The Travel and Tourism Industry The travel and tourism industry has experienced unprecedented growth over the past decades, becoming one of the fastest-growing economic sectors worldwide. This sector's expansion underscores its significant socio-economic contributions and resilience amidst global challenges The sector witnessed a 59% growth over the decade in international tourists’ arrivals from 1.5 billion 2019 compared to 880 million in 2009. Tourism is also a key driver for socio-economic progress, with tourism specific developments in an increasing number of national and international destinations. Globally, the tourism industry contributed to $8.9 trillion to the global GDP in 2019 equaling a contribution of 10.3%. It is also to note that 1 in 10 jobs around the world is in tourism, equaling 330 million jobs. However, the strong historical growth has been halted in 2020 amid the global Covid-19 pandemic. With airplanes on the ground, hotels closed and travel restrictions implemented, travel and tourism became one of the most affected sectors since the very start of the virus spread. The pandemic has cut international tourist arrivals in the first quarter of 2020 to a fraction of what they were a year ago. Closing borders, tourism & travel ban Countries all over the world applied travel restrictions to limit the coronavirus spread. Airport closures, the suspension of incoming and outgoing flights, and nationwide lockdowns are just some of the measures that countries are implementing in an effort to help contain the pandemic. After the spread of the pandemic in the first two quarters of 2020, at least 93 percent of the global population lived in countries with coronavirus-related travel restrictions, with approximately 3 billion people residing in countries enforcing complete border closures to foreigners. The decline of International Tourists during the Pandemic The number of international tourist arrivals has been growing remarkably in the last decade and still sustained growth throughout the last years; in 2017 arrivals reached a total of 1.3 billion globally, 2018 reaching 1.4 billion and 1.5 billion in 2019. In 2020, and with the severe impact of the COVID-19 Pandemic, international tourism went down by 22% in Q1 and by 65% in the first half of 2020 when compared with 2019 figures. In March 2020, the UNWTO proposed 3 scenarios for possible declines in arrivals of 58% to 78% for 2020 depending on the start point of gradual opening of borders and lifting travel restrictions. [caption id="attachment_5343" align="aligncenter" width="446"] 2020 Forecast (Updated)[/caption] [caption id="attachment_5344" align="aligncenter" width="447"] 2020 Forecast[/caption] According to the UNWTO’s March forecast and its September update, the recovery for the industry might be in 2021 and domestic demand is expected to recover faster than international. In May 2020, the majority of the UNWTO tourism experts expect to see signs of recovery by the final quarter of 2020 but mostly in 2021. Covid-19 and Airline Failures The International Air Transport Association (IATA) financial outlook released in June showed that airlines globally are expected to lose $84.3 billion in the year of 2020 for a net profit margin of -20.1%. It also stated that revenues will fall by 50% to $419 billion from $838 billion in 2019. In 2021, losses are expected to be cut to $15.8 billion as revenues rise to $598 billion. IATA’s Director General and CEO, stated that “Financially, 2020 will go down as the worst year in the history of aviation. On average, every day of this year will add $230 million to industry losses. In total that’s a loss of $84.3 billion”. What’s shocking is witnessing how many airlines have failed during the coronavirus pandemic. And even for airlines that are still in business, the situation is severely difficult: e.g. the US carriers have given out $10 billion in vouchers due to the pandemic. Listed below are a few examples of the biggest coronavirus-related airline failures worldwide. - LATAM: To date, Chile’s LATAM is the largest airline to file for U.S. bankruptcy protection in May due to the pandemic. LATAM says it will continue flying as it restructures its debts in bankruptcy court. - Avianca Holdings: The second-largest carrier in South America, Avianca survived the Great Depression - but not coronavirus. The airline filed for Chapter 11 bankruptcy protection in May. Like LATAM, Avianca will continue flying during the restructuring. - Virgin Australia: After almost 20 years of operation, Virgin Australia - the country’s second-biggest airline - filed for voluntary administration, the equivalent of bankruptcy restructuring. It’s the largest airline to collapse in Australian history. - Flybe: The British regional airline Flybe was already struggling before coronavirus and both the UK government and Virgin Atlantic tried to save it. However, the airline entered voluntary administration, similar to bankruptcy, in March. - Miami Air International: After 29 years in service, Miami Air International filed for Chapter 11, then proceeded to cease operations. Hospitality Sector Hit by the Lockdown The lockdown due to the