In the face of declining revenues on the back of low oil prices, Algeria has steered towards economic diversification with renewed focus, with tourism – among other sectors – being viewed as a key source of potential alternative revenues, as well as a vehicle for job creation and rural development. To that end, government priorities include accelerating hotel construction, improving personnel training, raising service quality and facilitating investment promotion. These key points were highlighted by Amar Ghoul, who was appointed to minister of territorial planning, tourism and craft industry in May 2015 and is the official that has taken the lead in expanding the sector.
In spite of a number of economic headwinds, ranging from slowing growth in China and still-low consumer activity in Europe, global tourism indicators are generally positive, with international tourist arrivals hitting a record 1.14bn in 2014, which was up by 51m from 2013. According to figures from the World Travel and Tourism Council (WTTC), the global travel and tourism sector today accounts for 9.5% of global GDP, 5.4% of world exports and one in every 11 jobs.
This highlights the potential the sector offers Algeria, particularly given the success of neighbouring Morocco and Tunisia in developing established tourism industries; in both countries, the tourism sector directly contributes approximately 8% to GDP. However, Algeria still has some headway to make before it can gain a larger slice of this market, as recent rankings of the country’s tourism sector show it is still developing. Out of a total 141 countries – accounting for 98% of world GDP – Algeria ranked 123rd in the World Economic Forum’s (WEF) 2015 Travel & Tourism Competitiveness Index. While this is an improvement from its ranking as 132nd out of 140 indexed countries in 2013, Algeria still lags behind other African nations such as Zambia (107), Tanzania (93) and Botswana (88), not to mention neighbouring countries with highly successful and established tourism industries like Morocco (62) and Tunisia (79).
This weak showing is the result of a number of challenges: a legacy of security concerns stemming from the violence in the 1990s, as well as the more recent hostage crisis at In Amenas, coupled with the country’s traditional emphasis on developing hydrocarbons. The resulting impact on everything from visitor attractiveness, to capital investment to exchange rate competitiveness has affected the tourism industry since the 1980s, affecting the sector on all fronts, whether in terms of arrivals, infrastructure, skills or promotion.
However, in spite of this, the outlook for the sector in coming years has improved significantly. According to WTTC data, the tourism sector’s direct contribution to total GDP stood at 3.5% in 2014, equivalent to AD633.1bn (€5.8bn) and it is forecast to rise by 6% in 2015. The sector directly accounted for 332,500 jobs, representing 3% of total employment. In terms of capital investment, the industry attracted AD160bn (€1.47bn) in 2014, and this is expected to rise by 7.6% in 2015. Leisure travel took a lion’s share of this spending, with 79.9%, or AD731.1bn (€6.7bn), while the remaining 20.1%, or AD183.9bn (€1.7bn) was generated by business spending. Domestic travel generated 97% of direct tourism GDP in 2014, while visitor exports accounted for just 3% overall.
While the latest figures for international arrivals were not available at the time of publication, the WTTC forecasts this number to reach 3.18m in 2015. As of end 2013, the number of these arrivals had reached 2.73m, comprised mostly of Algerians residing abroad (1.76m).
That said, according to Samy Elidrissi, manager of ALT Algérie travel agency, the number of Algerians in this particular category choosing to spend their holidays in their homeland is declining, due largely to insufficient visitor offerings and as generation gaps form between Algeria’s first generation of immigrants – who return mostly to visit family – and their offspring who were born and raised in a foreign country.
Diversifying source markets will therefore be key in offsetting any potential decline resulting from this trend and subsequently boosting the number of visitors to the country. For now, foreign visitors to Algeria are, for historical reasons, comprised mainly of French tourists. According to the WEF report, “While domestic and regional travellers appear to be less deterred by isolated incidents, international demand is sensitive to the threat level portrayed by press reporting and diplomatic travel advisories.” That said, the report also stresses the fact that the sector recovers from similar shocks more quickly today than it used to.
A number of other obstacles also stand in the way of foreign tourists, most notably visas. According to the same report, visa applications represent a major challenge for potential visitors and, if they were removed at the bilateral level, travel flows between countries would more than triple.
Limited accommodation is another impediment, although a number of construction projects currently under way should help boost the country’s overall bed capacity, diversify offerings and bring prices down in the near future (see analysis).
Domestic or internal travel remains strong, yet many Algerians now choose to seek holidays overseas. Like many in the region, stronger purchasing powers and changing world views are increasingly offering Algerians the possibility of doing so. “Travel habits have evolved considerably in recent years,” said Elidrissi. “Algerians are now interested in new destinations outside of Europe, such as Thailand, Malaysia and Mauritius.” Neighbouring Morocco and Tunisia also draw an important number of Algerian holiday makers.
The National Tourism Development Plan (Schéma Directeur d’Aménagement Touristique, SDAT), launched in 2008, was founded to develop the sector and address long-standing deficiencies, particularly in infrastructure, hotel capacity and human resources. This has led to some progress in recent years, particularly in terms of the number of projects in hospitality infrastructure, with over 1000 new hotel and resort projects approved by the ministry of tourism since 2008. Totalling around AD470bn (€4.3bn) in investment, these projects are expected to add up to 135,000 new beds and generate around 54,000 new jobs once completed.
