Located a short distance from Europe and with a large and comparatively wealthy population of its own, Algeria is primed to make use of its significant tourism potential. Prospective attractions include 1000 km of largely undeveloped coastline, as well as vast deserts, numerous mountain ranges and countless ancient historical sites. Despite this, tourism as an industry remains underdeveloped as the sector has faced several major obstacles recently, including past conflict, a lack of infrastructure – particularly in regards to the number of hotel rooms in the country – and a cumbersome visa regime for foreign visitors.
However, authorities are stepping up efforts to expand tourism as part of wider economic diversification plans, and foreign hotel operators have become increasingly active in recent years. While the mass market package tourism prevalent in many other Mediterranean destinations is not on the cards, or even desired by the authorities, foreign business tourism and niche areas such as spa, desert and ecotourism have strong potential for growth.
Economic Contribution
The World Travel & Tourism Council (WTTC) put the contribution of the Algerian travel and tourism sector to GDP at AD599.7bn (€5bn) in 2016, which is equivalent to 3.6% of total GDP. This compared to figures of 8.1% and 6.6% for the country’s Maghreb peers Morocco and Tunisia, respectively, both of which have well-developed markets for foreign tourism.
When including indirect contributions, the figure rises to AD1.2trn (€10bn), or 7.4% of Algeria’s total GDP for the year. The sector directly accounted for 346,500 jobs, according to the WTTC, equivalent to 3.1% of national employment, growing to 731,500 positions (6.5% of employment) when indirect contributions to employment are also taken into account.
The country’s National Statistics Office (Office Nationale des Statistiques, ONS) put the value of the hotel, café and restaurant sector’s GDP at AD240.4bn (€2bn) in 2016, equivalent to 1.4% of GDP. In constant prices, sector GDP grew by 1.3% over the course of the year, the same rate as in 2015. Sector growth stood at 3.1% and 0.4% in the first and second quarters of 2017, respectively.
International tourism plays a relatively small role in the sector. The World Bank (citing World Tourism Organisation figures) put the value of international tourism receipts at $357m in 2015 (latest available data), or about 0.2% of GDP for that year. This compared to receipts of $7.8bn for Morocco and $1.9bn for Tunisia. Receipts increased rapidly in the years following the end of the country’s civil war, from $112m in 2003 to $477m just two years later. However, they declined in subsequent years, falling from $473m in 2008 to $295m in 2012, before returning to moderate growth more recently.
International Arrivals
Arrivals from abroad rose sharply in the first decade of the century, from 866,000 in 2000 to 2.73m in 2013. However the following two years saw a significant fall in visitor numbers, to 2.3m in 2014 and 1.71m in 2015. The reason for the drop is unclear but is likely partly due to the fall in the international oil price and the consequent economic downturn, which saw businesses sending personnel to Algeria cut their travel budgets. Lower arrivals in 2015 were driven by a large decline in the number of Algerians living abroad visiting the country, from 1.36m in 2014 to 626,873 in 2015.
However, arrival numbers recovered in 2016, to 2.04m, according to ONS figures. This included 1.32m foreign nationals – up from 1.08m in 2015 – and 716,732 Algerians resident abroad, up 14% on 2015. The largest source market in 2016 was Tunisia, with visitor arrivals of 813,724. This was up 41% on the 2015 figure which was itself up 21% on 2014. Next in line was France accounting for 169,036 arrivals, a rise of 13% of 2015. Morocco came a distant third on 55,409 tourists, up 4% from the previous year.
Accommodation
Algeria was home to 1231 accommodation establishments as of 2016, with a combined 107,420 beds, according to ONS figures. The figures were up from 1195 establishments and 102,244 beds the previous year. Of the 1231 establishments in 2016, 440 were hotels, with a total of 40,842 beds. By star rating, one-star establishments accounted for the largest number of hotel beds, with 27.7% of the total. Another 55,380 beds were in 565 accommodation establishments, awaiting categorisation by the Ministry of National Planning, Tourism and Handicrafts (Ministère de l’Amé nagement du Territoire, du Tourisme et de l’Artisanat, MATTA), while 196 “other hotel-like establishments” provided 9381 beds. The country has around 0.1 hotel rooms per 100 of the population, the 119th lowest level out of the 136 countries covered by the World Economic Forum’s 2017 “Travel and Tourism Competitiveness Report”.
