Sharm el-Sheikh Faces Tourist Exodus from Ukraine and Russia

Sharm el-Sheikh, a renowned resort town at the southern tip of Egypt's Sinai Peninsula, is currently grappling with a significant decline in tourism as the ongoing war in Ukraine creates ripples across the travel sector. As vacationers from both Ukraine and Russia, traditionally key contributors to the local economy, have largely disappeared, the effects on this resort town have become increasingly evident.

On the once vibrant sandy beaches of Sharm el-Sheikh, many sun loungers are noticeably empty. The central promenade, usually alive with the hustle and bustle of shops, cafes, and nightclubs, is eerily quieter than usual. This downturn in activity marks a troubling shift in what was already a fragile recovery following the COVID-19 pandemic.

Tourism workers in the area have described a dramatic drop in visitors from Ukraine and Russia—who accounted for a substantial portion of the resort's clientele—leaving a palpable void. Their absence has compounded the challenges facing a sector that contributes as much as 15 percent to Egypt's gross domestic product, exposing the dire need for foreign currency that tourism typically supplies.

Ashraf, a small business owner in Naama Bay, reflects on the precarious state of his operations, stating, 'Months ago, we were catching our breath after the coronavirus hit and activities were beginning to recover, but we jumped from the frying pan into the fire.' His shop, which once thrived, has consequently suffered a loss of about two-thirds of its business.

The tourism sector in Egypt faced severe declines during the COVID-19 pandemic, with revenues dipping significantly. However, recovery started to take shape, culminating in nearly $12 billion in revenue in 2021, according to central bank data. The situation improved further when Russia reinstated direct flights to Sharm el-Sheikh in August 2021, a move made six years after a tragic incident involving a crashed passenger jet.

Despite the optimistic signs just over a year ago, there has not yet been an update on this year's tourism data. A cabinet briefing last month highlighted the concerning effects the ongoing conflict in Ukraine may have on Egypt's foreign currency income from the tourism sector.

The Egyptian government is now facing heightened challenges from rising import costs for essential commodities like wheat and oil. As a result, it has revised its growth forecast, adjusting the expected economic growth to 5.5 percent for the current financial year and 4.5 percent for the 2022-2023 fiscal year.

As the COP27 climate conference approaches, Sharm el-Sheikh stands as a key player, showcasing its dual language signs in Russian and English. This bilingual approach is indicative of how vital the Russian and Ukrainian markets have become in the resort's tourism landscape.

Data shows that last year, visitors from Russia and Ukraine accounted for 31 percent of Egypt's tourism demographics, significantly influencing tour packages to destinations like Sharm el-Sheikh and Hurghada. In the latter half of last year alone, over 1.1 million Russians and nearly 794,000 Ukrainians traveled to Egypt.

Since the initiation of military operations by Russia in Ukraine, the decline in Russian tourist arrivals has been stark, with almost all of the 20,000 Ukrainians present in Egyptian resorts at the onset of conflict now evacuated. A hotel manager, who preferred anonymity, relayed a story of losing around 70 percent occupancy since the outbreak of the war.

Although there are slight increases in tourists from Armenia and Romania, these numbers pale in comparison to the visitor statistics from Ukraine and Russia prior to the conflict. Statistics indicate that now, only 1,500 to 2,000 Russians arrive weekly, with the war causing substantial changes in pricing and travel logistics that threaten to keep this critical market at bay.

A shift in international financial interaction has made it difficult for some Russian travelers to spend freely; restrictions on major credit cards have left many with limited access to dollars. While there are plans for daily flights to resume from Russia as early as July, the doubts surrounding recovery persist amidst the backdrop of ongoing sanctions and rising travel costs.