Despite being affected by fallout from the Arab Spring and the slowdown in Europe, Morocco’s tourism sector is still able to demonstrate that it remains one of the country’s strong economic sectors. Continued investment in big tourism infrastructure projects is expanding capacity for an expected rise in beach travellers over the coming years. A government plan to reshuffle the way the sector is managed will see increased participation from regional authorities in shaping attractions, management and offers. Diversification of the country’s tourism products into niche segments, with an expansion in ecotourism and adventure opportunities, will also help encourage rural development and buffer the country from drops in demand from budget or luxury travellers. Considering the twin hits that were suffered in the larger region – the economic crisis in Europe and political unrest in the Arab world – the question posed by many industry players was how much damage the country’s tourism industry would sustain. Nonetheless, in 2012 Morocco was able to attract some 9.38m visitors, a timid but nonetheless comparatively encouraging 1% growth in comparison with 2011 figures. Furthermore, the industry was able to add 7000 new beds to its infrastructure and increase employment by an extra 22,000 positions.

IMPORTANCE: The sector remains an essential part of the country’s economy and is the second most important contributor to GDP. According to the report “Travel and Tourism Economic Impact Morocco 2012,” published by the World Travel and Tourism Council, tourism’s direct contribution to GDP was 8.3% in 2012. Vision 2010, the government’s ambitious plan for the sector in the first decade of the century focused on expanding capacity and sustaining visitor numbers. Launched in 2001 it achieved most its objectives by the time of its completion, generating about Dh440bn (€39.12bn) between 2001 and 2010, and closing in on the target of 10m visitors. Most importantly, the plan had a role in changing the focus of the industry from primarily cultural tourism, to one that includes beach tourism. This led to the development of six beach resorts under the Plan Azur, which aims to position Morocco as a seaside destination.

FORWARD PLANNING: The goals for the next leg of development, appropriately monikered the Vision 2020 plan, remain ambitious. The country aims to position itself as one of the top 20 tourism destinations by 2020, and raise its profile as a sustainable tourism developer. Morocco hopes to be able to attract between 18m and 20m visitors, and bring sector revenues to Dh140bn (€12.45bn). This will require continued investment in infrastructure to increase the number of hotel beds to 200,000. According the World Travel and Tourism Council, the sector’s total contribution to GDP will surpass 20% by 2020, at Dh281.4bn (€25bn). Vision 2020 will revamp sector governance, giving new regional authorities a bigger say in determining tourism policy (see analysis).

ARRIVAL MIXTURE: According to the Ministry of Tourism, Morocco received some 9.38m tourists in 2012, of which some 4.3m were Moroccans living abroad. As a whole, the EU accounted for 3.8m tourists, and France represented the most important individual market, with 1.7m tourist arrivals that year. In second place, Spain accounted for over 700,000 tourists travelling to Morocco. Operators are looking to diversify away from traditional source countries to places like Russia, Eastern Europe and Asia, but progress has been slow thus far. From 2007 to 2012, Russian visitors grew by only 17,000, to just under 30,000. During the same period, Egypt was averaging between 2.5m and 3m Russian visitors annually. However, the new markets do offer the potential for increased growth over the medium-term, particularly as Tunisia and Egypt struggle to shed off the perceptions of heightened risk they have suffered from since the Arab Spring. “These new markets are a good opportunity. For a long time we have been overly dependant on traditional European countries. The Polish market, for example, is growing stronger and is now served by Polish tour operators with their own charter flights,” Fouad Lahbabi, vice-president of the National Tourism Federation, told OBG.

Saudi Arabia is the most important market from MENA region in terms of tourist arrivals to Morocco, accounting for over 70,000 tourists in 2012. The government hopes to increases the number of visitors from the Gulf region as a whole. Tunisia and Libya posted considerable surges in the number of visitor arrivals to Morocco, although this might be more closely connected to political volatility in those two countries than normal tourism trends. Tunisian travellers to Morocco increased from 36,335 in 2010 to 41,650 in 2012. Over 45,000 Libyans arrived in Morocco in 2012, more than double the figure from two years before. The number of Moroccan nationals living abroad that visited home sustained a small reduction in 2012.

According to sector players, the number of repeat visits from this segment has been decreasing over the past two years, along with the duration of stay and expenditure levels of these visitors.

