ANALYSING THE IMPACT OF ON EGYPTIAN TOURISM AND HOSPITALITY

1YASMINE HUSSEIN RAMZY, 2AHMED MOUSSA ELSAMADICY

1,2Hotels and Tourism Department,Arab Academy for Science, Technology and Maritime Transport, Email: [email protected], [email protected]

Abstract - One of the biggest challenges facing tourism and hospitality industry is the emerging and fast growing ‘sharing economy’. Sharing economy describes a new economic paradigm driven by technology, consumer awareness and mobile commerce, particularly through web communities. There is a debate around the impacts of the sharing economy on tourism industry. Sharing economy activity might reduce formal published GDP and thus might be a type of shadow business practices. However, it has a tremendous impact on several business sector practices generally and specifically tourism and hospitality industry. This research aims to analyze the impact of sharing economy entry into Egyptian tourism and hospitality industry and analyze its costs and benefits.

Keywords - Sharing Economy, Tourism, Egypt, Peer- to- peer accommodation, Ride- Sharing

I. INTRODUCTION classical tourism business. In response to the growing concerns of natural resource preservations and Sharing is a phenomenon as old as time itself, constraints, societies started to utilize the Internet to collaborative consumption and the sharing economy increase efficiency by linking the online and offline are phenomena that occurred in the Internet world and sharing economy became one of these age[1].The world has witnessed revolutionary waves initiatives [3]. of digitalizing the economy for more than two decades. However, several businesses have not In particular, tourism and hospitality scholars realized the differences between digitization (i.e consider that sharing economy would change the technical process) and digitalization (i.e socio future of the hospitality and tourism industry technological process of applying digitalization dramatically [4][5]. However, literature concerning techniques to broader social and institutional contexts sharing economy, particularly in relation to this that contribute to digital technologies infrastructure). industry, is relatively fragmented. Since the From reviewing literature, sharing economy occurred emergence of sharing economy, tourism and due to the urgent need to co- create value with hospitality have emerged as one of the most consumers and converting to new business models pioneering sectors for its growth. Indeed, sharing that are considered the main features of sharing economy allows for tourists and residents to share economy. their homes, cars, meals, and expert local knowledge (e.g. locals being tour guides) [5] [6] [7]. There are a In the Arab world, generally, and in Egypt multitude of drivers encouraging sharing as one of the specifically the concept of sharing economy is not mainstream practices in almost all aspects of tourism new. Since the old days, the concept of sharing food and hospitality nowadays. Tourists are seeking better and cloths and lending money has been prevailing value for money, sustainable tourism products, and between neighbors, relatives, colleagues and friends. authentic tourism experience [5] [6] [8]. It has been addressed as a sort of social solidarity. It has been considered as a part of the culture and Moreover, the size of the sharing economy is still less religious beliefs. Additionally, this has been found in than 1% of the formal economy, most sharing Western countries; sharing economy can be traced platforms are growing fast, but some have already back to ancient times in sharing among close family reached a phase of growth maturity. Within localized members and friends. The concept of “sharing geographical areas, there appear to be limits to economy” in its current meaning has not been growth, for example around 10% of the overall addressed [1]. Indeed, the sharing economy has accommodation sector. These limits also occur experienced explosive growth in the recent fifteen because successful sharing economy enterprises tend years [2]. to move from pure non-profit platforms enabling peer-to-peer transactions to for-profit business-to- Since the beginning of the new millennium and the customer trade and thus away from the sharing information technology generally and the internet economy into the formal economy. In this way, the specifically has dramatically altered the way the pure sharing economy is an important tourism sector operates. Indeed, the explosion of new initiator/innovator for the conventional economy [9]. online platforms in particular, the new forms of In fact, the digital economy has emerged as a key tourism service has modified substantially the driver of growth and development across the

Proceedings of Academics World 89th International Conference, Oxford, UK, 19th-20th July 2018 5 Analysing the Impact of Sharing Economy on Egyptian Tourism and Hospitality world. According to Huawei and Oxford Economics, regulations, licensing, and taxes. Effects include it accounted for 15.5% of global GDP in 2016 and missed tax revenues, an uneven economic playing this share is expected to increase to 24.3% by the year field with the conventional economy, and increased 2020—growing 2.5 times higher than the overall risks for both producers and consumers. The growth of the global economy (see figure 1). consolidation of power in the biggest platforms reduces the competitive power of other stakeholders in the sharing economy[9].