pandemic has affected the tourism industry across the globe, and the hotel sector is among the hardest hit. Global hospitality data company STR compared 2020’s first quarter status to 2019 figures, hotel occupancy rates dropped as much as 96% in Italy, 68% in China, 67% in UK, 59% in USA and 48% in Singapore. There’s no doubt that the hotel industry has witnessed a severe impact by the pandemic and the lockdown status. STR is also comparing U.S. Hospitality statistics between 9th of May 2020 to 11th of May 2019 and reported a sharp decline in global hotel performance indices: - 55.9% decline in occupancy to 30.1% - 42.1% decline in average daily rate (ADR) to $76.35 - 74.4% decline in revenue per available room (RevPAR) to $22.95. Balancing the Return of Tourism Revenues and Safety As of July 2020, the EU opened borders to tourists from 15 different countries leaving the U.S. off the list. Health officials developed a plan to classify accepted countries based on how the country is performing in controlling the coronavirus. A country is considered under control when they have a number close to or below the EU average for new coronavirus cases over the last 14 days and per 100,000 inhabitants. On 15 June, the European Commission launched ‘Re-open EU’, a web platform that contains essential information allowing a safe relaunch of free movement and tourism across Europe. The platform will provide real-time information on borders, available means of transport, travel restrictions, public health, and safety measures. Safe Tourism Enabling tourism once again would require measures ensuring that people are and feel safe towards traveling. Global safety and hygiene stamps are awarded by the World Travel & Tourism Council (WTTC) to countries that are demonstrating their commitment to reopening their tourism sector as they recover from the coronavirus outbreak. The WTTC, a council that represents private-sector travel and tourism, created the Safe Travels Stamp to allow tourists to recognize governments and companies around the world which have adopted health and hygiene global standardized protocols – so consumers can experience ‘Safe Travels’. Eligible entities such as hotels, restaurants, airlines, cruise lines, tour operators, attractions, short term rentals, car rentals, outdoor shopping, transportation and airports, will be able to use the stamp once the health and hygiene protocols, outlined by WTTC, have been implemented. As of September 2020, the ‘Safe Travels’ List included 100 destinations with Saudi Arabia, Spain, Portugal and Mexico among the first destinations to adopt the stamp and the Philippines as 100th destination. The Return of Tourism Globally With lockdowns ending around the world, many countries have started to ease border restrictions and reopen for international tourists. Although many governments are still advising against "nonessential" international travel, a host of popular destinations have eased their Covid-19 border restrictions and are readily welcoming tourists back: - The European Commission has released guidelines for how its Member States can start to ease coronavirus travel restrictions and enable tourism to begin again - The Baltic states are creating a “travel bubble”, allowing citizens to travel freely between them. - New Zealand and Australia have committed to introducing a trans-Tasman "COVID-safe travel zone", as soon as it’s safe to do so - Destinations like Dubai, the Maldives, Egypt, Lebanon, Croatia, Kenya, Tanzania and Jamaica have already opened their doors to foreign visitors again, while Thailand hope to reopen soon While tourism is slowly returning in some destinations, most members of the UNWTO Panel of Tourism Experts expect international tourism to recover only by the second half of 2021, followed by those who expect a rebound in the first part of next year. However, there are still concerns over the lack of reliable information and deteriorating economic environment which are indicated as factors weighing on consumer confidence, especially with the potential new limits on travel as world comes to grips with second Covid-19 wave. The concerns over the “second wave” of coronavirus brought on by returning vacationers are wreaking havoc on the world’s tourism industry. Mohamed Aref - Business Analyst Sources: https://www.unwto.org/global/press-release/2019-01-21/international-tourist-arrivals-reach-14-billion-two-years-ahead-forecasts#:~:text=International%20tourist%20arrivals%20up%206,registered%20in%20the%20global%20economy. https://www.unwto.org/global/press-release/2018-01-15/2017-international-tourism-results-highest-seven-years https://www.unwto.org/news/covid-19-international-tourist-numbers-could-fall-60-80-in-2020 https://www.unwto.org/why-tourism https://www.phocuswire.com/str-global-hotel-data-march-21-coronavirushttps://wttc.org/Research/Economic-Impacthttps://www.hospitalitynet.org/file/152008846.pdf https://www.pewresearch.org/fact-tank/2020/04/01/more-than-nine-in-ten-people-worldwide-live-in-countries-with-travel-restrictions-amid-covid-19/ https://www.nytimes.com/article/coronavirus-travel-restrictions.html