Boston, MA -- (SBWIRE) -- 10/28/2013 -- BMI's Egypt Tourism Report analyses the investment potential which Egypt offers to large tourist industries - particularly global hotel groups - as they seek to harness the growth opportunities being offered by the local market over the long term. However, over the short term, still-high political risk will continue to act as a clear suppressant to tourism demand.

The past quarter has seen a significant increase in political uncertainty in Egypt, with the country likely to remain in a state of political flux for the foreseeable future, following the popular uprising and military intervention that removed President Mohamed Morsi in July 2013.

In August 2013, the situation turned more violent, with the Egyptian army's dispersion of pro-Morsi protestors at the Rabaa al-Adawiya and Nahda sites in Cairo leading to the deaths of more than 600 people, according to government sources, but over 2,500 according to the Muslim Brotherhood. This is one of the highest death tolls Egypt has experienced, possibly surpassing the bloodiest days of the overthrow of President Hosni Mubarak in 2011.

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More worryingly, the actions of the army could pave the way for an uptick in domestic terrorism - a situation that would have profound negative implications for the country's tourism sector. Moreover, prolonged uncertainty and instability would be negative for economic reform, potentially undermining Egypt's appeal as an investment and tourism destination.

Against this backdrop, the short-term outlook for the Egyptian tourism sector has worsened significantly. As of end-June 2013, inbound tourist arrivals were up by 13% year-on-year, at 5,924,360. However, despite this strong H113 performance, we now believe that the situation on the ground has now shifted dramatically and that a downward revision to our 2013 inbound tourist arrivals forecast is necessary.

We are now forecasting a 2.0% rise in full-year tourist arrivals, to 11,762,500, down from a previous forecast of 9%. This figure could be subject to further downward revision, dependent on how the security situation unfolds over the coming months.

Looking at inbound tourism flows by region, Europe is the largest source market for Egypt, accounting for 69.0% of the total forecast for 2013 - a figure we see remaining largely unchanged over the forecast period to 2017. However, it remains to be seen what impact the recent political unrest will have on arrivals from this key source market, with the Associated Press reporting in August 2013 that France's Association of Tour Operators had 'suspended tours to Cairo, the Red Sea and all other cities until further notice'. The same report also stated that Italian cruise company Costa Crociere has also cancelled all Red Sea cruises and port calls in Egypt for its 2013-2014 winter season.

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