Possible scenarios of Middle East unrest on travel and tourism
Source: Euromonitor International , Author: Posted by BI-ME staff
Posted: Mon March 7, 2011 4:37 pm

INTERNATIONAL. Turmoil in North Africa and the Middle East led to a change of leadership in Tunisia and Egypt and is currently behind the revolution taking place in Libya. Several other countries in the region were also affected by political tensions.

The extent of the impact the turmoil in Arab countries will have on the travel and tourism industry, however, remains uncertain and will depend on the development of events and, in particular, on which countries will be affected before the wave of uprisings subsides.

A direct impact of the turmoil will certainly affect tourism flows to the countries involved, while in the worst case scenario, it would also impact global air transportation as well as international tourism flows worldwide.

Hampering regional tourism development North Africa and the Middle East recorded the strongest growth development in tourism globally over the last five years, thanks to natural tourism resources, good value for money and proximity to important source markets. The current political unrest is likely to heavily affect their tourism growth potential, in particular in developed destinations such as Egypt, Tunisia and possibly Morocco with a strong infrastructure.

Despite best efforts by Egyptian and Tunisian tourism authorities and travel companies to reassure consumers about a fast return to normality, the development of the political crisis there is not clear year. Political unrest will also have an important impact on tourism flows to countries such as Libya and Algeria, where substantial investment has been made in tourism infrastructure over the last five years, albeit from a low base. Tourism development in these countries is now considered to be postponed for an indefinite time.

Table 1

Country            2009   2010 %   growth %   2005-10 CAGR %

Egypt            11,923    12,705          6.6              7.9
Saudi Arabia   9,490   11,792        24.3              8.0
Morocco          8,631     9,214          6.8              9.3
Tunisia            6,910     6,659         -3.6              1.7
Jordan            3,788     4,278         12.9              7.4
Bahrain           3,794     3,917           3.2              0.2
Lebanon         1,713     2,223         29.7             13.1
Oman              1,756     2,018         15.0             14.6
Iran                 1,861     1,918           3.0               1.5
Algeria            1,335     1,412           5.8             -0.3
Libya               1,229    1,245           1.3               3.7
Yemen            1,028    1,054           2.5               1.2
Sudan                  75         75           0.3               3.1
Mauritania            36         34          -5.9             -6.0

Source: Euromonitor International

Oil prices - a threat for air transportation
After having been severely affected by the recent global economic crisis, the air transportation industry recovered brilliantly in 2010 which marked a return to healthy profits. However, political unrest in a number of countries, which are among the most important world oil suppliers, could have a very negative effect on air travel.

Following the turmoil in Tunisia, Egypt and Libya, oil price exceeded the US$100 per barrel mark for Brent Crude, the highest price in the last two years since the last spike in July 2008. This led to a decline in share prices for the world's major airlines.

If political tensions will stop at Libya, the situation should be kept under control as OPEC member countries, and in particular Saudi Arabia, can use their spare production capacity to make up for missing oil supply from Libya.

However, in case political unrest spreads to other oil exporting countries, in particular Algeria, Iran and even Saudi Arabia, oil price would rise steadily to reach US$150 or, according to some analysts, even US$200 per barrel. Such significant growth in oil prices would mean sky-rocketing fuel costs and a likely return to losses for airlines.

High oil prices would also translate in higher air ticket prices which would lead in turn to a decline in air trips worldwide and undermine business travel.

A double dip recession?
The risk of a double dip recession has been often considered by analysts during the recent global economic crisis that began in 2008. In the second half of 2010 and beginning of 2011, some optimism was growing towards a general recovery in the world economy, driven by emerging countries, but also by the encouraging economic performance of the US and Germany.

However, a sharp rise in oil prices is capable of reversing this positive trend, increasing the risk of a double dip recession real. Analysts estimate that oil prices higher than US$150 per barrel could lead to another recession.

Such a possibility is linked to the worst case scenario regarding the Middle East turmoil spreading to Algeria, Iran and especially Saudi Arabia. The issue is therefore where will the turmoil stop? If it stops at Libya, the impact on world economic growth will most likely be negligible, but if the contagion continues to spread, the impact on the global economy, and subsequent tourism flows, could be significant.

After a 4.5% decline in 2009 and a 5.5% growth in 2010, international tourist arrivals are expected to grow by a healthy 4% in 2011. This forecast will stay valid in the case of a slowdown in political tensions, but may need to be revised according to how the North Africa and Middle East crisis will develop in the months to come.

For more information, please visit www.euromonitor.com.



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