https://www.forbes.com/sites/laurabegleybloom/2020/06/27/airlines-coronavirus-travel-bankruptcy https://www.traveldailynews.com/post/coronavirus-aviation-industry-losses-to-top-84-billion-in-2020 https://ec.europa.eu/info/live-work-travel-eu/health/coronavirus-response/travel-and-transportation-during-coronavirus-pandemic_en https://www.travelstride.com/blog/europe-travel-ban-what-you-need-to-know https://www.thenational.ae/uae/health/dubai-given-safe-tourism-stamp-of-approval-amid-global-pandemic-1.1054111 https://www.ttrweekly.com/site/2020/06/turkey-presents-safe-tourism/ https://www.unwto.org/news/international-tourist-numbers-down-65-in-first-half-of-2020-unwto-reports https://wttc.org/COVID-19/Safe-Travels-Global-Protocols-Stamp https://wttc.org/News-Article/WTTC-reveals-Indonesia-Dubai-and-Rwanda-as-latest-recipients-of-WTTC-Safe-Travels-stamp-for-safety-protocols https://wttc.org/News-Article/WTTC-celebrates-as-100-destinations-get-the-Safe-Travels-stamp https://edition.cnn.com/travel/article/global-destinations-reopening-to-tourists/index.html https://www.france24.com/en/20200727-new-limits-on-travel-as-world-comes-to-grips-with-second-covid-19-wave
For many decades, the African hospitality market has been exclusively reserved to private investors, of which the majority are hotel chains and property companies. Looking at the market today, it appears that the Sub-Saharan African hospitality sector, excluding South Africa, is now rising as a key investment opportunity for both international hotel chains and institutional investors such as private equity firms. With the tourism sector being a key target for most African governments, hospitality investments are strongly supported by public authorities who offer incentives to attract the world’s largest brands, making the continent the new battleground of major international hotel groups. According to EY’s Africa Attractiveness Survey, the African hotel and tourism sector was forecasted to grow by almost 17%, with accommodation demand increasing from the business travelers connecting to big smart African cities and many other African commercial capitals, as a reflection of strong economic growth. As the continent remains attractive to investors for business, trade and capital investment, it leads to an increasing demand for accommodation and hospitality products. The hospitality sector is developing at a fast pace with large investments planned in sub-Saharan Africa. It has shown a 29% average yearly growth rate between 2012 and 2016 in terms of room capacity, according to W Hospitality Group 2016 survey. At the end of 2016, hotel developments are planned for 35 of the 49 sub-Saharan African countries, with western Africa absorbing 45% of the capacity of rooms planned, followed by Southern Africa with 26% and Eastern African capturing 24% of the planned rooms. The offer covers all hotel’s segmentation, with an emphasis on 4-star hotels, mainly targeting business travelers and tourists with specific requirements when visiting Africa. In terms of the number of investments, they are largely focused on the southern region of the continent, with South Africa absorbing the highest amount of investments. Kenya attracts the highest amount of hotel investments in the east Africa region, followed by Uganda, as the countries are offering diverse opportunities for tourism development and therefore large capacity of absorbing hospitality investments. West Africa is also a key target for several investors, with Nigeria on top of priority, followed by Cote d’Ivoire and Ghana. Both countries are very attractive due to the rise of their business travelers, as their economies keep prospering. Historic segment investors like international hotel groups are actively taking advantage of the market opportunities. They all plan several openings and hotel extensions, with some looking to increase their footprint on the continent through hotel acquisitions in main countries and local development offices to support their strategies: AccorHotels has set up partnerships with strong investors to conquer the African hospitality market and aims to increase its sub-Saharan Africa network to 15,000 rooms in 100 hotels over the next five years. Carlson Rezidor, with 30 hotels comprised of 6,300 rooms under development across the continent, has set up a hospitality fund, Afrinord Hotel Investments, with Nordic institutions to support its growth on the continent. Marriott International announced in 2014 its plan to expand its African presence to 150 properties in 17 national markets by 2020. Its acquisition of Protea, a 116-hotel group spanning seven African nations, for USD 200 million, marks a key step in its strategy. The American group Hilton, with 39 hotels in 17 African countries, intend to double its presence to 80 hotels by 2020 with new openings and extensions in Ghana, Kenya and Nigeria. Even if international hotel chains seem to be the leading active players on the field, the local groups are not in marge. Mangalis Hotel Group, the new African hotel chain is investing USD 340 million to build 15 hotels in west and central Africa through 3 brands (Noom, Yaas and Seen) with a total of 2,200 rooms and suites. Azalaï Hotels