Entrepreneurs and inventors are still exploring the business activities of the sharing economy. There are 17 groups of sharing startups identified that have received considerable amounts of venture funding since 2007 (see Figure2).A few trends seem clear. First, sharing has certainly moved beyond rides and rooms. Startups offering shared workspaces, storage and delivery, and logistics (a category that includes pet sitting and parking spaces) are the third most popular targets of venture funding. The second trend is the expansion of investment activity into the Figure1: Global percentage of consumers willing to participate sharing market, with approximately $150 million in sharing communities according to Nielsen's investigation [10] invested in new startup ventures. Nowadays, few Sharing economy as an economic phenomenon in industries are immune to falling transaction costs and tourism industry has several features that make the the rise of sharing-economy business models [11]. research both necessary and relevant. First, the companies within the sharing economy have received more than $32 billion in overall funding [11], but almost none of them have reported their financial statements and proved their profitability. Second, sharing economy is still at its infant stage of development, until now it has an unclear future. Third, sharing economy is disrupting traditional markets [12]. Finally, sharing economy raises a number of legal and ethical issues. All of these factors require understanding of the impact of it on tourism industry.

There is an urgent need to understand the sharing Figure2: Venture- Financed Companies powering Sharing economy better, given the potential of the new Economy [11] platforms to enable millions of people all over the Indeed, sharing economy is essentially based on peer- world to earn more income from their assets and to-peer transactions. It isa “platforms” which enable skills; to give consumers access to more choice and the matching of the supply and demand. As a result of lower prices; and to contribute to productivity and this effective, quick and cheap matching, individuals growth. Indeed, sharing economy activity might do not necessarily need a business to act as an reduce formal published GDP and thus might be a intermediary to match their supply and demand. They type of shadow or underground business practice. only need a faster internet speed and mobile access. However, it has a tremendous impact on several These two have broadened the number of potential business sector practices generally and specifically participants, creating a viable market. The digital tourism activities. This research aims to analyze the platforms make transactions possible instantly. sharing economy entry into Egyptian market and Additionally, individuals use sharing-economy analyze its impact on Egyptian tourism and platforms due to the increased ease of access to the hospitality industry. supply and lower cost of transactions or services.

II. LITERATURE REVIEW Moreover, innovations in sharing economy can

provide people with low-cost access to goods and 2.1. Sharing Economy in Tourism Industry space, and some offer opportunities to earn money, At the beginning of 2015 almost 500 tourism related often to supplement regular income streams. The sharing economy platforms existed worldwide; 11% operation and the long-term impacts of these of these dealt in travel (and accommodation), 50% platforms are shaped by both their market orientation transport and 39% leisure. The main issues found (for-profit vs. non-profit) and market structure (peer- with the sharing economy are the evasion of

