It is late August and Marrakech’s Djema el-Fna square is filling up with tourists, mostly Europeans, in the early evening. Few, if any, are aware that one of the deadliest terrorist attacks on Moroccan soil in recent memory happened here a little under a year and a half ago.

In April 2011, a bomb was set off at the Argana cafe, which sits to one side of the busy Rue du Moussaine, the site of some of the area’s most popular tourist restaurants and shops. The blast, which killed 16 and injured dozens more, was claimed by Al-Qaeda in the Islamic Maghreb. It had the potential to derail the country’s tourism industry.

Yet ask taxi drivers, waiters, hotel managers and even carpet sellers why tourism is slow at the moment (and everyone says it is slow) and you will get one answer.

“It’s not terrorism,” says Hakim, a waiter at one of Djema el-Fna’s many cafes. “Most tourists don’t even know that happened.” What happened, he says, was “La crise”.

Eurozone crisis

With the eurozone financial crisis seemingly neverending and coming directly on the back of the global financial crisis of 2008-10, the hospitality sector has noticed a sharp drop in the number of tourists and the amount they spend over the past few years. That, says one hotel manager, is before you account for the impact of the Marrakech bombing and the Arab Uprisings, the effects of which Morocco did not escape.

Morocco’s travel sector is hugely dependent on European travellers. Tourism Ministry statistics show that 42.6 per cent of visitors to Morocco came from Europe in 2011, down from 47.7 per cent in 2010.

The travel and tourism industry is a major contributor to the economy. It was directly responsible, according to the UK-headquartered World Travel & Tourism Council (WTTC), for 8.9 per cent of gross domestic product in 2011. It also indirectly supports 1.8 million jobs.

“Tourism is one of the pillars of the Moroccan economy,” Lachen Haddad, Morocco’s tourism minister, tells MEED. “Our partners in Europe are going through tough financial and economic times, and that means fewer French, Spanish and Italian [tourists] coming our way.”

Hotel sector resilience

About 1.8 million French tourists visited Morocco in 2011, down 2.7 per cent on the year before. The number of Spanish tourists fell 4.6 per cent and 9.3 per cent fewer Italians visited the country than in 2010.

Yet visitor numbers from other countries showed surprising levels of resilience and even improved year on year. British tourists totalled 352,141 in 2011, up 4 per cent from 2010, while the number of Belgians rose 16.8 per cent and visitors from Portugal increased 15.7 per cent.

“Tourism is going through some interesting times,” says Haddad. “It isn’t in crisis and it has enough sturdiness and resilience to go through this turbulence without hurting too much.”

According to the WTTC, tourism directly contributed MD71.8bn ($203.7m) to the Moroccan economy in 2011. This was 3.8 per cent higher than the MD69.2bn generated in 2010. Total foreign exchange income from tourism in 2011 was MD59.1bn.

Part of the continued appeal of Morocco as a destination, Haddad says, is its proximity to most European cities and the fact that the cost of living is much lower. “You can evade the crisis and forget the ills at home,” he says. “We are two to three hours away, with guaranteed sun, and you will spend less than at home.”

Our partners in Europe are going through tough times, and that means fewer [European tourists] coming our way

Lachen Haddad, Morocco’s tourism minister

Despite this resilience, the tourism sector is not hitting the targeted visitor numbers set out by the government. In the mid-2000s, the government forecasted confidently that the country would attract 10 million visitors by 2010. The actual number, including Moroccan expatriates returning to the country to visit family, was 9.3 million, Tourism Ministry statistics show.

This was, however, a significant improvement on visitor numbers seen during the first wave of the global economic crisis. Arrivals in 2008 totalled 7.9 million. Despite this, those working in the industry still feel the sector has slowed significantly in recent years.

Hoteliers and tourism executives dispute the quoted figures. “I wouldn’t be sure that the gains they are talking about are entirely correct,” says an executive at a tour company based in Marrakech. “A lot of the Moroccan expats have been returning because they can’t get jobs in Europe, not because they fancy a trip home. The number of African arrivals has also been increasing, yes, but that may be because [state carrier] Royal Air Maroc’s current strategy is to turn Casablanca airport [Mohamed V] into a hub for African flights.”

