Forging ahead

Although the upheaval of the Arab Spring continues to have economic reverberations across the Mena region, tourism stood out as one of the sectors most profoundly affected. With 2012 having drawn to a close, however, data emerging is painting a largely positive picture of the region’s tourism recovery. Although visitor numbers slipped five per cent for the year, that rate was an improvement on 2011’s seven per cent reduction, according to data from the United Nations World Tourism Organisation (UNWTO). Looking ahead, UNWTO says positive numbers are likely for Mena in 2013, with tourism growth estimates between zero to five per cent.   

As numbers on the whole improved, they also demonstrated a trend of divergence among different countries in the region. “Tourism in the Middle East has become very polarised,” Nadejda Popova, senior tourism analyst at London-based consultancy Euromonitor, told Reuters in February 2013.  Looking at data from the past year, countries generally fell into three categories: those that remained stable, those that went through political transitions but bounced back and those that are still regaining their footing. 

STAYING STRONG

GCC countries like Saudi Arabia, the UAE and Qatar avoided the large-scale political strife that has affected other areas in the Middle East. The combination of political stability and expansionary fiscal policies from governments has helped shore up investment in these areas. In January 2013, for example, Abu Dhabi’s Tourism Development and Investment Company (TDIC) awarded a consortium led by Dubai-based Arabtec Holding a Dh2.4 billion ($650 million) contract to build the emirate’s branch of the Louvre Museum.  The 64,000 sq m art museum is part TDIC’s Saadiyat Island’s tourism and culture development.  In neighbouring Qatar, funding for tourism construction is also on the up. The government’s commitment to invest $65 billion in infrastructure upgrades seems to have helped encourage private investment. In 2012, the State saw the opening of three major hotel brands: the InterContinental, St Regis and the Hilton Doha.  Neighbouring Dubai, meanwhile, saw a tourism boost in 2012, with hotel guests there up 10 per cent  for the first three quarters of the year compared to the same period in 2011, director general of Tourism and Commerce Marketing, Khalid bin Sulayem, said at a conference in October 2012. 

Cornock… positive numbers for Mena in 2013

Like its regional allies in warmer Gulf environs, Turkey has also benefitted from its stable political situation and a healthy stream of investment. Tourism revenues there saw modest increases, growing 1.8 per cent year-on-year to $23.4 billion in 2012, according to data from the state statistics bureau, TUIK. Indicators picked up significantly during the fourth quarter. The year’s average spending per visitor, for instance, held steady at $637 per person, but the metric spiked to $795 per person in the fourth quarter, the highest quarterly average in the two year period.  Revenues also saw a boost at the end of the year. During the first three quarters, income from visitors was similar to that of 2011, but in the fourth, revenues spiked by 17 per cent from $5.2 billion to $6.1 billion, according to TUIK. 

In order to keep up momentum, stakeholders in Turkey are looking beyond the mainstays of beach resorts and cultural tourism, tapping other areas like history to attract more visitors. The government announced an additional $54 million would be spent on the region around Gallipoli, where Allied soldiers landed in 1914 during World War I. The site already attracts an estimated 50,000 overseas visitors each year, in addition to two million to 2.5 million domestic visitors.  Home to hundreds of different cultures dating back to ancient eras, Turkey’s territory is rich with historical areas that, if nurtured with some investment, could help the country expand its tourism offering further.

BOUNCING BACK

While areas like the GCC and Turkey have enjoyed political stability, North African nations have been working through political transitions. Despite these changes, some countries are seeing swift tourism recoveries. In Tunisia, for example, arrivals declined by about 32 per cent following the popular uprising that ousted former President Zine Al Abidine Ben Ali in 2011.  Although numbers have still not reached their 2010 levels, official data indicates that the North African country is well on its way up. Tourism arrivals grew by nearly 30 per cent from 4.6 million to six million between 2011 and 2012, according to data from the country’s tourism authorities.  Receipts from tourism also grew by about 30 per cent from TND2.4 billion to TND3.2 billion ($1.5 billion to $2.03 billion) during the same period. Total room nights grew faster, too, clocking a 45 per cent rate of increase from 20.6 million to 30 million.