The ONS put the number of nights spent in tourist accommodation establishments at 7.28m in 2016, up from 7.15m a year earlier and 6.33m in 2011, with the number rising steadily every year over the intervening period. Of the 2016 figure, 992,611, or 13.6% of the total, were accounted for by non-residents, and the remaining 6.28m by Algerian nationals. With limited capacity being one of the constraints to the sector’s development, the authorities are seeking to dramatically expand the number of beds available to tourists to 300,000 by 2030 – a near tripling in capacity in not much more than a decade. It will include an increase in the number of beds available in Algiers, the capital, from around 19,000 to 50,000.
Progress is already being made towards these goals: in December 2016 the then-minister of tourism, Abdelouahab Nouri, said that 550 new accommodation projects were under way across the country, and that another 1050 had received approval from the ministry and would be launched soon. Private investment in the upper end of the market is also taking off with numerous deals to launch hotels managed by international brand-name operators having been signed in recent months and years, which should also lead to job creation (see analysis).
In September 2017 MATTA announced that 197 hotels were due to open in the next three years in Algiers alone, representing 39,000 new beds. Major projects under way in the city include the Trust tourism complex being built in Bab Ezzouar, close to its airport, which is anticipated to host four hotels with more than 2000 beds between them, as well as a shopping centre. The project has faced delays, but local media reported in summer 2017 that it was close to reaching completion and would likely be inaugurated before the end of the year.
State-Owned Player
The largest player in the sector is the Groupe Hotellerie, Tourisme et Thermalisme (Groupe HTT), which is owned by the Algerian government and operates some 66 hotels across the country. The firm’s portfolio features mid-range hotels and resorts and spa centres, with a combined bed capacity of 30,000, or 28% of total tourism accommodation capacity. The authorities are currently in the midst of a AD70bn (€580.6m) project to renovate facilities managed by the group. Groupe HTT pans to expand this to 32,500 beds in 2018.
Lazhar Bounafaa, the CEO of Groupe HTT, told OBG that the firm’s priority for 2017 and 2018 was to upgrade equipment and services across its facilities under the renovation plan. The firm is also investing in the construction of new facilities under the plan, including hotels being built at the Sidi Fredj and Chellala spa complexes, a new thalassotherapy centre at the Les Andalouses tourism complex in the western city of Oran, a conference centre at the group’s tourism complex in Zeralda and several holiday villages across the country.
The state’s heavy involvement in the sector has attracted criticism from private players. For example, speaking in April 2017, Djillali Mehri, CEO of sector investor company Groupe d’Investisseurs du Maghreb et du Moyen-Orient, which has partnered with French hotel operator Accor in recent years, suggested that government involvement disadvantages private operators and called for the state to withdraw from the industry.
Local observers have also argued that the government’s repeated moves to bail out failing state-owned facilities underpin some of the key challenges as regards the development of the sector and the lack of hotel infrastructure.
Financing
Another challenge for the tourism sector that has held back development has been a shortage in the availability of bank financing for companies operating in the industry. According to media reports, the sector accounts for just 1% of banking lending, well below its contribution to GDP.
However, banks now appear to be seeking out new projects in the industry following an agreement between MATTA and private lenders in 2014 aimed at boosting the availability of financing. The authorities signed a similar agreement with public banks, which dominate lending in Algeria, in 2012. Since 2009 projects in the tourism sector have also benefitted from a 3% interest rate subsidy from the government. This rate rises to 4.5% for projects in the southern parts of the country.
Security Issues
Concerns regarding security have also held back the development of the sector. In the 1990s the country suffered from a civil war known locally as the décennie noire, or dark decade. Marked by a period of instability and unrest, the décennie noire saw the number of tourists visiting the country effectively cut in half.
Though relative stability ensued in the years that followed the end of the war, a couple of incidents have dampened the country’s image a tourist destination in recent years, notably the attack on the Tiguentourine gas plant in south-east Algeria.
Nonetheless, general safety conditions in the country have improved significantly due to enhanced security measures nationwide. Circulating both within and between the main coastal cities – as well as visiting southern desert towns such as Timimoun, Taghit or Tamanrasset – has not historically represented known risks, making these attractive travel destinations in the country.
Ranking
The extent of obstacles to sector development is underscored by Algeria’s ranking in the World Economic Forum’s 2017 “Travel and Tourism Competitiveness Report”, in which it placed 118th of out 136 countries worldwide, on a score of 3.1 out of seven. The country scored highly in the report’s price competitiveness pillar, ranking fourth worldwide, and moderately in the cultural resources and business travel pillar (53rd place), due in large part to its World Heritage sites and strong cultural heritage.
