The Tourism Crash

In a normal world, Tunisia would be a paradise for tourists. It has some of the best beaches on the Mediterranean. It boasts rich traditions of music and food as well as an astonishing material legacy from the myriad civilizations that have made the place their own over the centuries. One can visit a Roman amphitheater that rivals the Coliseum, view some of the world’s richest collections of ancient mosaics, and stroll through elegant harbor towns that would be an asset to the finest riviera.

These days, though, few visitors dare to sample the country’s charms. In March 2015, jihadis killed nearly two dozen tourists at the Bardo Museum in Tunis; a few weeks later, another attacker shot dead 38 foreigners, mostly from Britain, at a beach resort in the town of Sousse. Since then, the country’s tourism sector has slumped dramatically. Foreign travelers booked 29 million nights in Tunisian hotels in 2014, but a year later that figure had plummeted to 16 million. In a country where 11.5 percent of workers are employed in the tourism sector, and the livelihoods of many more are affected by its performance, the impact has been devastating.

There’s no question that solving the country’s security problems would go a long way to reviving the industry. Yet terrorism isn’t the only problem facing Tunisia’s tourism trade. In fact, the outrages at Bardo and Sousse have merely served to obscure the sector’s deeper malaise. A glance at the numbers shows that tourism was already an underperformer long before the attacks — and that they have merely helped to accelerate the rot.

The reasons are closely linked to the broader problems that plague Tunisia’s economy — above all its pervasive cronyism, which allows well-connected insiders to seek rents in lucrative markets while using bureaucratic allies to prevent potential competitors from challenging them.

Back in the 1990s, hotel magnates close to former President Zine El Abidine Ben Ali benefited greatly from their political access, obtaining loans from public banks that were never repaid — only to see those public banks later recapitalized with public funds, allowing the whole cycle to start again. The problem has persisted since the revolution. A 2014 World Bank report found that the Tunisian tourism sector accounts for a whopping 25 percent of the country’s non-performing loans — which, as the authors noted, “mask the problems in the tourism sector and contribute to them by channeling credit to less productive entrepreneurs and by freezing liquidity that would otherwise have circulated.”

The result is an industry that continues to be dominated by large, well-connected, state-subsidized hotels and tour operators. And that, in turn, has tended to encourage an extremely narrow and fragile business model: mass package tourism. In some ways this was also a logical choice in light of the country’s chronically high unemployment and the workers’ relatively low levels of skills and education.

But the reliance on quantity over quality brought problems of its own. Above all, as the political scientist Robert Poirier pointed out in a 1995 analysis of Tunisia’s tourism sector, it’s an approach that is sensitive to “political instability, both regional and Tunisia-specific.” Although published two decades ago, his words are still relevant today, as demonstrated by recent events. “People say we have no tourists because of terrorism, but it’s not true,” says hotel owner Chekib Zaibet. “Each year we have less because each year we offer the same thing. We only have one type of guest, and that makes us very vulnerable to attacks.”

Former Minister of Tourism Amel Karboul notes that boutique hotels continued to thrive after the revolution, while hotel operators who relied on mass tourism began to have problems due to fears of political instability. “This shows that diversification of products can really help,” she says.

Zaibet, who operates a boutique hotel of his own, believes that the current crisis offers an excellent opportunity to start making the changes needed to build a more resilient industry. But that’s exactly what hasn’t happened. After the 2015 killings, the government once again bailed out floundering big hotel owners with money from the public budget by forgiving their debts, waiving their social security taxes, and covering their electricity bills. The justification many legislators gave at the time was that they needed to help hotel owners keep people employed at a time of crisis.

Yet Karboul, the former tourism minister, says that the excuse doesn’t entirely wash. “A lot of people say it’s about jobs, but these bad hotels didn’t create jobs,” she says, noting that only a small fraction of the sector — some 20 percent — have the successful business model, high profits, and professional management needed to create value and jobs. Karboul, who worked in a special transitional government that had a strict mandate of only one year, proposed a series of obvious short-term reforms that focused on improving branding and quality and one long-term project to shake up the ministry’s bureaucracy.

Vested interests put up stiff resistance. Those in charge of regulating the sector had little incentive to allow their power to be whittled away, and the established hotel owners wanted to protect their own prerogatives. Karboul notes that the debts of the big players are huge: “They haven’t been paying and that has been a huge conflict.”

Smaller-scale entrepreneurs bear out her assessment. Shop owner Hatem Cherif, who works in the picturesque seaside town of Sidi Bou Said just outside of Tunis, says that the government “helped hotels, not us,” in the wake of the 2015 attacks. “We’re hurting,” he added. Since the attacks, many cruise lines have canceled their stops at Tunisian ports, depriving Sidi Bou Said of the busloads of tourists who were the main market for Cherif’s souvenirs. He doesn’t have high expectations — he’ll be happy if the government can simply do a better job of selling Tunisia’s “brand” to the world while boosting security.

Zaibet offers a glimpse of a possible future at Dar Nour, his boutique inn overlooking the beach resort of Hammamet, whose mega-hotels are struggling to fill rooms. After working as a manager for some of Tunisia���s top-ranked hotels, Zaibet decided to pursue his dream of building, owning, and managing a place of his own. He lives on the premises of Dar Nour and offers personalized service tailored specifically to the demands each guest. Although Dar Nour only launched about two years ago, it is already successful, with about 80 percent occupancy during the summer months, according to Zaibet.

The starting rate at Zaibet’s hotel is pricey by Tunisian standards — almost $200 per person per night — but it offers a promising alternative to the package deal. Turkey has seen great success in recent years partly by capitalizing on unique, personalized tourism services available at all price ranges, including penny-pinching backpackers and students. Such flexibility could well pay off for Tunisia — especially at a time when competitors like Egypt are also hurting.

In late 2013, lawmakers attempted to update the legal framework to make it easier for operators to run hostels and boutique hotels. But the structural challenges remain. One of the biggest, says Karboul, is access to credit, a problem that bedevils entrepreneurs in all sectors. That should serve as yet another reminder that the best way to revive the fortunes of Tunisia’s sagging tourism sector is by tackling the problems of the broader economy.

Photo credit: CHRIS MCGRATH/Getty Images

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