The opulent Palais Namaskar in Marrakesh... Morocco is looking to jumpstart stalled tourism projects in 2013

In the past the industry focused on using beach resorts to attract package tour groups from nearby European countries like France, Italy, Germany and the UK. This strategy has prevented Tunisia from reaching its full potential, however, since inclusive package tours tend to moderate visitor spending.  Like Turkey’s, Tunisia’s tourism stakeholders are exploring ways to expand tourism offerings into more niche markets, like medical and eco-tourism. In June 2012, the country held its first Alternative Tourism Fair in Sousse governorate. Organised by the Association for the Promotion of Alternative Tourism in Tunisia (L’Association de Promotion du Tourisme Alternatif en Tunisie, APTAT), the conference aims to cultivate potential niche areas, which could help the sector shrug off seasonality and attract more year-round visitors.

In Egypt, the post-revolution transition continues, as does the recovery in tourism – some 8.8 million visitors came to Egypt in the first nine months of 2012, according to Hisham Zaazou, the minister of tourism, who was targeting 11.5 million-12 million arrivals by the end of 2012. Over the longer term, the government aims to more than double tourist arrivals to 30 million, with revenues of $25 billion, by 2020.

POSTURED FOR GROWTH

While Morocco did not undergo a major political transition of its own, a combination of the global financial crisis and instability in the region has muted growth. In the lead-up to 2009, the North African Kingdom saw rapid development as a construction boom swept the country. Many projects were focused on tourism. These plans stalled in 2009, however, when banks and investors soaked up losses from projects that were paused or cancelled altogether. The situation has dampened the country’s lending environment. “Moroccan banks are working out their overexposure to commercial real estate, mainly tourism-related, which will limit the amount of their new engagements in 2013,” Matar told Bloomberg by e-mail in January 2013. “The Moroccan market isn’t mature enough to recover all these projects, which are too big to be completed by just Moroccan players.”

To jumpstart projects, many of which are already partially complete, stakeholders have been looking to international capital. Fortunately for the country’s tourism operators, Morocco did not see unrest like other countries in the region during 2011. Despite its stable political environment at home, some investors have still been skittish because of the current strife in neighbouring Mali and Algeria. “The country suffered from being a key Arab country that did not participate in the Arab Spring,” Daniel Broby, chief investment officer at London-based Silk Invest, told CNBC news agency.

“Western fund managers simplistically avoided or divested investment on the ‘they could be next thesis’.” The sector has also seen challenges because Europeans – who represent up to 50 per cent of visitors to the country – are going through their own financial troubles, which could be holding down visitor numbers.

Despite obstacles of the past, the North African Kingdom’s tourism indicators stayed stable through most of 2012, with arrivals for the first three quarters up one per cent year-on-year, according to the Observatoire du Tourisme, a trade organisation partnered with the government’s tourism arm.  Room nights also increased two per cent, while travel receipts eased by 2.5 per cent for the same period. Projections for stronger-than-average economic growth could help alleviate economic pressures by boosting domestic capital availability. The IMF estimates the North African country will see 5.5 per cent economic growth 2013, the highest rate in the Mena region. 

Indeed, across Middle East and North Africa, tourism prospects are looking brighter. Although challenges of the past three years have deeply affected the region as a whole, their adverse effects in many countries are already fading from view. Even as Europe tackles its debt crisis, other markets are showing promise. Saudi outbound tourism spending, for example, grew 14 per cent between 2011 and 2012, according to UNWTO data, and arrivals from East and South Asia continue to rise.

With new market potential on the up and metrics on the mend, Mena’s tourism sector has started 2013 with strong fundamentals.

Contributed by Oliver Cornock, regional editor for Oxford Business Group