Egypt crisis has dramatic effects on luxury market
The current ongoing turmoil in Egypt has brought a complete hault to the country’s feeble luxury market. Stores such as Burberry, Ferragamo (inagurated Fall 2010) have remained closed since the debut of the crisis. Despite remaining open , jewellery and watches stores within Hyatt and Four Seasons hotels as well as the leading multibrand stores EGO and BEYMEN have seen a drop of 70% in sales in the past 10 days and their forcast remains gloomy for the rest of the month. City Stars, the largest shopping mall in Cairo has seen its traffic decrease by 30% as people prefer to remain at home.
It is reported that the wealthy were the first to leave the country when the situation aggravated. CPP‘s Oliver Petcu believes the current situation will push back the development of the luxury market, which was very promissing, at least one year, with many projects postponned indefinitely. As highlighted by CPP’s research, Egypt’s luxury market depends on sales to Egyptians (more than 80%) and the rest being business travellers from other North African countries and the Middle East.
Even though there are no official reports, CPP estimates that occupancy in the major luxury hotels in Cairo (Four Seasons, Kempinski, Hyatt, Sofitel etc) dropped by 30% because of the current crisis, losing not only leisure travellers but also business travellers which had cancelled their trips to Cairo.
Egypt is losing more than $310 million a day because of the current crisis, which is expected to depress foreign capital inflow, fuel inflation and cut growth forecasts, a French bank has said.
French bank Credit Agricole said the economy is at the heart of Egypt’s problems and that Hosni Mubarak’s regime is facing the specter of collapse due to the lack of economic trickle-down, rising inequality, high incidence of poverty, soaring unemployment, and underemployment, and very high and sticky inflation.
"The current political crisis is costing Egypt at least $310 million a day. Tourism is the first industry that is being impacted. Prolonged political uncertainty and perceived violence could have a destructive impact on tourism earnings this year," said the study, authored by John Sfakianakis, chief economist at Banque Saudi Fransi (BSF).Its figures showed tourism accounted for about six per cent of Egypt’s GDP in 2010 and provides one out of eight jobs in the country with important multipliers for the economy as a whole.
"In view of the political and economic conditions currently prevailing, we are lowering our real GDP outlook for 2011 from 5.3% to 3.7% with additional downside risks lingering in the short term."