The new projects are much needed. As part of its plans to develop the tourism industry following independence in 1962, the Algerian government took on the construction of a number of hotels, many of which, such as El Aurassi Hotel and Hotel El Djazair, remain state-owned up until today. However, the instability of the 1990s limited both public and private investment in the sector for the bulk of that decade. As a result, capacity and new facilities have traditionally been constrained. ZETs: That is changing now. Post-SDAT, one policy in particular is placing private participation at the heart of the industry’s development strategy: Tourism Investment Zones (Zone d’Expansion Touristique, ZET). Aimed at regulating and streamlining access to land, the concept of tourism-specific areas was first introduced in the 1960s and has evolved today to what are now known as ZETs – specific areas planned with the view to attracting private investment into locations that are seen to have cultural, historic and scenic potential.
To date the number of established ZETs stands at 205, accounting for a total surface area of 53,000 ha. Of this, 37,000 ha (representing 160 zones) has been earmarked for ZETs located along the coast or around lakes, underscoring the public authorities’ determination to develop seaside offerings. The remainder of the ZETs can be found in the south of the country (23 zones) and the Hauts Plateaux region (22 zones). According to local media reports, an additional 50 zones are expected to be created by the end of 2015, with the largest majority going into the Hauts Plateaux region in a bid to promote niche markets like the thermal and ecotourism segments, which tap into global consumer trends.
A number of the zones have seen a burst of momentum in recent years. Works to establish the necessary utilities infrastructure recently began in the ZET of Cap Ivi in the wilaya (province) of Mostaganem, in the north-west of Algeria. Cap Ivi is one of the 16 ZETs (totalling 4339 ha) earmarked for development in the wilaya. It extends over 883 ha with the potential of adding more than 3200 beds and generating up to 6700 jobs. Kiza Tourist Village is one of the projects which has been secured for development within the ZET. Extending over 8 ha of land and expected to mobilise a total AD3bn (€27.6m) in investment, the resort will have a 316 bedroom four-star hotel, 84 holiday residences, 30 bungalows and a thalassotherapy station, among other features. A private investor, whose identity had not been disclosed at the time of printing, is developing the project.
Similar works are expected to take off next in the ZET of Ramdane Plage, located to the east of Mostaganem along the Mediterranean coast, though exact details as to when the works will begin are still to be announced. Extending over 182 ha of land, the zone is expected to have a bed capacity of more than 4000 beds and generate up to 8600 jobs. Movement on the other side of the coast also provides grounds for optimism.
Further east, in the wilaya of Annaba, another project was approved for development within the Corniche ZET, for the construction of a high-end tourism resort. Souha, expected to cover a surface area of more than 3.8 ha, will consist of 320 beds and will comprise a number of different types of accommodation, ranging from apartment-style hotels to villas. Work is expected to commence at the end of 2015 and will take up to 36 months to finalise at a total cost of AD1.31bn (€12m), AD526m (€4.8m) of which is to be derived from the investor’s personal funds. In terms of employment, the resort will generate 170 permanent and approximately 60 temporary jobs.
The progress that has been achieved so far within existing ZETs calls for cautious optimism, although only 30 out of 205 zones have had their development plans approved so far. The delays are often the result of inefficient administration procedures associated with development or difficulty receiving approval for the official investment plans. In some cases, delays have also been caused by the investors themselves.
A prerequisite to the establishment of any ZET is a tourism development plan, determining the type of offering to be developed in the area and the necessary infrastructure required. However, a number of obstacles often stand in the way of delivering these plans, including the high cost of project planning and development, estimated at AD142bn (€1.3bn), for the ZETs, which average 260 ha. Moreover, in some cases, areas that have been identified as potential ZETs have been appropriated for other developments unrelated to tourism, either as a result of delayed processing or poor coordination, highlighting the importance of inter-sectoral and ministerial collaboration.
Of the 14 zones totalling 1255.5 ha and first identified for development in Béjaïa back in 1988, for instance, none have so far drawn in any tourism-associated projects due to the delays in delivering the relevant tourism development plans, and exacerbated by the disruption ensuing from the instability of the 1990’s. Today these zones have come to host a number of unrelated private constructions which have been grown considerably over the years. The authorities are working hand in hand with consultancy firms to retrieve as much land as possible, sparing already existing infrastructure in order to carry out the corresponding development plans. Studies under way in these zones are expected to be finalised by end-2016.
Although much remains to be done for the ZET strategy to realise its full potential, a key enabling factor in recent years has been the attempt to address bottlenecks in order to ease access to land within these defined areas. To that end, the 2015 Finance Law introduced new incentives to ease access to land within the ZETs by granting concessions and subsidised loans.
