Tunisia's improved security sees European tourists return

Building upon its strong performance in 2017, the Tunisian tourism industry is poised to carry on growing both in terms of the number of arrivals and overall revenues. Since ebbing to a low point in 2015, owing to two security incidents, the sector has rebounded to nearly 2014 levels.

Key Figures

Arrival figures have recovered to pre-2015 levels, with 7.05m foreign arrivals recorded in 2017, a 23.2% increase over 2016. However, the Ministry of Tourism (MoT) announced revenue from tourism to be TD2.7bn (€1bn) for 2017, still significantly below the nearly TD3.6bn (€1.4bn) recorded in 2014. This disparity can largely be accounted for by the fact that the gap left by European tourists has been filled by tourists from non-traditional markets such as Algeria and Russia, with these visitors spending less than their European counterparts.

Nevertheless, both revenues and visitor numbers can be expected to continue to rebound, driven in part by the sector’s internationally competitive prices. According to the World Economic Forum’s “Travel and Tourism Competitiveness Report 2017”, Tunisia ranks 9th out of 136 countries in terms of price competitiveness. Furthermore, the low cost all-inclusive resort package segment has experienced rapid growth, especially among Europeans.

As tourism directly accounted for 14.2% of Tunisia’s GDP in 2017, the government is keen to build upon the strength of the tourism sector in 2018. This forms part of a broader strategy to increase tax revenue through stimulating growth as part of an agreement with the IMF, which has agreed to lend the state approximately $2.9bn through until 2020. To this end, Salma Elloumi Rekik, the minister of tourism, announced the MoT’s goal of attracting 8m foreign tourists in 2018.

The minister, furthermore, projected receipts would increase by 25% due to the return of European tour operators such as Thomas Cook and TUI.

“We aim to receive 8m tourists this year, with strong booking rates from European customers and other new customers,” Elloumi Rekik told local media in February 2018. This progressive return of European visitors is expected to boost the country’s economy, and raise its foreign currency reserves.

In early 2018 this recovery appeared to be fully under way, with tourism revenues rising to TD371m (€142m) in the first three months of 2018, a 23% year-on-year increase, and the country appearing to be on track to achieving its 8m visitor goal.

Open Skies

In December 2017 Tunisian officials finalised an open skies agreement with the EU. The deal marks a highly promising opportunity to bring in more European tourists; significantly, neighbouring Morocco agreed to a similar accord with the EU in 2005 and its foreign arrivals have since doubled. The agreement appears set to liberalise the aviation industry, bringing in much needed competition from European airlines, though this may pose challenges for the nation’s flagship airline Tunisair, which is currently a loss-making operation.

Nonetheless, Tunisair are preparing for the deal. In an attempt to diversify its offerings and bring more African tourism into the country, the airline will open more routes to Sudan and Cameroon by the end of 2018, following the addition of routes to Guinea and Benin in 2017 (see transport chapter).

“To boost tourism, flights need to be made cheaper,” Malek Zghal, director of renovation at Dar El Marsa Hotel in La Marsa, told OBG. “The industry is still dependent on airline operators, and it is still more expensive to come to Tunisia from Europe than to travel to Morocco. Therefore, flights need to be multiplied and the prices lowered.”

Regained Security

In 2017 a number of European nations lifted travel restrictions to Tunisia in light of an improved security situation in the country. In the aftermath of the events of 2015 the Tunisian government has reviewed and adjusted its approach to security. In addition to instituting 24-hour surveillance outside of resorts and archaeological sites, and establishing security checkpoints, the government has recruited security agencies to train and supervise workers in the sector. Speaking to international media, Elloumi Rekik stated that, “Security has been restored,” before adding, “We continue to strengthen and improve safety systems in collaboration with law enforcement agencies.”

Citing this improved security status, in July 2017 the UK Foreign and Commonwealth Office withdrew its advisory against travel to Tunisia. While the UK constituted one of Tunisia’s most valuable foreign markets prior to 2015, providing 440,000 visitors in 2014, this figure fell to 20,000 in 2016.

However, there are expectations that this figure will return to its previous peak level. For example, in February 2018 the UK tour operator Thomas Cook resumed selling holidays in Tunisia to UK tourists.

Choppy Waters

Despite these developments in security, Tunisia announced another precautionary extension of the state of emergency, which has been in effect since November 2015, through October 12, 2018. While terrorism directed at foreigners has not occurred in Tunisia since 2015, the country’s nascent parliamentary democracy has, nevertheless, experienced some turbulence. In January 2018 public protests broke out across the country related to the rising cost of living and planned austerity measures. However, these protests have since subsided and the country’s political and economic outlook remains stable, with the government reaffirming its commitment to the IMF terms.

Furthermore, these events do not appear to have adversely affected the rebound of the tourism sector. Tourism revenues rose 15.7% to TD151.7m (€58.3m) for the month of January 2018 from TD131.1m (€50.4m) in January 2017.

New Markets

Of the 7.05m foreign tourists in 2017, approximately 2.5m were Algerian, a 38.1% increase over 2016. This growth has been facilitated by improved procedures and amenities at border crossings, as well as by a targeted marketing campaign for Tunisian tourism in Algeria. Attracting Algerian tourists has been an increased priority for the country’s tourism sector in recent years, and the MoT has set the goal of attracting 3m Algerian tourists to the country in 2018. Furthermore, a plan of benefits for Algerians, including special offers for retirees, the possibility for Algerians to obtain a bank credit card and a 20% discount at a number of Tunisian medical clinics, are to be put in place.

Rising in tandem with deepening diplomatic and trade ties, Tunisia has experienced a strong increase in tourism from Russia. In 2016, 623,000 Russians visited the country, followed by 514,000 in 2017, while Elloumi Rekik undertook four ministerial visits to Russia, most recently in March 2018. “We expect to receive from 550,000 to 600,000 Russian tourists in 2018, which is a 6% increase compared to 2017,” Elloumi Rekik told Russian media. “This strategy focuses on all types of digital technologies and will be backed by an advertising campaign,” she added.

The country has also continued its recent strategic pivot towards China, which was the Tunisian tourism industry’s fastest-growing foreign market in 2017. Tunisia welcomed 19,000 Chinese tourists in 2017 compared to 7400 in 2016, an increase that is poised to rise even further in 2018 with the planned opening of a direct flight between Beijing and Tunis. The first chartered-flight tourist group landed in Tunis on February 23, 2018, directed by China CYTS Tours, one of the largest tour operators in China. This development was prefigured by the cancellation of visa requirements for Chinese tourists by the government in February 2017.

The increasing importance of this market was reflected in April 2017 when Tunisia was named “Top African Destination for Chinese Tourists in 2017” at the 14th Shanghai World Travel Fair (see analysis).

Regional Expansion

The tourism industry has also set its sights on increasing both visitor numbers and revenue from other African nations. The MoT has announced plans to open five new tourism representation offices in sub-Saharan Africa in order to penetrate new markets, with a particular emphasis on expanding the capacity and marketing of the country as a destination for medical tourism.

In January 2018 the government also launched tunisiatourism.info and a television channel intended to promote the sector both at home and abroad. The website, which is translated into four languages, is a government initiative in partnership with Tunisair and MCM, a private domestic media company specialising in tourism advertising.

Eyes on the Gulf

As part of Tunisia’s recent efforts to attract more tourism from the GCC, the government has revised visa procedures for residents of the six member states of the GCC, a market of 53.1m people. As of April 2018 GCC residents can obtain their visa upon their arrival in the country. Furthermore, there has been a recent uptick in investment in luxury hotels and amenities in an effort to attract this market.

Notably, the Arab Tunisian Tourism Investment Forum was held in Tunis in October 2017 and attended by 78 investors. The forum, jointly organised by the MoT and the Arab Tourism Organisation, highlighted investment opportunities and sought to encourage the development of business partnerships between Tunisia and other MENA states.

In March 2018 the Tunisian National Tourist Office in collaboration with Y&D Real Estate, a Saudi-based marketing company, launched the first digital platform between Tunisia and the Gulf states. The initiative seeks to further increase arrivals from the Gulf and solidify their economic relationship by linking Arab investors with Tunisian investment opportunities in real estate and tourism.

Medical Tourism

Tunisia has established itself as one of the leading destinations for medical tourism in Africa. Tourists spent $321.7m during approximately 500,000 wellness trips – both primary and secondary – to Tunisia in 2015, according to the Global Wellness Institute. Recent changes in visa requirements and the creation of an e-visa initiative, which is intended to go into effect in mid-2018, are among government efforts to attract more medical tourists. In particular, Tunisia is a major international destination for the niche medical field of thalas-sotherapy, a form of medical therapy that utilises mineral rich seawater and sea products.

