With over 1600 km of Mediterranean coastline, important cultural and historical sites, and the striking desert landscapes of the Sahara, Algeria has long held considerable potential for tourism. As the government seeks to rapidly diversify the economy, it has singled out tourism as one of five priority sectors for investment – not least in hopes that tourism can one day serve as a substantial alternative source of foreign currency. But building a renowned reputation as an international destination in a competitive global market, while overcoming regional security concerns, a chequered global economic landscape and a long-neglected national tourist infrastructure, will prove challenging. Betting on the country’s domestic population as the best hope for relaunching the sector, authorities have expanded investment incentives, sparking a construction boom aimed primarily at customers of modest incomes, alongside high-end projects for business clients. Building from the bottom up, they hope to see their population embrace tourism and induce foreigners to follow.
Destination Algeria
Africa’s largest country boasts a wide variety of attractions that lend it undeniable potential as a tourist destination. Its coastline holds 372 beaches, but much of the seafront remains undeveloped compared to other Mediterranean destinations. Algeria hosts important Roman, Islamic and Christian historic sites, seven of which are included on the country’s UNESCO World Heritage list, including the Roman cities of Tipaza and Timgad, and the Casbah of Algiers. The UN cultural organisation also recognises six seasonal festivals, traditional rituals and religious pilgrimages in its list of “intangible cultural heritage” practices. These coexist alongside Algeria’s contemporary cultural offerings, which are centred in its largest cities of Algiers, Oran, Constantine and Annaba.
Some four-fifths of Algeria’s 2.4m sq km are occupied by its star attraction: the Sahara Desert, which hosts a diverse array of landscapes, prehistoric rock art, oasis communities and unique desert fauna. Separating the vast Sahara from the coast are rugged plateaus dotted with hot springs and other features ripe for ecotourism.
History
With such varied cultural, historical and natural assets, Algeria has long held substantial potential for tourism, but the sector has developed in fits and starts. After independence a national tourism charter, launched in the mid-1960s, guided the development of a robust network of coastal and Saharan “tourist villages”. State-run tourism schools were opened in Bou Saada, Tizi Ouzou and Algiers between 1971 and 1976 to train hotel managers, servers and guides. The state encouraged Algerians to discover their country, and opened tourism promotion offices in several world capitals to collaborate with international operators in attracting foreign visitors, Said Boukhelifa, former advisor of the Ministry of National Planning, Tourism and Craft Industry (Ministère de l’Aménagement du Territoire, du Tourisme et de l’Artisanat, MATTA), told OBG. Political and economic shifts in the early 1980s, however, saw other sectors take priority. The sector then declined sharply during the civil war of the 1990s. Thanks to those shifts, “Algeria has spent 30 years unlearning tourism”, Boukhelifa told OBG.
Tourism represented just over 1% of GDP in 2008, when authorities convened a national conference with hotel and tour operators, travel agents and other sector players to adopt a plan for a relaunch of the industry. Cast within a larger national development framework, the National Tourism Development Plan (Schéma Directeur d’Aménagement Touristique, SDAT) of 2008 aimed to establish tourism as “one of the motors of economic development” and rehabilitate Algeria’s image as a renowned international destination. “Tourism is no longer a choice,” the plan proclaimed, “it is a national imperative.” The SDAT outlined ambitious targets for domestic tourism and international arrivals, aiming to expand from the 1.74m registered foreign visitors in 2007 – of whom 70% were Algerians living abroad – to 2.5m annually by 2015 and 20m annually by 2025. To achieve these objectives, the plan outlined an ambitious programme of public and private investment, including the construction of more than 280 hotels and 14 tourism villages in specially-designated priority areas.
Since the plan was unveiled, leadership of the government’s tourism portfolio has changed hands six times, and the SDAT managed to impose only a partial degree of continuity in steering the sector’s development. Most recently, in a June 2016 government reshuffle, then-minister of agriculture Abdelouahab Nouri, now minister of national planning, tourism and craft industry, called for “collective action to make up the shortcomings observed in the tourism sector” and render it “one of the principal vehicles of non-hydrocarbons economic development”.