who has footprints in several west African countries, with a capacity of 1,000 rooms, intends to grow above 1,600 rooms in terms of capacity after this fundraising. At the beginning of this year, AfricInvest announced an injection of EUR 17.3 million in Azalaï Hotels capital, to support the hotel group development across Africa through capacity extension and service improvement. Beside the hotel groups, institutional investors are also showing interest to the hospitality and tourism sector. Gradually increasing their exposure on the segment, investment funds see the African hospitality sector as a golden egg, and show their enthusiasm for the segment by mainly investing through equity vehicles. Their investments target both greenfield and brownfield projects in all geographies. These funds targeting African hospitality markets are largely funded by development institutions around the world, helping local tourism sectors take off and raise the economy. As other institutional investors, African sovereign wealth funds are looking to hospitality, as the segment is considered as a relatively safe investment sector. The Libyan Investment Authority (LIA), the Libyan sovereign wealth fund, has been actively investing in hotels in Africa through its subsidiary LAICO, Libyan African Investment Company. The fund owns hotel chain Laico Hotels & Resorts, which also owns the Ensemble Hotel Holdings group, proprietor of the high-prestige Michelangelo Hotel in Johannesburg. Laico Hotels & Resorts has 10 properties of 4-star and 5-star hotels with over 2,200 rooms through 2 brands: Laico and Ledger. Most of its acquisitions were targeting three-star to five-star hotels and are managed by international operators. In 2008, LAICO established a joint venture, called LAICO Hotels Management Company, with Tunisia Travel Service (TTS), a Tunisian company involved in the hospitality sector through hotel management, airlines and ground transportation. LIA is similarly followed by Angola’s Fundo Soberano de Angola (FSDEA), which is starting investments in hotel and commercial infrastructure in sub-Saharan Africa. The fund is expected to invest in 50 sub-Saharan African hotels over three years, including in Angola. This is thanks to allocation of USD 500 million in equity capital to a hotel development fund for Africa, as it has earmarked the tourism space as a particularly potent area. FSDEA’s hotel fund will focus on three-star to five-star hotels in sub-Saharan African capitals and other commercial centers, targeting business travelers rather than tourists for their currently returns. The fund will target existing hotels changing ownership or those still under development. Funds from Mozambique, Nigeria and Ghana are all intending to follow their peers and to exploit the recent rises in tourism to Africa. The new dynamism on the African hospitality sector proves that investment opportunities on the continent are diverse for all types of investors. All it takes is to be more alert to rising opportunities and growing sectors. Gaicha Saddy, Senior Associate at Infomineo. Sources: Agence Ecofin, AfricInvest investira 17,3 millions d’euros pour soutenir le développement du groupe Azalaï Hotels (January 2017) http://www.agenceecofin.com/investissement/0601-43579-africinvest-investira-17-3-millions-deuros-pour-soutenir-le-developpement-du-groupe-azalai-hotels Jeune Afrique, Hôtellerie : Hilton entend doubler sa présence africaine (October 2016) http://www.jeuneafrique.com/362631/economie/hilton-entend-doubler-presence-dici-4-ans-afrique/ W Hospitality Group, Hotel Chain Development Pipelines in Africa 2016 (May 2016) http://w-hospitalitygroup.com/newwhg/wp-content/uploads/2016/05/W-Hospitality-Group-Hotel-Chain-Development-Pipeline-in-Africa-2016-1.pdf EY’s attractiveness survey, Africa 2015, Making choices (2015) http://www.ey.com/Publication/vwLUAssets/EY-africa-attractiveness-survey-2015-making-choices/$FILE/EY-africa-attractiveness-survey-2015-making-choices.pdf JLL, Hotel Investment Outlook 2015, Hotels & Hospitality Group (January 2015) http://www.jll.com/Research/JLL%20Hotel%20Investment%20Outlook%202015.pdf African Union, Invest In Africa 2015 (2015) http://www.un.org/en/africa/osaa/pdf/pubs/2015investinafrica.pdf Bloomberg, Angola Sovereign Wealth Fund Starts Hotel, Infrastructure Pools (April 2014) https://www.bloomberg.com/news/articles/2014-04-23/angola-sovereign-wealth-fund-starts-hotel-infrastructure-pools African Development Bank, Africa’s Quest for Development: Can Sovereign Wealth Funds help? (December 2011) https://www.afdb.org/fileadmin/uploads/afdb/Documents/Publications/WPS%20No%20142%20Africas%20Quest%20for%20Development%20%20Can%20Sovereign%20Wealth%20Funds%20help%20AS.pdf Companies websites
