has run out of economic policies, there are also growing risks to the fiscal position. German economic growth is also forecast to slow in 2008 to 2.4%. The eurozone economy, meanwhile, will remain in solid shape through the forecast period, although growth is set to moderate from the cyclical high of 2.7% set in 2006. After 2007's 2.4% real GDP growth, we are anticipating 2.3% in 2008 and then 2.0% to 2.1% through to the end of 2012. This is around long-term trend levels. Notably, for the first time since 2001 the eurozone will be above the growth rate seen in the US. We anticipate this lasting through 2008, before dipping back below that of the US in 2009.

Hospitality

The favourable data on foreign tourist arrivals are mirrored in the hospitality sector. Official data for the month of April 2007, show the total number of tourist nights amounted to almost 8.9mn, representing a strong increase of 16.2% y-o-y. The average number of nights spent by tourists was up marginally on the same month in 2006, at 9.1 nights. Of particular note was very strong y-o-y growth in tourist nights by arrivals from Asia, in addition to robust growth in tourist nights by Eastern European tourists. Further official comments state that tourist nights were also up a buoyant 18% y-o-y in July 2007.

EgyptAir

In October 2007, Star Alliance – the largest airline alliance in the world – voted to accept the country's national flag carrier EgyptAir as a future member. As part of the agreement for membership, EgyptAir and the Star Alliance member carriers flying to Cairo International Airport will move to the new Terminal 3 once it opens in 2008, creating a hub for the alliance members and a gateway for the Middle East and North Africa. EgyptAir is set to become a full Star Alliance member carrier within the next 18 months.

Chapter 1 - New This Quarter

Bird Flu Update

In late December 2006, it was reported that three members of the same family in Egypt had died from so-called bird flu, formally known as the

H5N1 virus They were based in Gharbiyah Province, some 80km northwest of the capital, Cairo The three had all been in contact with sick

ducks Egypt has found it particularly difficult to control bird flu, and has been one of the worst affected countries in the world in 2006 It was

first reported in the country’s poultry in February, since which time it has infected 18 humans in the country, resulting in a death toll of 10

(figures are as of end-December 2006)

Latest Statistics

Domestic Economy Supportive

Eurozone Recovery Bodes Well For Visitor Arrivals

EgyptAir Profit Rises

Egypt Tourism Industry SWOT

Chapter 2 - Market Overview

Tourism Outlook

Table: Travel Industry Historical Data And Forecasts

Table: Tourism Historical Data And Forecasts

Chapter 3 - Forecast Scenario

Political Outlook

Domestic Economic Activity

Currency To Exert A Drag On Visitor Arrival Growth

Table: Egypt: Macroeconomic Data And Forecasts

Chapter 4 - Travel

Airports

Table: Key Players – Commercial Airlines 2003

Commercial Airlines

Chapter 5 - Hospitality

Table: Hospitality Market Structure

Accommodation

Companies Present

Hotel Projects And New Openings

Tourist Infrastructure

Chapter 6 - Special Report: Tourism And Terrorism

Chapter 7 - Middle East And Africa Business Environment Rankings

Middle East and Africa Tourism Business Environment Rankings Matrix

Long-Term Political Risk

Country Business Environment

International Tourism Receipts

Visitor Arrival Growth

Investment Environment

Shock Factor

Chapter 8 - H5N1 Virus (Update): Crisis For Egypt?

Regional Case Study – Accor

Key Statistics:

Table: Accor Hotel Business In Selected Middle East And Africa Countries

Chapter 9 - Company Profiles

EgyptAir

Travco

Egyptian General Organisation for

Tourism and Hotels (EGOTH)

Chapter 10 - BMI Forecast Modelling

How We Generate Our Industry Forecasts

Tourism Industry

Sources

Competitive Landscape for Middle East & Africa Tourism Reports: Sample of Companies Ranked

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Comparative cross-border analysis assessing business and regulatory factors to rank Asia’s most competitive tourism markets. Indicators used include Political Risk, Business Environment Risk, Forecast International Tourism Receipts, Visitor Arrival Growth, Investment Environment and Shock Factors (taking account of any special factors such as terrorism, natural disasters and disease). Company SWOTs for leading resort, hotel, airline, travel and tourism operators in each market, including competitive intelligence on overall geographic presence, competitive positioning and relationships with international operators; % share of operator markets; % share of international arrivals and departures; % share of busiest domestic routes; main products and services; panregional expansion, merger and acquisition strategies.

Network of Middle Eastern & African Tourism Sources

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BMI's Middle Eastern & African Tourism Reports are based on an extensive network of multilateral organisations, government departments, tourism industry associations, chambers of commerce and company reports. Information sources include: