Rising expectations: Plans to further sector development are moving forward

While the economic crisis in Europe and the fallout from the Arab Spring elsewhere in North Africa have continued to impact the tourism industry in Morocco, resulting in more modest growth in tourist arrivals and length of stays, the sector has nevertheless seen moderate expansion in activity. The tourism sector has undergone a major shift in recent years in large measure due to the implementation of the Moroccan National Tourism Office’s (Office National Marocain du Tourisme, ONMT) Vision 2020 programme, which seeks to attract 20m tourists, raise the country’s “sun and surf” profile, boost annual revenues to Dh140bn (€12.43bn), increase the country’s hotel bed capacity to 375,000 and create 9500 new jobs in the industry, all by 2020.

VISIONS & PLANS: Prior to Vision 2020, the government’s blueprint for the sector’s development was laid out under Vision 2010, which sought to increase the number of tourist arrivals to 10m by 2010. While the plan almost attained the 10m mark, with 9.28m tourists visiting the kingdom in 2010, it fell well short of its goal of increasing the number of nights spent by tourists to 50m, reaching 18m.

A government programme launched in 2002, Plan Azur has been the cornerstone of efforts to reshape the kingdom into a regional beach destination by creating six seaside resorts. The plan, however, has faced setbacks and the results have been disappointing. To date, only one of the six resorts has proven moderately successful, and the ratio between beach and cultural tourism has remained largely unchanged. Imad Barrakad, the president of the board at the Moroccan Agency for Tourism Development (Société Marocaine d’Ingénierie Touristique, SMIT), told OBG, “Ensuring appropriate sizing for resorts is a sine qua non condition for Morocco to develop successfully as a resort destination, given that it is not a mature market yet.” SMIT was created in 2008, in order to help boost investment in the sector. The public sector agency serves as a partner for both foreign and domestic investors in both the development and management of the country’s tourism zones, and carries out detailed analyses on project potential, including technical and financial feasibility studies. SMIT is also charged with assisting the strategic planning process for Vision 2020, and improving coordination between the private sector and local authorities on major projects.

In light of the performance of Vision 2010 and Plan Azur, Vision 2020 aims to leverage Morocco’s range of attractive natural landscapes, which include the Atlantic Ocean, the Mediterranean Sea, the Atlas Mountains and the Sahara Desert, with an eye to encouraging sustainable tourism. The Ministry of Tourism has delineated eight regions according to their tourism speciality and geography within the kingdom. It has established clearly defined goals to build new tourism facilities, attractions and infrastructure to reach its targets for the sector. To ensure that Vision 2020 is efficiently executed, the state is in the process of giving more authority to the 16 regional-level governments. The goal is to expand and strengthen local offerings, ensure they reflect an authentic Moroccan experience, and help develop rural and remote areas of the country.

The government’s ambitious plans require significant private sector investment and the support of the public sector. New resorts and hotels continue to open and more are planned going forward to meet demand from the increasing number of tourists. The Moroccan Fund for Tourism Development (Fonds Marocain pour le Développement Touristique, FMDT) aims to raise a total of Dh15bn (€1.3bn) in capital over a 10-year period for tourism projects. To date, the ONMT’s goals have succeeded in providing an impetus for the sector, although achieving some of its objectives will take time.

PERFORMANCE: The tourism sector remains one of Morocco’s leading contributors to GDP, at around 7%. The ONMT predicts that Morocco will receive 10.7m tourists in 2014 and 12m in 2016. Even if it maintains this pace, the government will fall short of the 20m mark targeted under the Vision 2020 plan. In large part this is because elements of the development agenda for the sector, particularly Plan Azur and its aim of making Morocco a regional beach holiday destination, have not yet been realised. “Nevertheless, the plan deserves a lot of credit because it is audacious, and it is the first time Morocco has created a strategic plan for this segment of the market,” said Hassan Joundy, general manager of the JM Suites Hotel in Casablanca.

According to the ONMT, 10m tourists visited Morocco in 2013, up from 9.37m the previous year, with the sector growing by 7%. In 2013 9400 hotel beds were added across the country compared to 10,000 the previous year, and SMIT is projecting that a further 28,000 will be added in 2014. The sector is expected to grow at a rate of 5.5% between 2013 and 2023, according to forecasts from the World Travel & Tourism Council (WTTC).

Meanwhile, receipts in the tourism sector reached Dh57.6bn (€5.11bn) in 2013, down slightly from Dh58.2bn (€5.17bn) in 2012, according to Bank Al Maghrib, the central bank. Moreover, despite the rising arrival figures, the sector’s contribution to GDP has fallen for several years in a row. According to the High Commission for Planning, it declined from 7.1% in 2011 to 6.9% in 2012, due in part to downward pressure on prices as operators looked to attract budget-conscious European travellers, as well as the strong performance of the automobile and aeronautics sectors, which had the effect of expanding overall GDP and thereby reducing tourism’s contribution. The National Confederation of Tourism (Confédération Nationale du Tourisme, CNT) expects to see expansion of around 6.7% in 2014 and stable growth over the medium term.

MARKET SEGMENTS: The vast majority of travellers to Morocco come from Europe. ONMT figures show that tourist arrivals from France and Spain totalled 3.4m (34%) and 2.1m (21%), respectively, in 2013. These two markets, while still key for Morocco, have been negatively impacted by the protracted economic recession in Europe. The ONMT is aiming to boost French arrivals by 10% under its current plan, but both markets grew by just 4% in the past two years, while others, such as Germany, Italy, the UK and the US, have expanded by double-digit rates.

In order to make up for the drop-off in French and Spanish visitors, Morocco – as in Turkey, Tunisia, Egypt and other regional holiday destinations – has sought to diversify towards new markets. “Tourist arrivals from Europe in 2012 and 2013 have decreased, and there has been an attempt to increase domestic tourism and other regions, such as the Gulf,” said Joundy. Moroccan tourism authorities have also been attempting to diversify by increasing their focus on Eastern European countries, such as Poland and Russia. The two countries supplied 50, 000-60,000 and 30,000-35,000 tourists, respectively.

Additional efforts have been made to attract Asian tourists, notably Chinese, but this effort has faced obstacles due to visa restrictions. “Even if Morocco only attracts 10,000 visitors from one country, the idea is to get word of mouth going so more people come,” Fouad Lahbabi, the vice-president and secretary-general of the CNT, told OBG.

Given the number of Moroccans living abroad, nationals returning from overseas were the largest segment overall, at 4.64m, up 8% year-on-year, according to the ONMT. Local tourism has also been buoyed by the growth of the Moroccan middle class and an increase in accommodation targeting this segment, such as residential apartments. Indeed, domestic tourism accounted for around 27% of the sector in 2013 in terms of tourist numbers, a figure which is expected to grow steadily.

Leisure travel continues to predominate, with business travel coming a distant second. In 2012 leisure spending accounted for 87.1% of the total, as compared to 12.9% for business expenditure, according to the WTTC. The relative strength of the leisure market should help the sector to ride out volatility in the short and medium terms, since this segment often travels for longer and thus spends more during their stays in comparison to business visitors.

OCCUPANCY RATES: Overall hotel occupancy rates hovered around 43% in 2013, which is a small increase over 2012’s 40%, according to figures from the National Federation for the Hotel Industry (Fédé ration Nationale de l’Industrie Hôtelière, FNIH). Marrakech led the way in terms of occupancy with 52%.

Although the sector continues to grow and occupancy rates are up, given the slowdown in global spending, hotels have had to reduce their prices. “Revenue may be up, but margins are smaller. Tourism establishments have had to lower prices in order to bring in clients,” Habib Hassani, the general manager of Hotel Kenzi Basma in Casablanca, told OBG. The average number of nights spent by tourists was 8.3, which has fallen during the past several years, although the total number of nights sold increased between 2012 and 2013 to around 19m, up 9%, according to the ONMT. The fastest-growing accommodation category was guesthouses, up 30%, followed by three-star hotels (19%), apartment hotels (18%), and four- and five-star hotels (13%). In terms of hotel capacity, Marrakech added 22% in 2013, followed by Nador with 14% and Fez with 10%.

Popular destinations continued to perform well in 2013, such as Casablanca, Marrakech and Agadir in particular, which both sustained growth of around 10% thanks to their strong respective business and leisure orientations. According to the FNIH, other areas fared worse, such as Ouarzazate, which had an occupancy rate of approximately 13-20%. Ouarzazate, which has hosted several major Hollywood productions, has been hard hit by the slowdown in local and international film industry activity, as well as a lack of air routes. Fez has also seen low occupancy rates, which hovered around 35%.

NEW HOTEL RANKING: In an attempt to professionalise the hotel industry, the ministry will implement a new star-based ranking system in line with that used by many European countries. The current system only provides a ranking for hotels based on technical aspects, such as room size, architecture, furniture, hygiene and security, but not on the perceived quality. The new system seeks to address inadequacies in the technical requirements for hotels as well as implement a quality ranking.

“The new ranking system will have a strong positive effect on the industry. It’s important that our system mirror a European model so that our European customers are satisfied with their stay in Morocco,” Hassani told OBG. The ranking system received approval from the UN World Travel Organisation (UNWTO) as well as the UN Development Programme (UNDP). The UNWTO will also provide technical assistance in implementing the ranking system until 2018. New hotels built after the implementation of the ranking, set for the end of 2014, will be required to adhere immediately, while older hotels will be given a two- to three-year transition period. Inspections will be conducted on a regular basis to ensure that the hotels’ rankings are justified.

INBOUND CAPITAL: In 2012 the sector attracted Dh14bn (€1.2bn) in investment, and in 2013 it is projected to receive Dh20bn (€1.8bn), according to SMIT. While both public and private sector spending is on the rise, bolstered by the government’s development strategy and the comparative resilience of the sector, public sector fiscal constraints negatively impacted the Ministry of Tourism’s advertising budget, which was reduced by 50%, or Dh678m (€60.2m), for 2013 and 2014. “Morocco’s tourism marketing budget is 10% of Egypt’s, which is one of Morocco’s main regional competitors,” Joundy said.

Nevertheless, spending has been slowly inching upwards. The state-owned SMIT, which is a government body responsible for developing, attracting investment for and executing tourism projects, brought in Dh14bn (€1.2bn) in investment in 2012, which increased to Dh18bn (€1.6bn) by November 2013, according to figures from the ministry.

SMIT was also involved in the development of two new resorts aimed at the domestic market near Nador and Benslimane, which respectively represent a total investment of Dh350m (€31.1m) and Dh400m (€35.5m) by AMSA Invest, a joint Saudi-Moroccan public investment fund.

In 2013 10 out of 14 regional programme contracts (contrat-programme regional, CPR) – public-private infrastructure projects that are designed jointly by the government and the private sector – were signed by the regional governments, SMIT and private investors. The government implements CPRs across a wide range of sectors to boost development and growth. The private sector has been equally active, particularly in regions targeted by the government for development, with new public-private partnerships on the board (see analysis).

NEW RESORT: In 2013 Alliances, Caisse de Dépôt de Gestion (CDG) and the FMDT signed a partnership agreement for the development of the Lixus resort along the Atlantic coast south of Tangiers. Part of Plan Azur, the project aims to boost “sun, sand and surf” tourism. The Alliances Group will be a 50% shareholder, while CDG will have 30% and the FMDT the remainder. A total of Dh3bn (€266.4m) has been set aside for the development of the resort, which will add a further 3600 beds to the tourism sector. The project is estimated to create some 4000 direct jobs and is expected to open its doors in 2016.

The Lixus resort is one of six that have been designated for development under Plan Azur. One of the more successful resorts under the plan has been the one at Taghazout, which has performed comparatively well in terms of attracting investment and tourists. Overall, it is expected to receive Dh10bn (€888m) in the form of public-private sector investment and will involve the construction of eight major hotels with a capacity of 12,376 beds.

However, the plan has faced challenges, including project delays due to financing issues and a lack of marketing, which has left some of the regions facing low occupancy. “Plan Azur has been slow in coming. Several projects lack a sufficient number of hotels and concurrent tourist activities. More investment is needed to make these other locations a success,” Hassani told OBG. In 2013 two resorts were launched. The Desert Resort in Dakhla, which represents a Dh1bn (€88.9m) investment from the Al Shafi Investment group, will focus on ecotourism. In addition, an agreement was signed by the Amer Group and the Ministry of Tourism; the Egyptian real estate developer will spend Dh2bn-3bn (€177. 6m-266.4m) building a holiday village in Tamaouanza, 15 km outside of Agadir, which will receive Dh27bn (€2.4bn) through a CPR project. The resort will be family-oriented and will span 120 ha.

BUILDING NEW CONNECTIONS: With an increasing number of tourists seeking to travel to Morocco, airlines have been expanding their operations in the country, including low-cost carriers, reversing a previous decline in budget connectivity (see Transport chapter). In 2012 Ryanair announced the closing of 34 flights a week between Morocco and European destinations. However, in 2013 the budget airline revealed plans for 42 new routes connecting Morocco; it intends to base two aircraft in Marrakech and one in Fez, and will add Essaouira and Rabat to its list of Moroccan destinations.