Proceedings of Academics World 89th International Conference, Oxford, UK, 19th-20th July 2018 6 Analysing the Impact of Sharing Economy on Egyptian Tourism and Hospitality to-peer vs. business-to-peer). These dimensions shape competence, insurance); lack of trust in the quality or the platforms’ business models, logics of exchange, reliability of the services and lack of industry and potential for disrupting conventional businesses. reputation systems and standards. Finally, there are [13]. costs associated with competition represented by Sharing economy is a loose term identifying set of current industry players who view sharing as a fierce organizational models involving the act of sharing. competitors to their existing business models; the Sharing services can be peer- to- peer, such as huge types of collaboration that can occur: reselling, Yallaread in Tunisia, or a simple shared public renting, subscriptions, co-ownership, swaps and gifts, resources such as Bike4all in Lebanon, they can be among others; and finally new competitive payment for profit such as or not- for- profit such as the methods that are appearing: virtual currency, peer traditional Ramadan free Iftar tables; there are currency and social capital, among others. cooperatives such as stocky in Canada or companies such as Deliveroo in the UK. Additionally, sharing Tourism has proven to be one of the most influenced economy aims to include everyone because its value sectors of the sharing economy, for many reasons. is based on network effect, or the number of people Nowadays tourists are seeking unique experiences choosing it. The sharing economy involves using that traditional service providers are not able to offer. internet technologies to connect groups of people and Internet and mobile technology ensure tourists easier organizations to make better use of goods, skills, access to information about tourism services and their services, capital and spaces. quality, through customer online reviews. Local and Uber have seentremendous growth over communities are taking the benefits in sharing the past two years, now reaching a scale where they activities as a way to earn additional income renting start to competewith mainstream hotels and their spare rooms as accommodation, providing car transportation providers [9]. But it seems that no rides within a destination or guided tours of the sector is immune asthe sharing economy gradually destination as unique local experience. Local makes its incursions into four key areas of the authorities are starting to recognize the potential of tourismsystem (see figure 3): sharing economy activities in order to strengthen the destination’s image and attractiveness. Tourists now are keen for social encounters than before, due to trusted and secure platforms. In fact, tourism is a phenomenon directly related to people who are naturally interested to experience social, local, unique encounters, and the sharing economy is based on this concept.

2.2. Sharing Economy in Egypt Indeed, the two major tourism services influenced by sharing economy are transportation and Figure 3: Forms of Sharing Economy Activities in Tourism and Hospitality [9] accommodation. The number of tourists using On the one hand, sharing economy has several ridesharing applications and non- traditional benefits [14][15]. These are like the reduction of the accommodation are relatively increasing. In Egypt, it need for individual ownership; the reduction of is evidenced that sharing economy has developed prices; the reduction of excess capacity and increases new micro- entrepreneurial opportunities for in the use of underutilized resources and more money engaging more individuals in the tourism industry in the pockets of customers, so they can consume and expanding the geographic reach of options for the other goods and services. Additionally, there are travelers. In spite of the fact that sharing economy reductions in pollution; improvements in the activities are increasing and mingling in most of daily importance and awareness of sustainability and the life activities, there are no official records to set reduction of deficiencies in public services because of determine its volume or its impact on the economy. In new business models (e.g. accommodation sharing fact, sharing economy activity might reduce formal and ridesharing).from and economic point of view published GDP and thus might be a type of shadow or sharing economy can offer new employment underground business practices. However, it has a opportunity and diversify the economic activities by tremendous impact on several business sector adding new business sectors models. On the other practices generally and specifically tourism activities. hand, other researchers pointed out a number of costs Services currently delivered in the Egypt via the associated with sharing economy practices [1] [14] sharing economy model mainly involve [15][16]. These are like vigorous opposition by transportation (companies like Uber and Careem) and industries; pressure on government to regulate hospitality (Airbnb). Indeed, it is expected that this collaborative business and loss of revenues and market will expand to include other services in the profits for traditional marketers. Additionally, costs near future, but this will depend on the policies and might include regulation and legal battles (tax, regulations that govern such services, a consideration