Key Indicators
The latest figures available from the MATTA at the time of publication list 2.3m tourist arrivals to Algeria in 2014, a 15.8% drop from the previous year’s 2.73m visitors. This downturn contrasts notably with global trends, which saw a 4.7% worldwide increase in international tourists the same year, according to the UN World Tourism Organisation. MATTA figures show that international visitors to Algeria in 2014 included 940,000 foreign nationals, down 2.5% from 2013, and 1.36m Algerians residing abroad, down 23% from 2013. While comprehensive 2015 figures have yet to be officially announced, in late 2015 Amar Ghoul, the previous tourism minister, told the press that foreign arrivals for that year had increased 15%. If confirmed, such a rate would significantly outpace both global averages – 4.4% worldwide in 2015, according to the UN World Tourism Organisation – and regional ones, which were negatively impacted by renewed security fears in 2015.
International arrivals to Algeria generated AD30.2bn (€249.8m) in tourism revenue in 2015, according to statistics from the World Travel & Tourism Council (WTTC), though this represented just a fraction of the sector’s total AD590bn (€4.9bn) in direct contribution to Algeria’s GDP. That contribution constituted 3.5% of overall GDP, behind the worldwide average of 9.8%, and behind Morocco’s 7.7% and Tunisia’s 5.8% in 2015. The WTTC predicts tourism receipts to rise by 4% to contribute AD613.9bn (€5.1bn) to Algeria’s GDP in 2016, and that they will grow to comprise 3.7% of overall GDP by 2026, still well behind the ambitious 10% goal that authorities aim to reach by 2030. Of current tourism revenues, the WTTC noted that 77.2% derives from leisure travel spending, with the remaining 22.8% from business spending. Additionally, 327,500 Algerians were directly employed in the tourism sector in 2015, representing 3% of the national workforce, according to the WTTC – notably less than Morocco’s 6.8% and Tunisia’s 5.3%, but not far from the global average of 3.6%.
The World Economic Forum’s 2015 travel and tourism competitiveness index ranked Algeria 123rd of 141 countries surveyed, and 14th of 16 countries in the MENA region. Its score puts it behind neighbouring Morocco (62) and Tunisia (79), but ahead of Mali (128), and Mauritania (137). Algeria’s scores for “international openness”, which measures visa regulations, trade ties and tourist infrastructure, weighed down the country’s average the most. However, its highest score came in the area of price competitiveness, followed by health and hygiene, and safety and security, with authorities expending considerable effort to reinforce security and ensure that safety concerns do not discourage prospective tourists, whether foreign or domestic.
Foreign Visitors
The 2.3m foreign visitors reported by the MATTA for 2014 accounted for just 3% of Algeria’s overall tourism revenues, according to the WTTC, and increasing international arrivals is among the government’s top priorities. Worldwide, international tourists numbered a record 1.14bn in 2014, according to the WTTC. To convince more of them to visit Algeria, the government is encouraging investment in tourism infrastructure, promoting the Algerian tourism brand in both traditional and new markets, and tentatively relaxing consular restrictions.
The first target of these efforts are the estimated 7m Algerians living abroad, who accounted for 60% of international arrivals in 2014. To boost their numbers, the government has demonstrated flexibility in implementing new passport restrictions, in particular the internationally mandated requirement to shift to machine-readable passports in November 2015. The government delayed imposing the tighter entry requirements until October 2016, allowing dual nationals to continue to enter Algeria with just a national identity card until after major religious holidays and the summer vacation period had passed.
If efforts to increase diaspora visitor arrivals fall short, the government may begin to look at maximising their per capita spending. Average travel and tourism revenue per international visitor in 2014 amounted to just under AD12,000 (€99.26), largely because the six in 10 foreign visitors who hail from the diaspora often prefer to stay with family when they return to Algeria, and spend less on sightseeing. Encouraging this group to increase spending on hotels and tourist activities could help to drive rapid revenue gains for the sector.
