Jordan Tourism Sector Report September 2014 Ahli Capital Markets and Investments Group Research & Studies Division Jordan Ahli Bank
1. Executive summary 3 2. Economic Overview 4 Economic Performance Main Economic Indicators Credit Facilities Targeting the Tourism Sector 3. Jordan National Tourism Strategy 2011-2015 9 4. Sector Performance / Indicators 12 Tourism Receipts Tourist Arrivals Tourist Sites Occupancy Rates Employment in the Sector 5. Sector Performance (1st Half of 2014) 24 6. Financial Analysis 29 Income Statement & Balance Sheet Financial Indicators Profitability Indicators liquidity Indicators Financial Leverage Indicators Stock Performance Indicators 2
1. Executive Summary While Jordan is a country of limited resources, Tourism is considered as a major income source for the national economy. Over the past few years, The Jordanian tourism sector remains to progress steadily after withstanding many difficulties imposed by the various challenges in which the region has faced that include the Global Financial Crisis as well as the (Arab Spring) revolutions. Since Jordan remains to hold high potential, resembled in the various advantages the country possesses such as globally acknowledged historical and religious sites in addition to captivating locations as well as attractive international hotels and resorts, it is but clear that with the relentless efforts exerted by both the public and private sectors, the tourism industry has yet more to offer and is bound to reach its full potential. This report aims to present a clear picture regarding one the key players of Jordan s national economy, shedding light on the tourism sector s main indicators over the past five year period as well as presenting a financial overview for some of the major companies working within this industry. 3
2. Economic Overview September 2014 Economic Performance Economic growth in Jordan was once again on the path of recovery as revealed by the growth of real GDP during the first quarter of 2014, rising by 3.2% at market prices compared to 2.6% during the same period of 2013. Such economic growth was realized while inflation, measured by the percentage change in the Consumer Price Index (CPI) declined to 3.2% during the first seven months of 2014 compared to a much higher inflation rate of 6.4% recorded during the same period of last year. Moreover, foreign currency reserves have witnessed a whopping increase of almost 20% during the first seven months of 2014 compared to their level by the end of 2013, adding US$ 2.465 billion and bringing the reserves to US$ 14.471 billion by the end of July 2014. Other economic indicators have also shown positive signs during 2014, in particular, travel receipts, workers remittances have both recorded growth rates of 10% and 1.4% during the first seven months of 2014, respectively, while unemployment rate dropped to 12% during the second quarter of 2014 compared to 12.6% recorded during the same quarter of 2013. Nonetheless, the national economy is still under mounting pressures due to structural challenges related to its dependency on energy imports and the lack of natural resources, while the Arab Spring spillover effect including the rising influx of Syrian refugees has led to escalating pressures on the Kingdom s infrastructure. Consequently, the aggregate of such pressures have resulted in additional burdens facing the Kingdom s general budget. In this context, the central government recorded a JD 354.1 million budget deficit - including foreign grants during the first half of 2014, compared to a fiscal deficit in the amount of JD 309.1 million during the same period of 2013. 4