Background and perspectives Morocco offers multiple types of destinations for tourists. First, it has almost 3000km of coastline which makes it a top destination for seaside activities; second, it is rich of history and offers cultural activities with entire cities being classified as world heritage sites by UNESCO; also, mountains and desert offer unique experience for people who come for discovery and adventure. Economically, tourism represents a key segment in the Moroccan economy; in fact, it represents the third leading sector after agriculture and industry. In 2013, the sector contributed by USD17.2bn to the Moroccan economy representing 18.7% of the total GDP and investments reached USD3.2bn representing 11.2% of total investments. The World Travel & Tourism Council (WTTC) expects the sector to grow by 5.6% per year from 2014 to 2024 and investments to increase by 5.4% per year (on average) for the coming 10 years1. In a country where total unemployment is reaching the two digits, tourism represents a good opportunity for young unemployed (20%). In 2013, the sector directly supported 814,000 direct and 1,798,000 indirect jobs and total employment is expected to grow by 2.4% (on average) per year during 2014-2024 period1. Stable country Despite the terrorist attack that hit Casablanca in 2003, and Jamaa El Fnaa’ -the most touristic space- in 2011, Morocco has always been considered stable compared to countries of the region. Recently, tourism has enjoyed particular growth following the uprisings that took place in competing economies such as Egypt and Tunisia. Thus, after years of flat growth, Morocco reported a 7.2 percent increase in arrivals since 2012. The enforcement and creation of a special security apparatus have played a significant role in preventing other terrorist threats. In fact, the World Bank ranks Morocco first in North Africa and above average in the MENA region on ‘political stability and absence of terrorism’ indicator. Infrastructure and foreign investments Along with stability, Morocco offers modern infrastructure. For years, the country has been investing significantly on structural projects. Today, the country is linked by 1800km of highway, has 15 international airports, offers advanced telecom services (129% mobile penetration) and hosts one of the biggest ports on the Mediterranean and Africa region; such big projects have attracted foreign investors into Morocco. In 2014, tourism represented 14.7% of total Foreign Direct Investments (FDIs) counting for MAD4.8bn in which more than 50% of investments originated from France, UAE, Saudi Arabia, USA and Kuwait. For instance, the French company “Accor Group” injected more than MAD3.5 billion investment on hotels from 2002 to 2012 and has expected to invest another MAD1.2 billion during 2012-2015 period. On regulation side, the country offers incentives for investors like total tax exemptions for the first five years of touristic projects. Open Sky Morocco has seen significant growth in its air traffic links since it signed the open skies agreement with the EU in 2006. The deal has resulted in a substantial influx of low cost flights to the country, which subsequently boosted the tourism sector. In 2013, Europe’s largest low cost company Ryanair added new aircraft in Moroccan airports and plans to grow its operations to 60 routes and eight airports delivering up to 2.5 million passengers a year to the country. Jetairfly, Easyjet among other low cost companies have also expanded their Moroccan network since 20137. Strategic plans The Moroccan government has implemented two strategic plans “Vision 2010 and 2020” to boost the sector in the last decade. Vision 2020 plans to double the size of the sector to reach 20 million visitors and make from Morocco one of the top destinations worldwide. The focus is to increase the total capacity of the sector by 200,000 beds, target tourists from new and emerging markets, and create 470,000 new jobs in the sector by 20209. Moreover, the Ministry of Tourism launched in 2001 another ambitious plan called Plan Azur. This later aimed to create six seaside resorts with a total capacity of 100,000 beds; yet, after thirteen years of Plan Azur, only three seaside resorts were inaugurated with a capacity of 5,000 beds. Sensitive sector Despite all the efforts made by the Moroccan government through big investments and promotion of the sector worldwide to make from tourism a main source of revenue, the delay of several projects could be explained by the terrorist threats in the region and the financial crisis in the Eurozone. Therefore, the future of tourism remains very sensitive to external factors especially that the recent events in neighboring countries keeps tourists skeptical from visiting the North Africa region. Kheireddine Boulghoudan, Analyst at Infomineo https://www.wttc.org/-/media/files/reports/economic%20impact%20research/country%20reports/morocco2014.pdf https://www.quandl.com/collections/morocco/morocco-unemployment https://www.foxnews.com/world/2014/03/18/morocco-tourism-industry-sees-2013-boost-with-10-million-visitors/ https://info.worldbank.org/governance/wgi/index.aspx#reports https://www.invest.gov.ma/?Id=6&lang=fr https://www.lexpress.fr/actualite/monde/afrique/maroc-l-empire-accor_1106838.html https://centreforaviation.com/analysis/ryanair-opens-two-new-bases-in-morocco-6-months-after-charges-dispute-and-ram-looks-for-a-partner-95684 https://www.tourisme.gov.ma/fr/vision-2020/vision-2020-en-bref https://www.medias24.com/ECONOMIE/ECONOMIE/15141-Le-Plan-Azur-dans-l-attente-d-une-reconfiguration.html