Proceedings of Academics World 89th International Conference, Oxford, UK, 19th-20th July 2018 7 Analysing the Impact of Sharing Economy on Egyptian Tourism and Hospitality that underpins the development of the entire sharing III. METHODOLOGY economy system. This research aims to answer three main questions. These two modes of sharing economy in Egypt These questions are as follows: directly associated with tourism industry. Indeed, 1. Doessharing economy have an impact on Egyptian ride-sharing and accommodation rentals emerged on tourism industry? the top edge of the sharing economy because tourists 2. Is sharing economy substituting traditional economy were already acquainted to calling taxis and booking in Egypt? hotel rooms. Tourist behavior could change when the 3. What are the benefits and costs of sharing economy economics, convenience, and variety afforded by new on Egyptian tourism? ways of conducting ordinary activities are sufficiently compelling. In fact, these companies within sharing This research adopts qualitative research economy have internationalized with a rapid pace and methodologies, including literature review, interviews scale. The two most popular sharing economy and online qualitative survey. A review of literature companies are Uber and AirBnB. Uber has expanded on the sharing economy and its impact on tourism, its operations into 71 national markets since 2009. accommodation sharing and ride- sharing impacts on AirBnB since its launch in 2008 have spread its the Egyptian tourism industry is conducted. To ensure activities into more than 190 countries worldwide. In that the topic is comprehensively tackled, multiple less than ten years the sharing economy has grown literature sources including academic publications, drastically from networks of friends and relatives to a research papers, scientific and business reports, number of global companies with cumulative periodicals were thoroughly reviewed (e.g. European revenues of more than $15 billion for the available Parliament Reports , The Financial Times, The data in August 2014 [9]. Guardian) and websites of accommodation sharing and ride- sharing platforms. Additionally, to First, accommodation rentals are represented by investigate the impact of sharing economy platforms Airbnb. Airbnb allows renters to obtain on tourism industry, data was collected via 30 in- accommodations at lower prices from Airbnb than depth qualitative interviews with government from hotels in most cities [17][18]. Hence, Airbnb officials, platform companies' operators and offers a win- win situation to both owners and traditional service provider. After that it is renters; that is, owners can earn extra income by complemented with a qualitative structured online renting out their unused houses or rooms, while questionnaire distributed among 500 users (tourists, renters can book accommodations at lower costs. guests and riders) to get the feedback of service users. However, Airbnb has raised several concerns for governments. For example, establishing the legality These methodologies have been chosen for several of Airbnb operations through existing laws and reasons. First, the early stage of the sharing economy policies is a complicated issue.Fang et al. (2016) development and the absence of academic research studied Airbnb and some of their conclusions are the call for descriptive analysis, because it is unclear how following. First, Airbnb is taking the role of low sharing economy companies function and what is the endhotels, thus a substitution effect is happening. future of sharing economy. Second, there is lack of Second, owners can earn an extra income and renters quantitative data on the sharing economy, because the can book accommodations at lower cost.Third, companies in the sharing economy do not provide visitors who choose airbnb accommodations spend reports of their business activities. Third, these more days traveling, consequently themarket size of methodologies are the most appropriate methods to the tourism industry is expanding for the increase in answer research questions. the number of visitors. Finally, thebenefits are unclear from a macroeconomic viewpoint because The current study is covering accommodation rental Airbnb room owners, usually, do not need employ and ride- sharing companies because they are the workers, thus the social unemployment rate could business models related to Egyptian tourism industry. increase due to the closure of suchlow-end hotels. In total, one accommodation sharing platforms Also,economic impacts in monetary income are not (Airbnb) and two ride- sharing platforms (Uber and proven yet. Careem) are included because they are used in Egypt.

Second, ride sharing is very appealing to those who IV. RESULTS AND DISCUSSIONS are concerned about the environment and about a secure ride to their desired destinations. Uber and 4.1. Literature Review Careem in Egypt 2016: Reached over 70,000 drivers The study of literature was useful to provide a a month, from 3500 at the same time last year and conceptual framework of the sector. The exploration Cairo remains UBER’s fastest growing city across the of existing literature followed a general to specific and North Africa region. sequence. It started from the explanation of the concept of sharing economy, a phenomenon that has