However, it placed in the bottom half of the rankings in all other categories. Its performance was lowered by a ranking of 134th place in the international openness pillar, on a score of 1.5, due to restrictive visa requirements, a lack of open bilateral air service agreements and several regional trade agreements in force. It also placed 131st in the prioritisation of travel and tourism pillar, due to factors including low government expenditure on the sector as a share of overall public spending and a low score in the tourist service infrastructure category.
Strong Potential
While the sector has faced numerous challenges and its proportional contribution to the economy is small by regional standards, these indicate ample room for growth.
“Algeria has very strong potential as a tourism market,” Malek Baiche, Maghreb development director for the hotel group Carlson Rezidor, told OBG. “It has innumerable tourist attractions, and desert, seaside and spa tourism all have room to grow.” He added that desert tourism held particular potential to revitalise the sector, especially after regional conflicts subside. “What is needed for this potential to be realised is a real political will to develop the sector and to place more professional organisation behind it,” he said. Baiche further argued that efforts to establish more entertainment activities, such as festivals and other cultural events, around which new tourism circuits could be developed, would be particularly helpful for the sector.
There are indications that such political will is becoming stronger in the country. “Until recently the sector had not been the authorities’ priority, given factors such as instability in the 1990s and the subsequent need to rebuild basic infrastructure and develop key sectors such as agriculture and industry,” Alexandre Kateb, CEO of the Competence Finance consultancy group and previously a member of a task force advising then prime minister Abdelmalek Sellal, told OBG. “Following the drop in the oil price, tourism has been increasingly seen as a promising source of revenues and employment, and is becoming a priority for the authorities.” He added that there was now political will to encourage private investment in the sector and renovate and improve both infrastructure – such as hotels and resorts – and tourist sites, such as monuments and ancient ruins.
“The model is unlikely to be the same as in other countries in the region that focus on mass tourism for Europeans, but will probably be focused more on niches such as cultural and historical tourism, discovering the south of the country, and so on,” Kateb said, going on to add that it was important that the country find and develop a model of its own.
Mohammed Khalef, director of the Hamam Bouhadjar Spa in north-western Algeria, agreed that the country’s desert holds particularly strong potential. “At the moment the south is almost unexploited due to a lack of hotel infrastructure, but up until the 1990s there were a lot of tourism circuits in the region and Ghardaïa was the most visited town in the country; more popular with international tourists than Marrakech,” he said, arguing that such levels of activity could return to the region.
Domestic Market
With requirements for most foreign visitors to apply in advance for visas, in addition to foreign travel warnings and restrictions on the movement of foreign visitors in some parts of the country still in place, domestic tourism unsurprisingly dominates sector activity. For example, Algerian residents accounted for 86% of nights spent in accommodation establishments in 2016. With mass foreign tourism not a priority on the government’s policy agenda, the domestic market also holds the most potential for increased development in coming years. With the country being home to 40.6m people, this potential is substantial. “There is already strong demand for domestic tourism, though it is not satisfied because of a lack of infrastructure,” said Kateb.
The market’s promise is further underscored by the fact that 1.85m Algerians visited neighbouring Tunisia in 2016 (up from 1.39m the previous year) according to ONS figures – equivalent to 50% of the number of Algerians residents who stayed in domestic accommodation establishments during the year. Numbers will be even higher for 2017 as a whole – the Tunisian authorities in late August said that more than 2m Algerians had come to the country between the beginning of the year and August 10, leading to speculation that the total number of visits will pass the 3m mark by the end of the year.
The recent large increase in the number of Algerian visitors to Tunisia is most likely a result of two major terrorist attacks targeting European tourists in Tunis and Sousse in 2015, which saw the number of European visitors to the country plunge, while pushing down prices and making the country more affordable for tourists from Algeria. Adjacent to Algeria and easily reachable by road, Tunisia is both geographically close and culturally similar, making it a practical destination for citizens.
This has led to a notable reduction in visits by residents to Algerian domestic tourism sites; for instance, the beaches of Boumerdes, a popular holiday spot which neighbours Algiers, saw a 30% drop in tourist arrivals in the summer of 2016, though the number of hotel nights spent by resident Algerian nationals in the country actually rose during the year.