Of the 940,000 foreign nationals who visited Algeria in 2014, 65% came for leisure, with business travellers accounting for the remaining 35%. Business travel has diminished since then, according to Reda Keraghel, general manager of Hotel Hydra in Algiers. “Because of the oil price drop, businesses have cut travel expense budgets,” Keraghel told OBG. “The international fairs that used to bring in lots of clients throughout the year are not as well attended.” With its shared land border, Tunisia accounted for the largest proportion (50.4%) of foreigners visiting Algeria in 2015, followed by France (12.9%), with substantial numbers also hailing from Morocco, Spain, China, Turkey, Italy, Germany and Portugal. While then-minister Ghoul indicated that in the first half of 2016, foreign arrival figures were very positive, particularly toward Ghardaia, Biskra and other Saharan destinations, more recent statistics on air departures from France showed a 12% drop in travel to Algeria during the summer of 2016.
Amid these mixed signals, tourism authorities are working hard to attract more international arrivals by diversifying Algeria’s target markets. At a national meeting on tourism promotion in May 2016, Ghoul listed Canada, China, Germany, Japan, Poland, the UK, the US and GCC nations as new priorities for official outreach. In his first months as tourism minister, Nouri continued this approach, travelling to China in September 2016 to discuss tourism promotion and cooperation.
Visa Reform
Algeria’s strict visa regime has long been an obstacle. Nearly all foreigners are obliged to apply for a visa in advance, and to provide supporting documentation, such as an official invitation from a local firm for business travellers. This can prove a burdensome process, and is among the principal reasons behind Algeria’s low ranking on the tourism competitiveness index. In July 2016 the Algerian minister of state and minister for foreign affairs and international cooperation, Ramtane Lamamra, confirmed that the foreign and tourism ministries were together reviewing the possibility of revising visa procedures to reduce the burden on would-be visitors. Those efforts, Lamamra said, exemplified Algeria’s “will to modernise […] and to ensure that the Algerian economy modernises, adapts to new changes and improves its competitiveness.”
Loosening visa requirements is an easy way Algeria can quickly present a more welcoming face to prospective visitors. Backing those revisions up with swift processing of requests and preparing consular staff to assist tourists would also help. Limited information and a lack of assistance that many would-be travellers encounter at consulates are also among some of the challenges facing the industry. “There are no tourism personnel in Algerian consulates, and the cultural affairs officers typically do not have enough knowledge to answer these questions,” Boukhelifa told OBG.
Others note the inconvenience posed by armed security escorts once foreign tourists finally reach Algeria. Police escorts are required to accompany foreigners traveling in certain regions of the country, particularly the southern desert, an imposition not required in neighbouring Morocco, for example. However, many Algerian tourism professionals see strong promise in the international market and believe the obstacles can be overcome. “There are millions of curious, adventurous people who are ready to come today,” Alex Fezouine, manager of travel agency XL Travel, told OBG. “But transforming these potential tourists into ‘real tourists’ will take work.”
Domestic Market
Even as the government works to reverse the recent slip in international arrivals, it must also contend with growing numbers of its own citizens who prefer to spend their holidays outside the country. In 2014 Algeria witnessed a 33% increase in departures on 2013 to 2.84m, according to MATTA figures, largely due to a growing preference among Algerians to spend their holidays abroad. Mediterranean countries like France, Morocco, Spain, Tunisia and Turkey are the most popular international destinations for Algerian holidaymakers. Since 2014 the number of Algerians traveling to Tunisia has increased almost 36%, as hoteliers there slashed prices to maintain occupancy rates after European arrivals plunged in the wake of a 2015 terrorist attack. Announcing that 1.1m Algerians had visited Tunisia in the first 8 months of 2016, Tunisian tourism authorities singled Algerians out for special thanks in speeches.