In August 2015, tourism minister Ghoul announced that, as of September 2015, new incentives would be introduced in a bid to alleviate administrative procedures, further ease access to land and bring about the necessary financial support to develop tourist resources. As a part of this, project approvals are expected to experience faster turnaround thanks to new measures targeted at digitising the investment application procedures and other processes.
Along with the new incentives and reduced bureaucracy, Algeria is also looking to improve collaboration, both within government departments and with neighbouring countries. Enhanced inter-ministerial and cross-sector cooperation will be crucial in determining the successful deployment of tourism projects within many of the ZETs; this is something that has held back the timely progress of projects in a number of these areas. The problems associated with poor connectivity or the absence of the necessary utilities infrastructure, have also increased delays.
Algeria also signed a series of agreements with Tunisia in May 2015 which relate directly to the tourism sector. The agreements consisted of strengthening collaboration in terms of human resource training and security, improving the quality of services at cross-border offices, devising a common marketing policy highlighting both countries’ resources, planning a maritime link dedicated to the transportation of tourists, and strengthening air and land connectivity.
The WEF’s Travel & Tourism Competitiveness Report 2015 highlights the importance of deeper regional collaboration. “Given the move towards regionalisation and proposed agreements among regional blocs in establishing common policies, the international community should encourage and enhance collaboration within and across regional blocks,” according to the WEF report.
Along with expanded bed capacity, there is also a push to improve the supply of tourism activities and destinations, including key products such as coastal, Saharan and thermal resorts.
More than three quarters of identified ZETs, for instance, have been earmarked for development along the coast and around lakes. This is a necessary step, as the range of current destinations are limited and underdeveloped, while existing accommodation is usually fully booked by locals prior to summer holidays and consists for the most part of state-owned hotels. Moreover, countless beaches remain inaccessible as they lack the necessary amenities to welcome holidaymakers, while others are exposed to overcrowding. To that end, the government is working on developing more facilities for beaches and updating or modernising existing sites. For instance, in October 2015, AD500m (€4.6m) was allocated for the development of eight beaches in the wilaya of Ain Temouchent.
Another potentially valuable resource – particularly for ecotourism – is Algeria’s vast Sahara desert, which covers over three quarters of the country’s territory. Once a magnet for tourists, the desert gradually saw the number of people flocking to its sands decline as security concerns grew throughout the 1990s. Saharan tourism has fallen short of its potential ever since. Security warnings issued in recent years by Algerian security services banning visits to certain parts of the desert, notably Djanet and Hoggar, constitute another factor that continues to dissuade visitors.
However recent efforts to reinforce hospitality infrastructure in the region provide reason for optimism. Over 30 projects consisting of resorts, hotels and motels have been approved for development since 2012 in the wilaya of Ouargla, located in the south-east of the country. These investments have the potential to generate over 5300 beds and 3500 jobs once realised. 13 are currently underway, with completion rates hovering between 40% and 96% in different areas. South of Ouargla, in the wilaya of Illizi, another three projects are currently under way to add a total of 138 new beds each in Illizi, Djanet and Bordj El-Haoues.
Spa tourism is also a niche segment the country is looking to expand. Algeria boasts more than 280 thermal sources nationwide. Between 2011 and 2015, concessions were granted to develop 51 of these sources. Projects for these resources include 19 developments already under way and another 10 in planning. Moreover, AD12bn (€110.4m) has been allocated by the Algerian government to rehabilitate nine existing thermal resorts.
With capacity expansion taking place across the country, staffing at all of these expected facilities is the sector’s next challenge. To that end, a considerable number of training centres are currently being set up to bridge the deficits that exist in terms of qualified human resources. Algier’s High Institute of Hospitality and Catering (Ecole Supérieur d’Hôtellerie et de Restauration d’Alger, ESHRA), inaugurated in July 2015, is one of the latest additions. The public institute is managed in partnership with the renowned Swiss Ecole Hôtelière de Lausanne (EHL) and has the capacity to train up to 800 students annually for managerial positions in the hotel industry. This adds to the country’s existing three training institutes in Algiers, Tizi-Ouzou and Bou Saâda, which have a combined annual student capacity of around 880. Another new training institute specialising in tourism-related professions is expected to be established in Zighoud-Youcef, in the wilaya of Constantine. Works on the institute are expected to last 12 months and, once completed, the facility is projected to cater to up to 300 students.
Foreign hotel brands that are present in Algeria are also contributing in this regard, through the sustained training of staff in line with international standards. With the anticipated rise in hotel capacity in the coming years, quality of service will become an important distinguishing factor in an environment of heightened competition.
Global tourism indicators bode well for the future development of the industry, and with the volume of planned public spending on bed capacity, private partnerships and training, Algeria should be well placed to capitalise on these projections. As the 2015 WEF study has suggested, “emerging economies, which generally run a higher risk of political unrest, are expected to account for 57% of total tourist arrivals by 2030”. The future development of Algerian tourism will depend on its ability to tap into such opportunities and focus on new trends such as rising purchasing power and the shifting demographics of travellers. Identifying such trends and distinguishing between the different categories of potential visitors will be crucial in determining the type of developments and offerings that are required to cater to each category.
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