Proceedings of Academics World 89th International Conference, Oxford, UK, 19th-20th July 2018 8 Analysing the Impact of Sharing Economy on Egyptian Tourism and Hospitality brought disruption in the economy, and it continued like job creation and innovation, while mitigating with the impact of sharing economy in the field of risks to tourists. The framework has five aspects. tourism and nature of sharing economy in Egypt. First, the concerned ministries or authorities need a From its application in tourism it then continued with governance model to control sharing economy the explanation of the peer- to peer accommodation activities in their respective sectors and address the sector and ride- sharing sectors. The analysis of implications of the new business models system. literature and secondary data was both of qualitative Second, specific purposes regulations should address and quantitative research articles and conducted on market access requirements, legal liability, and tourist deduction of on online and printed sources of protection. Third, updated labor policies should be information. The sources were selected on the basis designed to protect part-time employment for of online research. Additionally, three major issues nationals and expatriates to participate in the sharing have been identified after reviewing literature: economy. Fourth, Egyptian government should ensure that a fair taxation policies covering the  The first issue was related to the relationship between sharing economy. Fifth, Egyptian government should sharing economy and tourism. It was noticed that promote localization of sharing economy platforms to globally sharing economy applications in tourism are provide local solutions to local problems. found in transportation, accommodation, hospitality (mainly food and beverage services) and tour guiding. Sharing economy companies' representatives agreed However, in Egypt the two main models are that in the past tourists visiting Egypt had no other transportation (ride- sharing) and accommodation choices but to stay in local hotels and use expensive (peer- to- peer accommodation) deregulated modes of ground transportation.  The second issue of study was related to However, Airbnb, Uber and Careem now give them concepts of sharing economy and its impact on the opportunity to choose between several forms of tourism, which appeared to be the basis to accommodation and modes of transportation. understand the phenomenon of peer-to-peer Additionally, this enrichestourist facilities in accommodation rentals and ride- sharing. Indeed, destinations who do not have appropriate hotels or after reviewing literature, it has been noticed that sufficient numbers of hotel rooms and who do not sharing economy business models are gradually have proper modes of transportation.Thus, sharing replacing traditional business activities like hotel economy provided additional transportation and accommodations, limousines and taxis. This is accommodation capacity available when needed. because services are more convenient and Moreover, they agreed that sharing economy business cheaper. models has created additional job opportunitieson  The third issue of study is related to the part- time basis to increase income.Sharing economy application of sharing economy business models offer them the opportunity to be self- employed, thus to the Egyptian tourism sector, including flexible working conditions. Finally, they agreed that accommodation and ride- sharing. It was noticed government should regulate the sharing economy that these two business models are having both business practices. Oppositely traditional hoteliers, negative and positive impacts on Egyptian limousine drivers and taxi drivers are not satisfied. tourism industry. On the one hand, they are They believe that sharing economy business models beneficial for tourist and local community who are influencing them negatively. First, hoteliers and find them as an activity to increase their income. private taxi drivers would lose their jobs, while peer- On the other hand, they are considered risky and to- peer accommodation do not need to hire any loss for traditional service providers who are workers and skilled ride- sharing drivers replace losing substantial percentage of their market unskilled taxi drivers. Therefore, this could cause job share. loss for these workers. Second, service offered by sharing economy business models is cheaper, with 4.2. Interviews high level of service quality. This might produce Several stakeholders in the Egyptian tourism industry unfair competition between them and traditional have been interviewed. 30 interviews have been business models. This is also because sharing conducted. These interviews have been conducted economy business models regulating the process are with government officials, Airbnb company foreign direct investment with high capital representatives, owners of rented accommodations, investment. There for low and medium sized hotels representatives from ride- sharing companies (Uber and private taxi and limousine drivers could be out of and Careem) and finally ride- sharing drivers. the market. Oppositely, interviews were conducted with hoteliers, 4.3. Online Structured Questionnaire limousines and taxi drivers. The results of the The qualitative structured online questionnaire was interviews were as follows: Government officials distributed among 500 users (tourists, guests and stated that a differentiated legal framework should be riders) to get the feedback of service users. After tailored specifically for sharing economy business examining and analyzing the opinion of government models. This is in order to promote economic benefits officials, service operators and providers and

Proceedings of Academics World 89th International Conference, Oxford, UK, 19th-20th July 2018 9 Analysing the Impact of Sharing Economy on Egyptian Tourism and Hospitality traditional service providers; it is important to explore new understanding of the consumer is needed to drive the feedback of tourists, guests and riders. The results successful business models. Finally, traditional of the online questionnaires showed the following: businesses need to look closely at the sharing  Most of tourists prefer to use sharing economy economy model and further develop what the model business models. This is because they belief it is does well, and incorporate those aspects in to their more transparent. Especially riders who believe own businesses. they pay fair prices.  Sharing economy is more convenient for young REFERENCES and middle age tourist because they are more familiar with the use of technology. Oppositely, [1] R. 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