But while the surge in Algerian visitors has been an evident boon for Tunisia’s tourism industry in a time of crisis, it presents challenges back home. For example, in Boumerdes, a coastal region popular for summer holidays, authorities observed that the number of beach-goers dropped off by over 30% in summer 2016 compared to 2015. Convincing Algerians to vacation within their own country is a critical step to relaunching the domestic tourism trade, since resident Algerians provide the vast majority of the country’s tourism earnings, representing 96.5% of the tourism sector’s 2015 revenues, according to WTTC figures. The domestic market, with 40m potential tourists, has long been the backbone of Algeria’s tourism industry, and officials are quick to affirm that the government places domestic tourists at the centre of its development plans. As with foreign tourists, authorities will need to convince local tourists to spend more within the country. “Today, more than ever, citizens need services of higher standards, since their own standards of living are rising. They have the right, therefore, to want to see services rise accordingly,” Nouri told local press in June 2016.
The expectations of Algerians are due, in part, to their travels abroad, Mustapha Haouchine, director-general of Algiers’ High Institute of Hospitality and Catering (Ecole Supérieur d’Hôtellerie et de Restauration d’Alger, ESHRA), told OBG. “More and more Algerians travel today. They are tourists themselves and they have contact with foreigners, so they see what level of service is provided abroad,” he told OBG.
Despite the rising expectations, the local market is also characterised by price sensitivity; several hotel managers and tour operators told OBG that low prices were among the most critical factors to attracting domestic clients amid the current period of financial austerity. This preference is a major driver of the current boom in one- and two-star hotel development.
Investment Incentives
At the centre of the strategy to attract more international and domestic tourists is a major push to expand hospitality infrastructure, especially hotels. Authorities have set the ambitious goal of raising Algeria’s hotel capacity – 100,000 beds in 2016 – to 500,000 by 2030, with capacity in Algiers targeted to grow from 19,000 to 50,000 by 2030. The campaign “will allow us to put a definitive end to this deficit of hospitality infrastructure”, and to create 30,000 new jobs in Algiers and 250,000 nationwide in the process, Ghoul told local press in May 2016. But doing so will require raising investment amid difficult macroeconomic conditions. According to WTTC figures, in 2015 tourism sector investment reached AD161.2bn (€1.3bn), or 2.8% of Algeria’s total capital investment, far below the 12.4% spent in Morocco or 8.4% in Tunisia.
The MATTA – which saw its own annual budget cut by a third in 2016, as the government adopted new austerity measures – is aiming to do more with less by motivating the private sector to drive infrastructure development. A public investment fund in place for over a decade was retired in 2015, in favour of new tax incentives aiming to spur private investment. Most firms in the tourism sector were recipients of an exemption to an across-the-board 3% hike in the corporate tax rate, imposed by the 2015 complementary finance law. Soon after, the 2016 finance law established a 3% interest rate subsidy with five-year terms for new investments across all sectors. When the Parliament passed a revised investment law in July 2016, scaling back the terms of that subsidy, tourism was one of just five “priority sectors” exempted. Under measures in place since 2009, a large number of tourism operators also receive exoneration from corporate taxes for their first 10 years of activity, as well as reductions on value-added tax and Customs duties.
Targeting Investors
In addition to these financial incentives targeting private investors, authorities have taken steps to streamline the application process for hotel permits, land concessions and financing. MATTA officials asserted in 2015 that the application review process had been shortened to one week, and that regional officials had been instructed to simplify investors’ access to parcels in specially designated Tourism Investment Zones (see analysis). Nouri endorsed these incentives on recent visits around the country, in addition to a September 2016 trip to China, signalling that authorities welcome both foreign and domestic investment. Accounts vary widely as to just how many investors are taking the government up on its favourable investment terms. What is sure, however, is that as tourism officials seek more private investment, they may encounter investors reticent to back an industry still in its infancy. “Private investors will invest in hotels if there is a return on investment in the medium term,” Xavier Arnoux, general manager of the new Radisson Blu in Algiers, told OBG. “If the demand exists, it is in the big cities and high-potential destinations. Only the state can take the risk of building in new locations.”
In Arnoux’s estimation, however, conditions in the country are favourable for returns on investment. “Algeria is virgin territory in terms of hotels. Everything needs to be done, and all the factors for success exist: the workforce, space and investment,” he told OBG.