Encouraging Investment
Under the Tourism Development Masterplan, the authorities aim to increase the sector’s contribution to GDP to around 10%, and also plan to roughly quadruple the number of tourists in the country by 2030.
While public investment – such as the current AD70bn (€580.6m) being spent on renovating and expanding the publicly owned hotel segment – will play a role, the plans will require large-scale private investment in the development of infrastructure and hotels, particularly given the recent efforts to rationalise government expenditure following the 2014-15 international oil price slump.
The authorities have taken a number of recent measures to encourage such investment in the sector. Most companies operating in the industry were exempted from the 3% rise in the corporate tax rate introduced in 2015. Tourism establishments benefit from a corporate tax holiday during their first 10 years of operation, as well as from the tax on professional activity for their first three years under the 2016 investment promotion law, which also exonerates them from value-added tax and import taxes on equipment and furnishings acquired during their construction phase. The sector also enjoys a wider reduced rates of value-added tax at 7%, in place until 2019, and firms are eligible for a five-year interest rate subsidy worth 3% off the cost of a loan, introduced in 2016.
International Boost
While domestic tourism is likely to remain the main driver of growth and although the development of mass-market package tourism is not on the cards, the authorities nonetheless aim to boost foreign tourism. To this end, in July 2016 the authorities announced that MATTA and the Ministry of Foreign Affairs were jointly considering moves to reduce the burden imposed by the country’s visa process on visitors – though there have been several Cabinet reshuffles since then, meaning the status of the initiative is currently unclear.
Efforts to boost air transport infrastructure should also help with the development of tourism in coming years. A 73-ha new international terminal, capable of hosting 10m passengers a year, is being built at Algiers’ Houari Boumedienne Airport. In September 2017 the authorities announced that the project was 75% complete and remained on track for completion in 2018. The Algiers’ metro system is also being extended to reach the airport. Furthermore, in September 2016, national flag carrier Air Algérie announced plans to acquire 40 new aircraft between 2018 and 2025, which will bring its fleet size to around 100. The firm bought 16 new aircraft under a previous 2012-17 acquisition plan.
Spa Tourism
A key focus of current sector development efforts is spa tourism, which is already well developed and has substantial additional potential thanks to the country’s wealth of hot springs.
“Algeria is home to more than 200 springs with therapeutic properties that have been demonstrated by scientific studies, and their waters are generally pure and clear of any kind of bacterial pollution,” Bounafaa told OBG, adding that the segment would play a key role in the government’s strategy for developing both domestic and international tourism.
The segment currently comprises eight large government-run facilities that have agreements in place with major local health insurance providers, such as the state-run National Health Insurance Fund, to provide treatments to their clients, in addition to 13 privately run spa resorts.
“Spa tourism has very strong potential,” agreed Khalef. “There are at least 10 spas of a very high level in the country, offering modern treatments such as balneotherapy and physiotherapy, though not all of these establishments currently provide a good enough quality of accommodation,” he said.
Efforts are under way to remedy this: in 2015 the government launched an initiative to modernise the eight state-run facilities, at an investment cost of AD12bn (€99.5m), as part of Groupe HTT’s wider AD70bn (€580.6m) renovation programme. Khalef told OBG that three of the government-owned spa resorts in the west of the country were undergoing renovation, including the Hamam Bouhadjar facility.
“We have launched an international tender for the works, which will see the facility closed for a year in order to renovate the spa and treatment areas and our equipment,” he said, adding that the works should boost visitor numbers. “We have lost a lot of guests recently because the quality of our infrastructure hasn’t been high enough,” he said.
Privately backed activity in the segment is also due for rapid expansion in coming years, with Djamel Ali, then-minister of tourism, announcing in April 2017 that 70 hot springs across 24 governorates in the country had been turned over to private investors for development into spa facilities.
Outlook
The Algerian tourism sector’s potential is difficult to dispute, given the country’s natural assets, its large domestic market and the under-developed state of infrastructure.
While the authorities have made it clear that they do not wish to develop a mass-market foreign tourism model, the growing activity by international hotel operators suggests that the fulfilment of the country’s international potential, which has been largely on hold in large part since the late 20th century, may now be well under way.
However, the future of the sector will nevertheless remain dependent on a wide range of factors, such as the authorities’ ability to mobilise continued investment in the current difficult economic environment, in addition to ensuring that institutions which are seeking to develop the domestic market can compete with the low-cost options on offer in other countries in the region, particularly at a time when local purchasing power is under a lot of pressure.
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