Royal Air Maroc, the county’s flagship carrier, is planning on opening 20 new routes, including one to São Paolo, which is expected to facilitate business ties between the two countries, as well as several new routes to Europe, serving cities such as Munich, Manchester, Saint-Petersburg and Vienna. Flight frequency may be impacted by a recent government’s decision to impose a Dh100 (€8.88) tax on all leisure tourist arrivals and Dh400 (€35.52) for business travellers as of April 1, 2014. The tax will be used by the ONMT to promote the country as a holiday destination in places including Brazil, West Africa, the Gulf, China and Eastern Europe, as well as for social projects. According to press reports, the decision has already prompted easyJet to halt three weekly flights between Paris and Fez and three flights per week between Tangiers and Paris as of May 2014.

NICHE MARKETS: Within the context of Vision 2020, the authorities are looking for niche markets to attract more tourists. Ecotourism is one of the more prominent segments in this regard, but medical tourism has also grown over the past several years, and the kingdom is aiming to capitalise on the French-and Arabic-speaking markets and its proximity to Western Europe. With this in mind, construction of Marrakech Healthcare City began in 2013. This project will help boost the sector’s profile in neighbouring countries, such as Egypt and Tunisia. The clinic, a $40m investment, will have 160 beds, 60 rooms and seven operating blocks. It is forecast to receive 5000 patients per year, many of which are expected to be foreign tourists and retirees, and will offer cardiology and radiology, among other treatments.

Sports tourism is also projected to expand, particularly golf. Morocco has 29 courses that attract around 90,000 golf enthusiasts, but this number is expected to increase to 40 in the next two to three years with the goal of bringing in 250,000 golf tourists annually. The ONMT hopes to attract more golfers from the UK, which is one of the biggest golf markets worldwide, with 4m regular golfers. British golfers often head south in the winter, particularly to Portugal and Spain, when local golf courses close.

Several ports are planned or are undergoing expansion, notably in Tangiers and Casablanca, which will allow more cruise ships to dock along Morocco’s coastline. According to the ministry, 450,000 cruise tourists arrive every year, a number which has grown by an average of 9% annually since 2004. Port projects will receive Dh160bn (€14.2bn) between 2012 and 2016 for expansion of capacity.

MICE SEGMENT: While mainly a cultural tourism destination, Marrakech remains the national leader in the meetings, incentives, conferences and events (MICE) segment in terms of capacity and the number of conferences held. Casablanca, Tangiers and Rabat have been less successful in implementing a conference tourism strategy largely due to a lack of adequate infrastructure, and more generally, Morocco lags behind other MICE destinations in the Mediterranean region, such as Egypt or Spain.

However, several plans are in the pipeline to make Casablanca, Morocco’s commercial centre, a more prominent conference destination. A convention centre is planned to open in coming years, which will include an auditorium with 3000-4000 seats, at least two additional auditoriums with 300-700 seats, 10-20 meeting rooms, as well as an exhibition hall with 10,000-20,000 sq metres of space.

A large part of this strategy involves expanding Casablanca’s cultural offerings, in a bid to increase the length of stay for business travellers and raise visitor spending on the weekends. “Marrakech and Agadir are destinations for leisure travellers, while Casablanca is focused on the corporate segment. Casablanca’s hotels are full from Monday to Friday, while for Marrakech and Agadir that’s true for the weekend,” Joundy told OBG.

The city is currently constructing a massive new performing arts theatre, which is expected to open in 2016 or 2017. It will be the biggest on the African continent and in the Arab world, with a 1600-seat theatre and two other auditoriums with a combined seating capacity of 1000. The project received an investment of Dh1.4bn (€124.3m) from public sources, including the municipality and the Hassan II Fund for Economic and Social Development.

OUTLOOK: The tourism sector in Morocco has demonstrated its resilience amidst a challenging international context, with visitor figures continuing to rise. However, tourist expenditure and nights spent at hotels have decreased. Taken together, these factors have put pressure on profits and prices have been reduced in an effort to increase volumes.

Efforts by both the public and private sectors mean that the industry’s long-term outlook remains robust, although things may be more volatile in the medium term. Given the plethora of public-private infrastructure projects, as well as the increased level of foreign investment flowing into the country, the business and luxury segment should see more growth over the coming years. Other niches are also developing and experiencing moderate success, such as ecotourism, medical tourism and cruise tourism. Domestic tourism has been showing strong signs of growth recently, which should continue as Morocco’s GDP increases and its middle class expands.