A DIFFICULT ENVIRONMENT: The economic crisis in Europe has reduced discretionary income in some of Morocco’s traditional source markets. Additionally, the growth of tourist arrivals in 2012 was further hampered by perceptions of risk from the continued political turbulence in Tunisia, Libya and Egypt. A stable and safe country in an uncertain region, Morocco had some difficulties in standing out and distancing itself from its neighbours. “We did not defend ourselves well enough from the external context. We have well-developed infrastructure, but we did not communicate well enough that we are not Tunisia or Egypt,” Lahbabi told OBG. The attack on the Al Amenas gas facility in Algeria by armed militants in early 2013, and resulting hostage crisis, brought further attention to the impact security issues in one country can have on the general image of the whole region.

A difficult external context has not derailed the government’s plans for the sector, though. The Moroccan Agency for Tourism Development (Société Marrocaine d’Ingénierie Touristique, SMIT) is tasked with attracting investment into new tourism projects, especially from Gulf countries, and, in what might prove more challenging, making sure investments are distributed across different regions. After years of focusing the majority of private development of tourism products in places like Marrakech and Agadir, Morocco is aiming to spread the benefits of tourism to previously unknown corners of the kingdom.

For instance, in 2012 the government’s tourism investment agency succeeded in attracting Dh14bn (€1.25bn) in new projects set to create 4200 new jobs and add 10,300 new beds to current capacity. However, in a clear sign of an unfavourable financial context abroad, most of the financing into new tourism projects came from domestic investors, 82%, followed by US-based investors at 15% and the remaining 4% originating elsewhere in the MENA region. Moroccan tourists are increasingly the target of offerings.

“New programmes are targeting Moroccan families, such as the Kounouz Biladi programme, which offers reduced-price packages to Moroccans,” Imad Barrakad, the director-general of the SMIT, told OBG. In 2013 the SMIT is aiming to secure Dh20bn (€1.78bn) in new investments through development contracts. It will also study an additional 23 new projects with potential combined value of some Dh38bn (€3.38bn).

The Plan Azur originally called for the creation of six seaside resorts as a way to position the country as a summer and beach tourism destination. The plans were delayed because of difficulties faced by some financiers in securing enough liquidity. This led to a financial restructuring of some projects, including Saïdia resort, in the country’s Oriental region, as well as the Taghazout in the central Atlantic coast.

DIVERSE INVESTMENT: The nature of tourism investment into the kingdom has also evolved over the past 20 years. This is both a reflection of the increasing diversification of the country’s offerings, which started in earnest over a decade ago, but also a response to the international context over the past two years, which has prompted the government to step in and cover investment needs to assure completion of some new beach resort developments after a reduction in the financial capacity of private international investors.

CHANGING FINANCING SOURCES: During 1996-2000, investments into the Moroccan tourism sector were mainly done by general investors and hotel chains, at 45% and 55%, respectively, of total investment. The picture is now very different, with a diverse set of actors putting money into the sector. During 2006-10 investment flows into the tourism industry were distributed between hotel chains, financial investment firms, real estate developers and tourism animation companies. The government’s role as an investor in tourism sector offerings really began to make itself felt between 2011 and 2012, when state financing of new tourist projects jumped from 3% of the national total to 40%. Overall, global investment into new tourism projects in Morocco during 2012 was distributed between hotel operators at 4%, tourism development companies at 15%, real estate investors at 34%, financial investors at 2%, general investors at 5% and the government and institutional side at 40%, according to SMIT figures. The perils of concentrating tourism investment in a limited number of locations have been laid bare in the current operating environment. For years continued development of Marrakech and Agadir proved a weakness in times of crisis. In 2012 uncertainty in Europe (especially France) had an acute impact on Marrakech’s tourism industry. The city’s 53,000 beds were sold for 4.3m nights, a noticeable decrease from 2011 figures of 5.7m nights sold. The city’s tourism business was further worsened by the reduction in the number of regular flights from Europe. “Marrakech is suffering from over-capacity. In the past two years, occupancy rates has gone below 40% for some hotels in Marrakech,” Abdellatif Seddiqi, chairman of H Partners, a fund that invests in tourism projects, told OBG. The sector now holds fears that one of Morocco’s tourism jewels might be suffering from over-capacity under the current conditions.

