Care and attention: The sector is receiving government support after years of playing second fiddle

For the past three decades Algerian tourism has lagged behind its competitors, with the country in recent times engaged in restoring stability following la décennie noire of the 1990s. However, now that the security issue is largely in hand, Algeria is looking to develop the sector as it aims to ease its dependence on hydrocarbons revenues by pursuing more sustainable sources of growth, capitalising on attractions such as its extensive desert and a coastline that stretches more than 1200 km.

FIRST THINGS FIRST: Issues facing the sector include hotel capacity and quality. Algeria does not have enough hotels to develop tourism on the same scale as Morocco and Tunisia, for instance, so will first focus on building new hotels and upgrading existing ones to bring them into line with international standards and visitors’ expectations.

The country instituted a long-term plan, the National Tourism Development Plan (Schéma Directeur d’Aménagement Touristique, SDAT), in 2008 to increase sector revenues from the current annual average of €344m to €480m by 2015, and boost visitor numbers to 3.5m by 2015 and 20m by 2020. The sector will be developed around seven tourism regions, with three investment zones in the north and four in the south. Better quality hotels and services are expected under the Quality Tourism Plan Algeria (Plan Qualité Tourisme Algérie, PQTA), which was launched in 2009 to oversee the modernisation of existing hotels and build new infrastructure in line with international standards.

INTERNATIONAL TRAVEL: The number of tourists visiting Algeria in the past four years has risen by an annual average of 10%. According to the World Travel and Tourism Council (WTTC), the direct contribution of tourism and travel to GDP was AD529bn (€5.1bn) in 2011. Some 2.4m tourists visited the country in the same year, up from 1.4m in 2005 and 2m in 2010. Non-resident Algerians accounted for the largest number, increasing year-on-year (y-o-y) by 5.5% to reach 1.5m visitors in 2011. The number of foreign tourists registered considerable y-o-y growth of 38%, exceeding 900,000 in 2011.

Leisure tourism absorbed the largest number of foreign visitors, 629,000, up 67% on 2010. Business travel accounted for over 267,000 foreign visitors, and mission tourism for just under 4000. If this trend is sustained, Algeria would be on track to reach its target of 3.5m visitors a year by 2015.

While the inflow of international tourists is on the rise, so is the outflow of Algerians, with 1.6m holidaying abroad in 2011. Neighbouring Tunisia is one of the most popular destinations for Algerians to spend their summer holidays, partly due to its proximity and the absence of visa and border restrictions.

GOOD NEIGHBOURS: Algerians and Libyans have become an important source of revenue for Tunisia, especially since the global economic crisis in 2008 and the consequent drop in European tourists, who have traditionally made up the country’s largest market. The number of Algerians travelling to Tunisia has been affected by the uprising of 2011, dropping from 1m in 2009 to 607,000 in 2011. However, their numbers seem to be slowly picking up again, with 700,000 visiting the country by September 2012.

France is also a destination accustomed to receiving a regular flow of Algerians, who travel there mainly to visit family. Spain has also recently been attracting a large number of Algerians. “Spain is an increasingly popular destination. Visas are easy to obtain, and for as little as €90 you can fly to Palma in just 30 minutes, and for €125 to Barcelona in 45 minutes,” Samy Elidrissi, the manager at ALT Algérie travel agency, told OBG. “A new trend is also developing to visit Asian countries, which are reputed for their low-cost accommodation.”

INCENTIVES: Although the first hotels sprang up in the 1970s, Algerian tourism has generally suffered while public funding and support were poured into the hydrocarbons sector. However, the government has made clear its intention to boost both public and private investment in the sector to encourage job growth and diversify the economy. Consequently, incentives have been introduced in the past four years to encourage private investment and address issues that have hampered sector development, such as access to land and credit.

Fiscal incentives include state subsidies of 3-4.5% of interest rates on bank loans for tourism modernisation projects, Customs exemptions for PQTA-related imports until December 31, 2014 and value-added tax reductions on tourism products from 17% to 7% until December 31, 2019. Additionally, financial incentives introduced under the 2009 Complementary Finance Law include a 50% discount on government-owned land grants in the Hauts Plateaux region and 80% in the Sahara.

Access to land for tourism-related projects is expected to be eased thanks to the National Agency for Tourism Development, which offers 33-year land concessions that can be renewed twice, and the creation of investment zones solely dedicated to tourism-related projects in various designated parts of the country (see analysis). Finally, a new body was established in March 2012, the National Federation of Algerian Hôteliers, with the purpose of supporting and assisting investors in hotel management and development projects across the country, aiding them with legal and administrative tasks and the issues of access to land and financing.