Therefore, the government has made efforts towards solidifying its status as a leader in this field as it examines the possibility of a new certification process for thalassotherapy centres.

Heritage

While considerable efforts have been undertaken in order to attract tourists to the country’s beach resorts and major cities, the great potential of the heritage sector remains under utilised. Mohamed Zine El Abidine, the minister of culture, told the Parliament that, while Tunisia is home to approximately 30,000 archaeological sites, only 0.2% of them — 60 in total — are open to the public. “Tunisia has a lot of tourism potential to exploit, and not only in the north of the country as a beach destination, but also in the interior of the country,” Zghal, told OBG. “Besides beaches, Tunisia should expand its offerings. There is a lack of international communication as to all that Tunisia could offer”.

The country hosts a total of seven UNESCO World Heritage sites of archaeological merit, yet the infrastructure for attracting tourists to these sites is currently lacking, with few options available to tourists for transit between the popular coastal locations and archaeological sites in the interior of the country. While presently underdeveloped, the heritage tourism segment has considerable untapped potential, especially as Tunisia turns towards the burgeoning Chinese market, which has a significant appetite for such attractions.

Domestic Market

Traditionally, the overall strength of the sector has been directly dependent on the performance of the European market. However, since 2015 the sector has become increasingly more self-sufficient by reorienting towards the domestic market (see analysis). The number of domestic overnight stays booked by Tunisian residents totalled 2.01m from January through the end of June 2017, a 20.3% increase compared to the 1.7m stays in the first half 2016. Furthermore, this figure reflects a 4.8% increase over the same period of 2014. This share of the market is even more substantial if the Tunisian diaspora is included. The total number of overnight stays booked by both resident and non-resident Tunisian citizens in the country was 6.4m at the end of June 2017, compared with 5.3m at the end of June 2016, which again marked a 20.3% increase. It should be noted, however, that this latter figure was lower than the 11m overnight stays recorded over the same period of 2014. These figures were reached in part due to an effective TD950,000 (€365,000) government-initiated promotional campaign to increase domestic tourism.

Hospitality

Despite a contraction in the country’s hotel offering in the immediate aftermath of 2015, international hotel companies have been investing again, particularly in the luxury segment. In addition to the Four Seasons Hotel Tunis, which opened at the end of 2017, a number of large hotel operators are slated to open properties in Tunisia before the end of 2018, including Mövenpick, Six Senses, Avani and Anantara.

Although investment is rising in the sector, much of the hotel industry faces a relatively high amount of debt. “Out of a total of TD4.6bn (€1.8bn) of bank commitments for all hoteliers, there are TD2.2bn (€845m) of classified debts,” Khaled Fakhfakh, president of the Tunisian Federation of Hoteliers (FTH) told local media. In order to address this issue Fakhfakh and the FTH have called upon the government to liberalise the hotel industry and introduce new financial mechanisms to protect hotel owners.

However, this increased debt burden can be largely explained by the downturn of the sector prior to the recent uptick in activity. The sector’s positive outlook and high-growth potential, both among emerging markets, and for medical and heritage offerings, suggest that these debt levels are sustainable over the medium to long term. “As more tourists come into the country, hotel standards will increase as they will have more money to renovate,” Chaker Heni, country manager for Cristal International Standards, told OBG. “Still, there is a lot of work to do to update the hotel and tourism infrastructure in Tunisia, including improving taxis, renewing restaurants and generally updating the entire tourist ecosystem,” he added.

Outlook

The government has significantly improved the security situation since 2015, particularly in the country’s major tourist destinations. Meanwhile, the tourism sector has recovered significantly, in part by pivoting towards non-traditional markets like Algeria and China. The strong performance of the sector in 2017 and early 2018 gives the industry reason to be optimistic.

However, infrastructural problems and a lack of diversified offerings threaten to restrict this progress to the coastal regions and major cities, leaving the rich potential of the interior of the country untapped. Nonetheless, the sector continues to recover in terms of it its traditional market, with increasing activity at the country’s beach resorts. New markets and investors are generating meaningful gains, and both the government and private sector appear committed to the sector’s continued development, solidifying the industry’s position as an integral part of the country’s economic future.