December 6, 2010

Developing the MENA Region’s Coastline to Boost to Tourism

As the MENA region diversifies its economy, tourism—especially nautical tourism—presents a major opportunity. With some of the most stunning marine assets in the world, the MENA region offers jet-skiing, wind surfing, diving, rafting, kayaking, underwater photography, reef walking, sport fishing, and expedition cruising. These activities hold undeniable appeal to a global cadre of tourists whose lifestyle increasingly features yachting and marina activities. Enterprising governments, private investors, and marina developers in the region would reap significant benefits if they were able to capitalize on this demand: “Nautical tourism boosts regional economies by encouraging foreign spending on domestically produced goods and services, increasing governmental revenues through taxes, and creating employment. MENA governments, supported by private-sector players, will need to create an environment conducive to the sector’s development in order to make the most of their marine assets,” said Fadi Majdalani, Partner, Booz & Company.

“To some degree, the MENA region is already making efforts to respond to booming demand for marine leisure activities. In the last seven to 10 years, the region has seen an explosion in the construction of marinas. The UAE, Egypt, Bahrain, and Qatar have been spending billions of dollars to vie for the title of the “Yacht Capital” of the region,” said Alessandro Borgogna, Principal, Booz & Company. In doing so, they have built new marinas that bear no resemblance to simple piers with a few slips for midsize boats. Instead, they are complete entertainment hubs that cater to the needs of boaters and non-boaters equally, able to compete with the facilities in other popular destinations that have been built to respond to rising demand. These new nautical playgrounds are built to compete with similar facilities along the Mediterranean’s established cruising routes—which encompass Cannes, Antibes, Monaco, Nice, the Italian coastline, Sardinia, and the Balearics—as well as newly popular ports in Croatia, Greece, and Turkey, which have been developed in response to greater demand.

At this point, however, all evidence points to the fact that the MENA region’s new marina villages will fall short of the demand for their services. Growing affluence around the world—in some segments of the developing world as well as in developed countries—has led more and more people to pursue marine activities for enjoyment as well as to symbolize their wealth and success. “The demand for marina berths is expected to more than double by 2015 to about 82,000 berths, with the GCC and Egypt expected to account for the bulk of the demand. Further, if MENA governments take the right steps to develop the sector, this number could approximately quadruple by 2025. In order to meet this frenzied growth in marina demand, developers will have to make capital investments of $200 billion to $300 billion in the next 15 years. The development of marina leisure resources must keep pace with the growing demand if the MENA region is to achieve the economic benefits that marine tourism can bring, and the creation of more and better resources will create a virtuous cycle of even greater demand,” said Majdalani.

Certainly, the private sector has a role to play in making this happen effectively. “Governments should use public–private partnerships to grant long-term concessions for the development, financing, and operations of marine infrastructure and services to private consortia, consisting of reputable marina master developers and operators. Governments can attract such partners by negotiating public guarantees and other subsidies on a case-by-case basis. It will fall primarily to the government, however, to create the conditions that are conducive to the sector’s development,” said Borgogna. Doing so will require a focus on five critical areas:

  • Regulations: There is an urgent need to make the regulatory environment more user-friendly to consumers, operators, and service providers by reviewing the existing laws and requirements. The relevant statutes include port of entry requirements, customs and taxes, berthing permit requirements, treatment of pleasure boats, and real estate construction guidelines.

  • Nautical Culture: The nurturing of nautical culture is an important prerequisite in stimulating demand growth. This includes setting up nautical training schools to develop local qualified manpower, encouraging the growth of the local and international yacht manufacturing industry, and developing financial products to finance and insure yachts.

  • Promotional Campaigns: The promotion of the marina industry would raise awareness of its possibilities and help grow demand. Promotions may include advertising campaigns and the organization of events such as regattas, festivals, and carnivals. These efforts should focus on attracting key players in the marina business, such as yachting services and maintenance providers.

  • Environmental Sustainability: The long-term health of the industry should not be compromised for short-term profits. Best-in-class eco-friendly methods of design, construction, and operations are necessary both to win licenses from regulators and to attract tourists who want to feel good about leaving natural resources in their pristine state.

  • Network of Marinas: It is imperative to create a strong network of marinas in the region to create a natural cruising circuit for yachting and sailors.

MENA governments have a fundamental role to play in creating the right conditions and guidelines to steer the development of the marina industry—and reap its substantial rewards. The public sector should focus on setting up a comprehensive master plan to combine all the elements of the marina sector development and involve the private sector in executing the government vision.