INCENTIVE PLAN: To encourage the emergence of new tourist spots and spread available financing to build up infrastructure in underdeveloped areas, the SMIT has established an incentive plan aimed at increasing the attractiveness of unexplored tourism areas. This will be especially important to help harness the country’s rural tourism potential, and create infrastructure in isolated zones. “We are putting in place an investment premium that will depend on the quality and size of the assets, but also on the specific territory,” Barrakad told OBG.

Investment incentives will go up to 20%, depending on the volume of investment, the type of structure being built and the region chosen by the investor. For example, under the new scheme, an investor looking to create a tourism project in the country’s Atlantic coast or in Marrakech, both of which are considered mature areas in terms of tourism infrastructure, will get a smaller government incentive than an investor that decides to stake it out in the southern town of Dakhla or the Atlas mountains.

The same principle goes for the type of tourism project. Hotels will receive fewer incentives than beachside resorts, which are an intermediary priority, or the development of cultural heritage sites, which the government wants to promote heavily.

OCCUPANCY RATES: An element that troubled operators during 2012 was the reduction in the number of flights to Morocco, especially low-cost flights which have been mainly serving Marrakech and Agadir over the years, but were cancelled in large numbers due to reduced interest from European tourists.

To compound the problem, Royal Air Maroc grounded 10 of its aircraft in an effort to extract itself from non-performing routes. This invariably had an impact on the number of hotel nights sold. The National Federation for the Hotel Industry complained to the government, urging that investment and promotion to increase bed capacity should be matched by equal efforts to secure an adequate number of regularly scheduled flights into the country.

“You might have attractive packages in terms of accommodation and tourist offer, but if you don’t have the flights, people will not come,” Abdelaziz Samim, director of the National Federation for the Hotel Industry, told OBG.

Despite the country’s ability to sustain the number of arrivals, the average duration of visits was reduced, which affected sector revenues. According to industry figures, in October 2011, tourism revenues reached Dh50.2bn (€4.46bn), but suffered a slight reduction of 2.5% for the same period of 2012, when they amounted to Dh48.9bn (€4.35bn). This is in part a reduction in tourism arrivals, but also a consequence of discounts that were offered by some operators.

“Despite the increase in arrivals, the prices have been lowered and the duration of stays has also decreased, so this means that the country is getting less money from tourism,” Samim told OBG. In total, some 17.5m hotel nights were sold around the country in 2012, a slight increase on 2011, which reached a total of around 16.89m sold nights.

Despite the rise in the number of arrivals, the number of nights spent experienced a reduction per traveller. Average occupancy rates are also going down for all segments of the hotel business. There are a few exceptions, notably in the case of hotel brands that have the possibility of marketing nights in a large scale because they belong to international hotel groups. According to figures from the National Federation for the Hotel Industry, average occupancy rates in Morocco hovered around 43% in 2012.

CONFERENCE TOURISM: Nonetheless, hotel chains are still viewing Morocco as a good opportunity. Hotel projects represented 2% of new investment coming into the sector in 2011 and 4% in 2012. Besides the coming opportunities for new hotel development in resort towns such as Saïdia and the future Marchica development, both in the North Mediterranean coast, other areas of the country are seeing new hotels spring up. In Casablanca between four and five new hotels in the four- and five-star range are set to open in 2013-15, including a new Four Seasons and facility by the Louvre Hotels Group. Despite the abundance of hotels in the country, certain niches are unexplored.

As the commercial capital, Casablanca mainly attracts a business clientele for most of the week, but there is not yet a lot of conference tourism, because the only venues for large meetings exist in hotels themselves, and are not big enough to support large-scale events. “There is potential to develop the meetings, incentives, conferences, and exhibitions market, as there are not enough venues here,” Cesar Latrilla, director of the Hotel Husa in Casablanca, told OBG.

For some hotels, the business segment has also proved more resilient than the leisure tourism segment. According to Said Mahboubi, general manager of the Golden Tulip Morocco in Casablanca, leisure visitors were reduced by 30%, double the blow taken by the business segment, which saw a 10- 15% reduction. In the last two years, occupancy rates have gone down 5% and average prices by 3%.

To stem this, the government is trying to create specific attractions that would increase the number of days visitors stay. In Casablanca’s case, average occupancy rates can be 80-85% during the week and then go down to 40% at weekends, due to the slowdown in business activity. This could change, believes, Latrilla, if more effort is put into promoting Morocco’s two main cities as destinations in themselves, as opposed to starting points to other destinations.