INFRASTRUCTURE: Plans for hospitality infrastructure are divided between upgrading existing hotels and building new ones, as Algeria looks to virtually double bed capacity from 94,000 to 180,000 by 2015. The government will spend AD70bn (€672m) to overhaul existing hotels under the SDAT and the PQTA. The state-owned Aurassi Hotel was the first to undergo renovation works, for a two-year period at a cost of €56m. The newly refurbished hotel reopened its doors to customers in March 2012.

Investments have been announced for the construction of new hotels across the country, with nearly 800 projects in the pipeline expected to boost bed capacity by an estimated 86,000 over the next three to four years (see analysis). International newcomers in partnerships with local investors in the past two years include Sheraton and Le Méridien in Oran, Le Mercure in Algiers and Le Renaissance Marriott in Tlemcen. A Golden Tulip in Skikda is due for completion by 2013 and a Holiday Inn Algiers-Cheraga Tower, InterContinental Hotels Group’s first hotel in Algeria, is expected by 2014. In addition, Accor plans to build more than 20 Ibis and Novotel hotels by 2015. In 2011 the group inaugurated a Novotel and its fourth Ibis hotel in Constantine. Ongoing hotel projects include two Ibis and Novotels in Sétif, one Ibis in Skikda and one Novotel in Algiers.

DOMESTIC TOURISM: As the country awaits rising inflows of foreign visitors, domestic tourism has come to be seen as an important source of growth, and a segment that is ripe for development.

As the middle class expands and living standards improve, the government is turning towards satisfying the needs of its people by stepping up efforts to boost domestic tourism. “An increasing number of Algerians are spending holidays abroad,” Abdelkader Gouti, the director of communications and cooperation at the Ministry of Tourism, told OBG. “So, the ministry’s objective in the short term is to develop similar quality offerings as those proposed abroad to satisfy the needs of Algerian tourists.”

The sector currently has a window of opportunity, given that the 2011 revolution has made Algerians more reluctant to visit Tunisia, given the rise in security issues in recent months. Additionally, with Ramadan coinciding with summer months, more Algerians are choosing to spend their holidays at home with family. “If more attractive and competitive offerings are developed to promote domestic destinations, Algerians may decide to spend their holidays in their own country,” said Gouti. The national tourism agency (Office National du Tourisme Algérien, ONAT), a state-owned travel operator carrying out a wide range of activities, is one of the main developers of domestic tourism. “Algeria is the largest country in Africa, and many parts of it are totally unknown to its own people. Developing domestic trips and tours provides a perfect opportunity for Algerians to discover their own country and consequently to boost the sector as a whole,” Mohamed Cherif Selatnia, the general director at ONAT, told OBG.

UPMARKET INTENTIONS: With 1200 km of coastline and unspoiled Saharan desert covering four-fifths of the territory, the country is targeting tourists who value these resources. “Algeria is not looking to develop mass tourism, but rather to create an upmarket industry,” Selatnia told OBG. Offerings are being designed for small groups from nearby European markets. ONAT, for example, is developing trips in partnership with Italian, German and French operators for groups of up to 20 people.

To provide a more reliable and regular flow of visitors, tourism is also being developed as a year-round business to evolve around five niches: Saharan, business, seaside, cultural and wellness. Seaside remains the most popular, as most people take their holidays during the summer and the other activities are still in the development phase and lack promotion. However, seaside tourism suffers from a shortage in capacity, with less than 30,000 beds available along the coast. This area should eventually benefit from the eight tourism villages and 11 marinas planned under the SDAT. The seaside segment caters to a large number of domestic tourists, while the number of foreign visitors should rise as planned projects for quality infrastructure under the SDAT materialise. Some 14 wilayas (provinces) make up the Algerian coastline, and the most popular destinations include Annaba, Jijel, Bejaia, Algiers and Oran.

A popular and established niche in European markets in the 1970s and 1980s, Saharan tourism suffers today from poor quality hotels and a shortage in beds, with a capacity of just 6000. Nine Saharan hotels are currently undergoing renovation works as the country looks to revive the sector. Under the SDAT, four desert tourism centres are to be developed. Famous sites include the UNESCO-listed regions of Tassili N’Ajjer and Hoggar in the far south. Destinations for cultural tourism include Tipaza, 50 km west of Algiers, and Timgad and Djemila in the northeast, which are popular for their Roman ruins. The government is looking to capitalise on these resources to boost cultural tourism.

Wellness is still in its infancy and is planned for expansion over the medium and long term. The country is currently modernising its nine thermal spas. Concessions are being granted to private investors to develop geothermal projects at 200 registered springs in partnership with the EU under the DIVECO programme launched in 2008 to promote economic diversification. Most of the springs are located in the north of the country, one-third of which with temperatures higher than 45°.

