The Abraham Accords agreement signed in August 2020 heralded the beginning of normalized relations between Israel, Bahrain and the United Arab Emirates and the potential for cross-border investment and development, including in the hotel industry.
In December of the same year, the accords were extended to reinstate full diplomatic relationships between Israel and Morocco.
Last year, Israel’s national carrier El Al started flights between Tel Aviv and Marrakech, while Morocco’s national carrier, Royal Air Maroc, began direct flights between Casablanca and Tel Aviv this month.
Diplomatic relations between the two countries also open opportunities for meetings, incentives, conventions and expositions business in Morocco from hundreds of thousands of Israelis of Moroccan Sephardic origin.
As with cross-border hotel development and investment between Israel and the UAE, there have been discussions between Israel and Morocco, but things will take time, according to sources speaking at a webinar hosted by Questex and HVS London titled “Morocco Israel Investment Tourism Summit.”
“A real push has been substantiated since the signing last year of the Abraham Accords,” said Doron Aharon, deputy director-general of the Israel Ministry of Tourism.
Fatim-Zahra Ammor, the Kingdom of Morocco's minister of tourism, handicraft and social and solidarity economy, said Morocco is “fully committed to instigate a full relationship with Israeli and international investors.”
She said 80,000 tourists from Israel visited Morocco in 2021, and the goal is to reach 200,000 tourists in the next few years, helped by simplified visa bureaucracy.
She added Middle Eastern investors and funds remain the largest players in the kingdom.
Let’s Talk
Russell Kett, chairman of business advisory HVS London, said the Abraham Accords already have been an important stimulus, improving links and economic ties, with tourism one of the most important focuses.
He said there are 120,000 rooms in 4,000 Moroccan hotels, which he said indicates the average, small size of each hotel. Many traditional lodgings are riads, homes with multiple stories that center around an open-air courtyard that contains a fountain. A lack of larger hotels presents opportunities for investors and developers interested in that type of product.
He said tourism contributes 12.2% to Morocco’s gross domestic product, while in Israel it contributes 2.5%.
Daniel Roger, managing director of Fattal Hotels, which owns and manages 120 hotels in 20 countries, said the company is looking “quite closely for a proper project for us in Morocco. We are confident Morocco has a great future in leisure and incentive travel.”
Leon Avigad, CEO and co-founder of Brown Hotels, said he has been approached at least once every month in the past six to eight months by Moroccan partners.
“We will not be the first to enter, but we are looking,” he said.
Michael Hay, founder of Vision Hospitality, said he also recently had a lengthy conversation with a Moroccan investor for projects both in Israel and Morocco.
“We might even pursue it,” he said.
“Leisure always [is of interest], but all classes should be looked at from their own merits. All are relevant,” he added.
Everything Settling Down
Both countries’ hotel industries are expected to recover from the demand crisis perpetuated by the COVID-19 pandemic in the next 48 months or so.
Hamid Bentahar, CEO and executive vice president of Accor Gestion Morocco, said by the end of 2023 Morocco's hotels are expected to regain 2019 levels in occupancy and average daily rate, but profitability likely would take another two years.
“[Summer 2021] saw the same number of flights to Morocco as came in 2019,” he said.
Hay said hotel values in Israel have not dropped noticeably as a result of the COVID-19 pandemic.
“Selling and buying is very limited, and profitability is a global issue, with rising salary costs and other operational costs,” he said.
Roger said he expects profitability to follow the “return of international conferences, exhibition and incentive travel hitting the level of three years ago.”
Getting to that point will be tough for all, Avigad said.
“I have electricity bills five times more expensive than what they were. Flight fares will be significantly more expensive than before, and I am seriously afraid of the erosion of profitability in the sector," he said.
“There is a limit to what you can do with robots. At the moment, there is a limit to how much we can reduce costs, especially with huge segments [of hotels] still reliant on the old-fashioned concierge,” he added.
Neil Kaye, president of Silverock Group, which is currently developing hotels in Israel, said construction costs have gone up more than 20%.
Despite these hurdles, “a lot of Israeli investors are coming to Morocco looking for projects,” Bentahar said.
Jalil Benabbés-Taarji, director and CEO of Tikida Group, said the Moroccan Agency for Tourism Development, known by its transliterated Arabic initials SMIT, has lobbied to reduce sales tax on hotel asset sales, not just on accommodation bookings, to 10% from the standard 20% and to reduce tax on capital gains and profits pertaining to investment and divestment in hotel assets.
Tikida Group is a family company that owns and manages 10 hotels in Agadir, Casablanca and Marrakech, usually developed in partnership with European chains.