The number of Moroccans living abroad returning has increased significantly since the onset of the financial crisis. The Tourism Ministry says 3.6 million Moroccans arrived in the country from abroad in 2008, 4 million in 2009 and about 4.4 million in both 2010 and 2011, accounting for 47 per cent of all tourists.

Royal Air Maroc has been working to turn Casablanca airport into a transport hub for Africa, adding regular flights to most of the continent’s capitals over the past decade with many stopovers counted as incoming tourists.

Project investment

Perhaps another check for the health of the sector, says one hotel executive, is the amount being invested in the country. Before the crisis, Morocco’s tourism industry was attracting huge inflows of capital. In 2007, MD12.4bn flowed into the country for new tourism projects, mostly large hotel schemes. That figure has fallen significantly to MD2.6bn in 2011.

According to regional projects tracker MEED Projects, of the $3.4bn of major new hotel and tourism projects planned since 2005, $881m-worth have been completed, while another $890m are under construction. The remaining $1.7bn of developments are on hold.

One of the biggest investors in new projects over the past decade was the Moroccan government, which, along with private partners, built $6bn of new hotels and resorts at six coastal destinations. The last of these, a resort at Taghazout on the Atlantic coast, will be completed in 2013. The government stands to lose as much as anyone if the tourism sector does not pick up.

One project that went ahead during the crisis was a $120m Four Seasons hotel in Marrakech developed by a consortium including Saudi Arabia’s Kingdom Investment Group (a 70 per cent shareholder), Alliances Development Immobilier, owned by Morocco’s royal family (20 per cent), and the UK’s European Hotel Corporation.

“In 2005, the project started to take shape and in 2007 we broke ground and began construction, that was all prior to the crisis,” says Nick Yarnell, manager of the hotel, which opened in June 2011. “In those days, when you looked at the occupancy of the high-end properties, they were booming and it was great times for everyone. Today, we are opening in the depths of the recession.”

Occupancy at the hotel was “in the low 30s” in 2011, but has improved in 2012, says Yarnell, and will probably average 35-38 per cent for the year. To make a return on the initial investment, the investors need occupancy rates of 60-70 per cent. “For an opening year, it’s not that surprising,” he says. “If you add the bombing, the Arab Spring, the economy and the French election, it was a tough time for Marrakech.”

It is not just new hotels that have been affected. A tourism landmark in Morocco is La Mamounia, which has won a succession of tourism industry awards since reopening in September 2009 after an estimated $179m refit.

“We have managed to create a big buzz and the expectations were very high,” says Denys Courtier, the hotel’s executive director. This helped the hotel achieve 48 per cent occupancy in 2010 and an “excellent average room rate”.

“Our expectations in 2011 were higher than 2010 and January 2011 confirmed the same tendency,” says Courtier. “But given an overall picture of events in 2011 – geopolitical problems, the Marrakech bomb and the economic crisis – the business couldn’t follow the same progression and we faced a difficult 2011. This year is hopefully much better and the rest of 2012, as well as 2013, are to confirm the pick-up.”

Optimism rising

This optimism is consistent across the industry. “The fact we are now going through some turbulence does not mean that we are not getting ready to rebound,” says Haddad. “We have seen [positive] signs in May and June and are going to do a lot better in the other months, as well.”

The Tourism Ministry says visitor arrivals increased 10 per cent year on year during the six months to June, buoyed by an influx of British and Spanish tourists. Spanish arrivals increased 37 per cent. However, at the same time tourist receipts fell by 1.9 per cent to MD25bn.

The ministry still hopes to attract 20 million visitors by 2020. This plan is feasible, say government officials and tourism industry executives, but if the European economy continues to falter, it could take a little longer.

“A recovery in the eurozone would be good news for us, not just in tourism but in everything,” says Haddad. “About 70 per cent of our business is with Europe. The sooner those countries get back to a virtuous cycle of development, the better. It’s going be bad news for Morocco [if the crisis continues], but it won’t be as bad news for us as other destinations.”