In addition, there are plans to rehabilitate some 50 thermal stations across the country currently under way, costing some AD50bn (€480m). An additional AD800m (€7.68m) will also be allocated for the rehabilitation of outdated hospitality infrastructure accommodating geothermal tourists. Plans are under way to bring state-owned resorts in line with international norms and upgrades are expected at Hammam Bouhanifa in Mascara, Hammam Bouhadjar in Ain Temouchent, Hammam Boughara in Tlemcen and Hammam Rabbi in Saida.

TRAINING: “It is pointless to build new infrastructure and develop tourism offerings if qualified and trained personnel are not available. There is a need to boost the quality of training and review curricula at existing public institutes to align programmes with international standards,” Gouti told OBG.

There are three public institutes, offering 880 places. The institute in Algiers (École Nationale Supérieure du Tourisme), located in the Aurassi Hotel, has a capacity of 200, offers management programmes in tourism and hospitality, and has trained 1250 managers so far. The second institute is that of Tizi-Ouzou (Institut National des Techniques Hôtelières et Touristiques de Tizi Ouzou) in central Algeria, with 300 places and another 80 at its annex in Tlemcen. Finally, the institute in Boussaada (École Fondamentale de Technologie Hôtelière et Touristique) in the south offers 300 places.

Two more institutes are planned for 2013 in Ain Temouchent, in the west, and Tipaza, with capacities of 200 and 1200, respectively. Training centres will also be created in each of the seven tourism regions under the SDAT. Training in private institutions remains limited, reflecting the overall situation for private education in Algeria, which has been restricted since the 1990s. In 2011 travel and tourism directly supported 359,500 jobs – around 3.6% of total employment – according to the WTTC.

CONNECTIVITY: To welcome the rising number of visitors and enhance internal connectivity, the government is investing €229bn on the modernisation and expansion of Algeria’s roads, airports, railways and ports under its five-year plan (2010-14) to improve transport links (see Transport chapter).

To boost passenger capacity and bring infrastructure in line with international standards, modernisation and expansion works are ongoing at existing national and international airports. Renovation is expected to begin before the end of 2012 at Algeria’s main airport, Houari Boumediene in Algiers, and the airport of Oran, while extensions are currently being carried out at the airports of Annaba Rabah Bitat and Constantine Mohamed Boudiaf, with the construction of new terminals boosting their annual passenger capacity from 500,000 to 700,000 and 700,000 to 1.2m, respectively. Extensions are also ongoing at the airports of Jijel Ferhat Abbas and Biskra Mohamed Kheider to expand annual passenger capacity by 100,000 and 200,000, respectively. Some 14 new airports are also expected to be built in 2014, bringing the country’s total number to 70.

The expansion and upgrade of Algeria’s road network is also under way, with 2500 km of new routes to be built over the next three years, as well as the rehabilitation of around 8000 km of existing roads, set to facilitate national connectivity. Plans include the construction of the East-West Highway, launched in 2007, stretching across 1216 km and passing through 24 provinces from the eastern city of Annaba to Tlemcen in the west, facilitating access to previously isolated areas. Work on eight new highways is expected to start in 2013, linking the East-West Highway to the Ports of Djen Djen (Jijel), Skikda and Bejaia. The Autoroute Transmaghrébine, a transnational highway that will connect Morocco, Algeria, Tunisia and Libya, is also expected to play a major role in boosting regional connectivity and easing the transportation of goods and people.

MARKETING: Despite being the biggest African country since the separation of north and south Sudan, Algeria remains a relatively unknown tourist destination. Therefore, with assistance from the EU, it is developing a marketing strategy for the short, medium and long term. In the first few months of 2012 Algeria was represented at events including Madrid’s FITUR in January, Paris’ MAP and Milan’s BIT in February and Berlin’s ITB in March. However, it has much catching up to do to reach the scope of advertising carried out, for instance, by neighbouring Tunisia and Morocco, and to make up for the deteriorated image that resulted from the conflict in the 1990s. Algeria is looking to create a unique brand to differentiate itself from its neighbours and promote an upmarket industry rather than mass tourism.

In the meantime, marketing the country at a domestic level is also crucial. “Algerians need to be made aware of the local offering and international tourists need to be reassured that the country is not what it was a decade ago,” Selatnia told OBG.

OUTLOOK: Almost 1.5m tourists visited Algeria during the first half of 2012, and a total of 3m are expected by the end of the year. With the rise in foreign visitor numbers and increased investment in hospitality, the country seems to be on track to deliver an attractive and competitive sector. “Developing tourism is no longer an option, it is a necessity,” Gouti told OBG. “The sector is now open for investment and the state is ready to help investors.” In light of the improvements being carried out under the SDAT, visitors should benefit from quality infrastructure and services within the next three to four years.