Hotel Construction
Amid the steadily increasing incentives to investors, Algeria is experiencing a boom in hotel construction, mainly in major urban centres and primarily at two opposing ends of the market. One- and two-star projects are under way across the country, many of them aiming at local clients. At the other end of the spectrum, 13 international chains had begun hotel projects in Algeria by the end of 2015, most of them five-star properties aiming for high-end local and international business clients. Since 2014 the Marriott Constantine, Starwood’s Sheraton Four Points Oran and Louvre’s Golden Tulip Oran have opened, among others. Radisson Blu anticipates opening its four-star Algiers hotel in mid-2017 and a seaside resort in Tipaza later the same year. Sheraton will also unveil another property in Annaba, and new Novotel, Mercure and Marriott properties are also in the pipeline. Local promoters like Groupe Chérif are building five-star properties in the capital, and even the south is attracting new luxury hotels, such as Djilali Mehri’s Gazelle d’Or, which opened in El Oued in 2016. Fewer investors are aiming for mid-market clients, though InterContinental Hotel Group are scheduled to enter the Algerian market with a Holiday Inn in Algiers in spring 2017.
In total, since the establishment of the SDAT framework in 2008 through to the first half of 2016, the MATTA has approved 1560 hotel projects with a capacity surpassing 200,000 beds, according to official ministry figures. These projects are valued at AD747.5bn (€6.2bn) and are expected to generate over 81,000 jobs nationwide. In late 2015 Ghoul indicated that as many as 1200 of these projects may be one- and two-star properties. However, amid the flurry of project approvals, delays have been a cause for concern. Of the 1560 approved projects, official statistics show that by mid-2016 just 47 hotels, counting 4200 beds, were operational, with a further 79 constructed but not yet equipped and furnished, and 550 more still under construction. Work has not yet started on over half the approved plans due to delays in financing, a lack of building permits, administrative delays or personal reasons, many related to inheritance disputes. Over 120 have been effectively halted due to more serious financial or administrative blockages.
In recent years infrastructure project delays have caused Algeria’s tourism sector to miss important opportunities to shine before international audiences. In 2015, for example, Constantine was honoured as the Arab Capital of Culture – a distinction awarded by UNESCO – drawing 350,000 domestic and international visitors to the city. But while Constantine has more than tripled its hotel capacity since 2011 – from 10 hotels with 750 beds to 23 hotels with 2500 beds in mid-2016 – few of these were ready in 2015. The Mediterranean Games, scheduled for 2021 in Oran, represent the next opportunity for Algeria to show its tourism credentials on the international stage, and hotel expansion there is booming, but delays continue to pose a risk.
Amid the building upsurge, attention has shifted strongly from quality to quantity. In 2008 the government revealed that only 10% of the country’s hotels met international standards, and established the Quality Tourism Plan Algeria (Plan Qualité Tourisme Algérie, PQTA) to address the shortfall. Under the PQTA, hotels, restaurants and tour operators had the chance to conduct subsidised service quality audits, and make specially certified upgrades. While authorities had envisioned that some 20% of hotels in the country might adhere to the plan, the first five years of implementation saw only 124 hotels enter the process, and only 15 complete the studies required to earn certification. Today, amid the upswing in hotel construction, the PQTA is rarely mentioned, and travellers have little besides reputation and name recognition to help them evaluate hotels in the Algerian market.
Outlook
While Algeria holds clear potential as a tourist destination, the country faces challenges in its campaign to relaunch its tourism industry amid an era of intense global competition, shifting security threats and uncertain economic conditions. Multiple sector actors note that effective tourism demands not just competent tourism policy, but also a coordinated approach across multiple sectors, from transport to consulates and communications.
While the drive to spark a building frenzy appears to have finally materialised after years of limited action, auxiliary services and personnel training may still lag behind, impeding progress. Nonetheless, both local and foreign investors have shown an interest in new ventures, and many are determined to do what is necessary to continue developing Algeria’s vast tourism potential. “Algeria is definitely the destination of tomorrow,” Arnoux told OBG. “It has everything needed to succeed.”
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