Main Economic Indicators Main Economic Indicators JD Million 2010 2011 2012 2013 2014 Money and Banking June Currency with Public 2,843.6 3,019.3 3,215.0 3,606.6 3,777.2 Deposits of Residents in Jordan Dinar 16,231.6 17,573.7 16,334.5 19,121.6 20,428.9 Deposits of Residents in Foreign Currencies 3,231.5 3,525.9 5,395.6 4,635.2 4,576.7 Money Supply (M2) 22,306.7 24,118.9 24,945.1 27,363.4 28,782.8 Foreign Assets (Net) 10,078.5 9,370.1 6,665.5 6,923.4 8,202.0 Domestic Assets (Net) 12,228.2 14,748.8 18,279.6 20,440.0 20,580.8 Public Finance Jan - Jun Domestic Revenues 4,261.1 4,198.9 4,726.9 5,119.1 3002.6 Foreign Grants 401.7 1215.0 327.3 639.1 291.2 Current Expenditures 4,746.6 5,739.5 6,202.8 6,050.4 3260.6 Capital Expenditures 961.4 1,057.1 675.4 1,015.0 387.3 Overall Deficit (Including Grants) -1,045.2-1,382.7-1,824.0-1,307.2-354.1 Overall Deficit (Excluding Grants) -1,446.9-2,597.7-2,151.3-1,946.3-645.3 Internal and External Public Debt Jan - Jun Net Domestic Debt of Central Government 6,852 8,915 11,648 11,862 11,708 External Public Debt Outstanding 4,610.8 4,486.8 4,932.4 7,234.5 8384.5 External Public Debt Service (Commitment Basis) 450.0 518.8 558.1 598.9 295.4 External Sector Jan - Mar Current Account -1336.3-2098.8-3345.3-2384.6-231.5 Trade Balance Deficit -4823.8-6261.7-7486.6-8143.6-1896.6 Exports, f.o.b. 4990.1 5684.5 5599.5 5616.7 1456.3 Imports, f.o.b. 9813.9 11946.2 13086.1 13760.3 3352.9 Services Balance (Net) 926.2 896.0 1332.3 1265.7 592.4 Income Account (Net) -152.4-187.8-275.9-240.4 57.6 Current Transfers (Net) 2713.7 3454.7 3084.9 4733.7 1015.1 Capital and Financial Account (Net) o/w : 772.4 2329.5 3812.1 1974.6 106.5 Direct Foreign Investment in Jordan 1172.1 1046.2 1063.1 1276.9 164.4 Gross Official Reserves (June 2014) 8,679.1 7,465.2 4,702.5 8,512.0 10,149.7 Production and Prices Jan - Mar Nominal GDP at Market Prices (JD Million) 18,762.0 20,476.6 21,965.5 23,851.6 5729.5 Population in Million 6.113 6.249 6.388 6.530 N/A Per Capita GDP at Current Market Prices (JD) 3,069.2 3,276.8 3,438.6 3,652.6 N/A Percentage Change in Consumer Price Index (Jan -Jun 2014) 5.0 4.4 4.7 5.6 3.2 5
The following chart shows the percentage contribution of GDP according to the different economic activities at the end of the first quarter of 2014. 30% 25% 20% 15% Gross Domestic Product by Economic Activity at Constant Basic Prices - Q 1 2014 24.5% 18.6% 17.3% 13.6% 12.4% 10% 5% 0% 3.8% 1.8% 1.9% 4.7% 5.0% 0.5% 0.6% Agriculture Mining and Quarrying Manufacturing Electricity and Water Construction Trade, Restaurants and Hotels Transport and Communications Finance, Insurance, Real Estate and Business Services Social and Personal Services Producers of Government Services Producers of Private Non- Profit Services for Households Domestic Household Services Net outstanding domestic debt stood at JD 11.708 billion by the end of June 2014, while outstanding external public debt stood at JD 8.384 billion, thus bringing net public debt (domestic and external) to represent 78.6% of GDP by the end of June 2014. Net Public Debt to GDP Ratio 14 76% 80% 79% JD Billion 12 10 8 6 4 3.869 57% 5.791 65% 61% 8.915 6.852 4.611 4.487 11.648 11.862 11.708 8.385 7.235 4.932 2 0 2009 2010 2011 2012 2013 Q1/2014 Outstanding External Public Debt Net Outstanding Domestic Debt 6