“To get higher occupancy rates in Casablanca, the priority should be to develop the city’s brand. There is potential for this, because of its architecture, its proximity to the sea, and availability of golfing and other activities. This could make average occupancy rates increase to levels of 72-75%,” Cesar Latrilla told OBG.

ECOTOURISM: In view of the country’s natural attributes and diverse scenery, rural tourism will be a focal point. Over the next 15 years, the government wants to increase the number of visitors to rural areas and ecotourism activities. Following international trends, a recent government survey established that 60% of tourists arriving in Morocco would be willing to pay a premium to visit an ecotourism destination. “This is a good indication of where the industry is going on a global scale,” Barrakad told OBG. Morocco already has an emerging ecotourism offer, focusing on the national parks of Al Hoceima and Talassemtane, and in the Atlas Mountains. The town of Beni Melal is to be developed as an ecotourism centre.

Over the coming years, under Project Qariati, the state will invest Dh3.6bn (€320m) in the enhancement of ecotourism spots. Projects will be aimed at combining tourism, agriculture and artisan production. Investment will be geared towards the creation of 35,000 new beds in rural areas of the country, as well as 20,000 new jobs. This will diversify tourist offers, but, more importantly, should also have a localised economic impact on rural communities.

More focus is also going into cultural tourism, notably, into the maintenance and improvement of certain areas to promote visitor increase. An example of this is the governmental project to renovate some of the old centres in towns and cities across the kingdom. For this, the Société Marocaine de Valorisation des Kasbahs was created in 2011, with an initial budget of Dh400m (€35.56m) for its first set of projects. The first Moroccan towns to get work done on their historical central neighbourhoods will be Tétouan, Oujda, El Jadida and Essaouira, which should be completed in 2013. Work will also be implemented in the two imperial cities of Fez and Méknés.

Much of the work to fix ancient historical areas is also geared at increasing the number of domestic tourists. This is an intrinsic part of the Vision 2020, which aims to increase the percentage of domestic visitors travelling within the kingdom to 40% of total visits. Currently, this segment makes up between 22% and 23% of the market. Domestic tourists also accounted for between 26% and 30% of hotel nights sold in 2012, according to figures by the National Federation of the Hotel Industry.

The government is also proceeding with the Renovotel programme, which is aimed at the renovation, and the repositioning of hotel capacity. The initiative will give new impetus to the expansion of hotel capacity, which is expected to rise by the equivalent of 16,000 beds between 2012 and 2015. The programme initially consisted of a budget of Dh500m (€44.45m), but negotiations between the government and industry representatives agreed on an eventual increase of the allocation to Dh1.3bn (€115.6m). The programme, in its third scheme (the first was in 2003 and the second in 2010-11), is targeting the two-star and three-star segments of the market.

FINANCING: The Hassan II fund provided Dh200m (€17.78m) of the Renovotel programme’s funding, and the government contributed Dh300m (€26.67m). One of the new changes will be the inclusion of guesthouses in the project. While previously not part of the initiative, they will under the new system be eligible for up to Dh100,000 (€8890) per room in financing.

The budget for the higher-end hotels will be bigger – up to Dh200,000 (€17,780) per room for five-star units. Hotel wanting to take advantage of the programme will need to contribute with 10% of the renovation costs, if they are in the one- to three-star category, and 15% for four- and five-star hotels. The first two editions of Renovotel represented a Dh1bn (€88.9m) investment and upgraded 10,000 rooms.

OUTLOOK: Morocco’s tourism sector is faring relatively well in a challenging context. The continued turmoil in the region has increased the importance of enhanced efforts to position Morocco as safe destination. This is especially relevant now, when international visitors are shying away from travelling to regional competitors Tunisia and Egypt. Future growth of the sector will likely continue to be connected to the economic fortunes of Europe. But until the economic situation in Morocco’s traditional markets of France and Spain improves, the country has much new territory to explore. Russian, Polish and Gulf tourists are increasingly becoming important for the tourism industry to sustain visitor numbers.

Continued investment to develop the Plan Azur seaside resorts is increasing the country’s profile as a beach destination. Channelling of coming tourism investment into under-developed areas will promote a more efficient use of resources, as well as avoid an excessive focus on specific zones and cities. Other niches, such as cultural tourism and ecotourism, are also helping to diversify the country’s offer, preserve national heritage and distribute the benefits of the industry more evenly through less developed regions of the country. Securing adequate air connections between Morocco’s destinations and its traditional markets should also support the flow of visitors.