With oil revenue flagging, Algeria turns to tourism

The Holiday Inn Algiers - Cheraga Tower. Photo credit: IHG

Algeria, much like the UAE, is courting tourism and hotel investment to compensate for falling oil revenue—and global companies are taking note.

The oil and gas sector has been the backbone of Algeria's economy, accounting for about 35 percent of the gross domestic product, and two-thirds of total exports. According to OPEC, Algeria was ranked 18th among global oil producers in 2016 at 1,348,361 barrels per day.

But the oil downturn took its toll on the country. Over the past year, Algeria’s crude oil production fell from 1,091,000 barrels per day in January 2017 to 997,000 barrels per day in October. By December 2017, it was up to 1,037,000 barrels per day—an improvement, but not where it had been a year before. 

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Room for Growth

With oil prices still uncertain, the country is turning to tourism to keep its GDP afloat—and it has plenty to offer visitors and investors alike. “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,” the Oxford Business Group said in its latest report on Algeria's tourism sector. “Though the industry remains underdeveloped, particularly in regards to the number of hotel rooms and the cumbersome visa regime, foreign business tourism and niche areas such as spa, desert and ecotourism have strong scope for growth.”

The Algerian government’s National Tourism Development plan intends to attract more foreign visitors to the country by 2027, bringing the total to 4.4 million from 2.7 million last year. The government has committed to developing the infrastructure needed to support this goal, which has become more pressing as the oil price wavers.

In December, the minister of tourism, Hacène Mermouri, said that the ministry had approved 1,812 new hotel projects as part of a plan to bring the country’s capacity from 100,000 guestrooms to 240,000. Of those projects, the minister said that 582 rooms were already under construction.

Branded Development

InterContinental Hotels Group made its debut in Algeria with the 242-guestroom Holiday Inn Algiers - Cheraga Tower hotel. “The opening of Holiday Inn Algiers - Cheraga Tower is a strategic move for us as Algeria’s proximity to Europe, airline connectivity, strong culture and heritage along with substantial business links creates a strong demand for international branded accommodation and a need for world-class hospitality,” Pascal Gauvin, MD, India, Middle East & Africa, IHG, said in a statement, adding that the midscale brand would cater to both domestic leisure and international business travelers.

Omar Ramdane, co-manager, Modern Towers, which owns the hotel, said that his company was looking to develop similar projects in the future.

IHG is not alone. The Hilton Alger is due to reopen later this year after a renovation. “Last year we established a permanent Development resource in Casablanca to help us focus our efforts to grow in North Africa,” Feras Hasbini, development director for the Middle East & North Africa at Hilton, said. “We believe that there is definitely potential for more hotels in Algeria, we are actively looking at opportunities in the market and are interested in looking at more possibilities to add to our existing Hilton Algiers.”

Last March, an affiliate of Hyatt Hotels Corporation entered into a management agreement with Société d'Investissement Hôtelière for a Hyatt Regency hotel to be located at Houari Boumediene Airport in Algiers, Algeria. “Hyatt Regency Algiers Airport will be the first Hyatt-branded hotel in Algeria and further demonstrates the company’s commitment to growing its brand footprint in Algeria and throughout Africa,” Peter Norman, SVP, acquisitions and development–Europe, Africa, and Middle East for Hyatt, said at the timet. “The region is home to some of the world’s fastest-growing economies, with enticing prospects for both business and leisure travel.”

Marriott International opened its seventh hotel in the country last year, a location Alex Kyriakidis, president & managing director, Middle East and Africa, Marriott International, described as “integral to our overall development strategy throughout Africa,” and where the company has another six hotels in the pipeline.

Pipelines of another form remain key to Algeria’s attraction as a business destination: The country is the largest oil and gas producer in Africa, with 94 percent of its export revenues coming from the fuels. Rioting over the cost of food has made the country less attractive to visitors and also forced the government to look at diversification into renewable energies. The recent increase in the price of oil may provide a breathing space, but alternative industries will be needed to ride out these fluctuations and the volatility they bring in the long term.

Katherine Doggrell is an editor at Hotel Analyst, the U.K.-based news analysis service for hotel investors.