No Money No Holiday?

Burdened by financial decisions

Photo: Should we stay or should we go?

Financial uncertainty and higher costs of living will force people to shop around even more for their holidays now than ever before. Will they be more likely to choose all-inclusive or half board packages? Or will they be looking for cheaper accomodation forcing mid-market hotels to downgrade and become budget places? Or will people decide not to travel abroad at all and holiday at home?

Dahab is a resort town on the East Coast of Sinai, it has a resident population of about 15,000 people of which at least 3,000 are employed in tourism – The main source of income for the majority of the population here. Dahab is seen as little sister to the glitzy resort of Sharm El Sheikh and is dependent on travellers flying to Sharm El Sheikh Airport (100km to the South of Dahab).  Previously a backpackers haven, the last 5 years have seen Dahab grow with many new hotels and businesses focusing on the mid-range holiday market. 

Food & Oil Prices
Everyone has felt this cost increase in the last few months but very few have seen a salary increase to match.

In Egypt food prices rose by some 20 to 25% in the period March to May 2008. Shopkeepers said it was mainly due to oil price increases (everything in Dahab comes by truck mostly from Cairo and Upper Egypt), and global shortages of rice and flour.  Everyone has felt this cost increase in the last few months but very few have seen a salary increase to match. In the last few months oil prices have dropped, but the benefits have not been felt in Dahab. Prices will probably never return back to the levels they were before the oil crisis began. The impact of this has left most of the population in Egypt struggling to cover the basic costs of living. Whilst some tourist establishments can increase their food menu prices, many hotels and resorts offering all inclusive packages cannot, their prices would have been set last year with their travel agents. As a result a loss in profits is sure to follow for most travel businesses.

Travel & Transportation
A reduction in the number of flights to Sharm El Sheikh has increased the cost of a ticket by 25% in the last month.

The Airline Industry has been directly affected by the oil crisis. One of the UKs biggest travel companies XL Airways collapsed recently and the whole industry is feeling shaky. The impact of this crisis will undoubtedbly be passed on to travellers through increased ticket prices, baggage charges and inflight meals (scrapped, or made more expensive).  The majority of holiday destinations are dependent on airlines offering good value flights to passengers, so increased ticket prices will mean less holiday makers and less money being spent when people arrive. A reduction in the number of flights to Sharm El Sheikh has increased the cost of a ticket by 25% in the last month compared with the same period last year.

Another area hit is the taxi and transportation services, with price increases of about 12 to 15% on most journeys, the cost of an airport transfer from Sharm El Sheikh to Dahab is now over EGP£210 (UK£22), each way. Increased from EGP£175 last year. This addition to the cost of a holiday in Dahab could lead to tourists favouring the resort and air-linked city of Sharm El Sheikh.

Hotels, Camps & Resorts

Everyone is waiting to see who will put their prices up first.

The cost of hotel and camp rooms in Dahab have not increased so far this year, but this will have to change soon. The current situation is unsustainable for most businesses. Almost all running costs (electricity, water, waste removal, telephone services) have increased by 12%.  Salaries need to increase so that staff can survive the rise in the general cost of living but the situation is bleak. Accomodations want to increase their room rates but at the same time cannot afford to lose out to the cheaper accomodations. Everyone is waiting to see who will put their prices up first.

Cafes and Resturants

Menu prices in Cafes have increased by 50% in the last four years, excluding any recent price rise due to food prices. Everyone wants to increase prices further but again are concerned that if they do they will lose out to cheaper priced establishments. Dahab has a history of being an good value destination and has been popular with backpackers for years. (It still is good value, but for how much longer in the current situation?).

Excursions, Diving and Activities

On average most excursions have raised their prices by 25% since last year, but some areas like diving are still holding on to last years prices. Again due to the number of dive centres competition for customers is high and no one wants to lose out.  Most other activites are in a similar situation (wind and kite surfing, horse riding and quad biking) all holding prices over fear of losing customers.

Current Situation = Unsustainable

Dahab has just benefited from Eid Celebrations and had an influx of customers from Cairo for 2 to 3 days but the current conditions are unsustainable. Small businesses are operating mostly at a loss and over the next few months (supposed to be the High Season) all hotels are seeing a reduction in the number of bookings based on last year. The domestic holiday market is still fairly strong, but this is not enough to keep some 3000 workers employed on a permanent basis.  The town is reliant on European and Russian tourists (mostly independent travellers) and with a decrease in bookings over the coming months everyone will be watching to see what happens next.

Mid-range holidays will be the most likely loser in this current economic climate and this is unfortunately where Dahab seems to be positoned at the moment. The majority of cheap backpacker camps were replaced by mid range hotels, and just getting to and from Dahab via  Sharm El Sheikh adds another UK£42 to the holiday price.  Is Dahab different enough that people are prepared to pay the price? Will travel become a two horse race between high end luxury travel and cheap and cheerful budget trips?

I have good links with hotels and businesses throughout Dahab and in the last few weeks I’ve been listening to their concerns.  Everyone is concerned about the current situation and really needs feedback from travellers and input from the travel industry.  The next few months will be a good indicator for the next few years as the slow down and its effects really start to kick in. How will you be changing about your holidays and travel during these difficult times?