Investors dump regional travel stocks as images of burning hotels hit the front pages

Egypt’s tourism industry has so far escaped the fallout from the war in the Gulf largely unscathed — with European visitors still arriving on schedule and hotel cancellations limited to guests who simply can’t get flights out of the GCC. “We’ve had many no-shows and a few cancellations, especially from the Gulf and Saudi Arabia,” a senior exec in the Egyptian hospitality sector tells EnterpriseAM.

Importantly, this isn’t because of a lack of appetite, but a lack of flights. While the cancellation of flights from the GCC had caused some disruption, visitors from elsewhere kept coming uninterrupted. “We had no cancellations from Europe. We have group holidays. They’re still coming in,” we were told.

Tourism Minister Sherif Fathy said much the same, noting that “regional developments and current geopolitical events in the region have not affected the incoming tourism [flows],” according to a ministry statement.

The outlook: When airspace reopens, visitors from the Gulf should come back, with traffic expected to pick up “as much as the airplanes can [handle],” we were told.

It’s a very different situation in the Gulf

The situation for hotels elsewhere in the region is very different, with “Egypt being the least affected,” we were told. The impact of videos of hotels being struck by drones and appearing in flames will take time to fade before tourism picks up again. “It will take time, but definitely not three years — I think a maximum of one year.”

Industry participants say it's too early to talk about whether strategic investors could shy away from the sector. “It’s a bit too early to decide or to say if investments will be affected,” our source in the hospitality sector tells us, explaining that much rests on how long the conflict will continue. But if the war ends soon, investment interest could tick up shortly after, as “people and investors forget quickly.”

Flights still grounded

Most of the region’s major air hubs remain shut on day four of the conflict, with thousands of flights canceled and hundreds of thousands of passengers stranded. Air traffic seems to be showing few signs of returning, with flight tracker FlightAware clocking in 2.8k cancellations on the day that war started, 3.3k the day after, and 3.1k yesterday.

A handful of flights are set to leave the UAE today as officials there look to repatriate travelers stranded by the outbreak of war.

The almost complete shutdown of air traffic in the Gulf had seen Riyadh emerge as an exit point for those stranded. High-net-worth individuals, senior executives, and their families were reportedly driving from Dubai to Riyadh and boarding private planes for as much as USD 350k a trip to get out of the region or simply make business trips.

Less well-heeled travelers have traveled by land and sea as far as Egypt to fly out of the region, with the Arab Bridge Maritime Company — which operates ferries connecting Egypt and Jordan — increasing the number of scheduled trips to accommodate the uptick in demand, according to a Transport Ministry statement.

Travel stocks are taking a hit

Traders have voted with their wallets, with the stocks of the region’s few listed airlines closing deep in the red. Saudi Arabia’s Flynas fell 6.4% on the Tadawul yesterday, while Jazeera Airways fell 5.5% on Boursa Kuwait. Attention will move today to budget airline Air Arabia as the Dubai Financial Market reopens following a two-day pause in trading in response to the start of the war.

Shares of listed hotel groups and travel companies — almost all of which have a sizable footprint in the Gulf — seem to have taken a hit, too, as Western markets opened yesterday for their first day of trading since strikes on Iran began. Fairmont brand owner Accor saw its share price fall 8.9% on the Euronext Paris after images emerged of the French hospitality group’s Fairmont The Palm hotel in Dubai in flames.

You didn’t have to be a direct target of the attacks to feel the pinch, with German travel company Tui — which has a sizable presence in the region and especially in Egypt — seeing its shares fall 9.9% yesterday on the Deutsche Börse. Shares of InterContinental Hotels Group fell 4.2% on the London Stock Exchange. Hilton Worldwide was down 2.2% and Marriott International was down 3.3%.

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