Credit Facilities Targeting the Tourism Sector Credit facilities and loans granted by licensed banks operating in the Kingdom rose by 6.2% during the year 2013, while a growth of 0.93% was recorded during the first seven months of 2014 compared to their level at the end of 2013. This was reflected in a JD 176.5 million increase which raised the standing balance of total credit facilities to approximately JD 19.12 billion by the end of July 2014. The industry sector was the prime beneficiary of these facilities, accounting for more than JD 137 million of the total increase in facilities during the first seven months of 2014. On the other hand, credit facilities extended to general trade as well as public services and utilities have declined by 6.2% on average during the same period compared to their levels by the end of 2013. The classification of extended credit facilities according to the borrower reveals that the boost in the credit facilities during the first seven months of 2014 was mainly due to the credit facilities benefiting the private sector (resident), which increased by almost JD 50 million, thus standing at JD 17.184 billion by the end of July 2014, while facilities granted to the central government, witnessed a decline of JD 37.5 million during the first seven months of 2014, standing at JD 1.084 billion according to the latest figures issued by the CBJ. Credit Facilities According to Economic Activity - July 2014 Financial Services 2.2% Other 23.5% Agriculture 1.5% Mining 0.8% Industry 14.6% Public Services and Utilities 10.7% General Trade 19.3% Tourism, Hotels and Restaurants 2.7% Transportation Services 3.0% Construction 21.7% 7 In parallel to the growth in total credit facilities, extended credit facilities targeting the tourism sector has followed suit recording a percentage increase of 4.4% by the end of July 2014, thus standing at JD 525.4 million compared to JD 503.5 million in 2013. In terms
of market share, credit facilities extended to the tourism sector correspond to a 2.75% share out of total credit facilities during the first seven months of 2014. JD Million YEAR 2009 2010 2011 2012 July 2014 Chg. % Chg. Agriculture 231.2 211.8 229.2 254.9 288.8 53.1 22.5% Mining 60.2 55.4 79.5 73.0 162.3-1.8-1.1% Industry 1,631.2 1,929.0 2,297.2 2,515.7 2,787.3 137.7 5.2% General Trade 3,195.4 3,594.0 3,779.0 3,754.9 3,682.5-254.8-6.5% Construction 2,582.5 3,167.7 3463.6 3,682.6 4,140.2 53.8 1.3% Transportation Services 453.1 484.1 531.6 554.5 577.0 40.3 7.5% Tourism, Hotels & Restaurants 427.9 457.3 493.7 505.6 525.4 21.9 4.4% Public Services & Utilities 909.5 1,050.0 1,135.3 2,172.0 2,036.4-136.2-6.3% Financial Services 434.1 408.3 430.5 486.1 423.4-85.4-16.8% Buying Stocks 487.0 435.6 413.7 322.5 294.5 34.5 17.6% Other 2,905.1 2,658.2 2,997.9 3,508.0 4,198.4 313.3 8.9% Total Credit Facilities 13,317.2 14,451.4 15,851.2 17,829.8 19,116.2 176.5 0.98% The largest share of credit facilities during the first seven months of 2012 was attributed to general trade as it locked down a share of 19.3% of total facilities followed by the construction sector with a share of 21.7%. The percentage growth in credit facilities targeting the largest two sectors in terms of their share of credit facilities, namely, general trade and construction are shown in the following graph along with growth rates associated with credit facilities targeting the tourism, hotels & restaurants sector. Growth Rates in Credit Facilities 25% 22.7% 20% 15% 10% 5% 0% -5% -10% 12.5% 9.3% 12.5% 11.0% 9.7% 8.5% 6.3% 6.2% 4.4% 8.0% 6.9% 2.4% 5.1% 4.9% 1.3% 2010 2011 2012 2013 H1/2014-0.6% -0.4% 0.9% -6.5% General Trade Construction Tourism, Hotels and Restaurants Total Credit Facilities 8
3. Jordan National Tourism Strategy 2011-2015 National Tourism Strategy 2004-2010 The National Tourism Strategy (NTS) 2011-2015 builds upon the significant achievements made since the launch of the original strategy (2004-2010), during which Jordan firmly strengthened its reputation as a destination of choice for both visitor and investors. Managing this success in to the future now poses new challenges for all stakeholders in the industry in terms of sustaining momentum and level required to underpin long-term sustainable growth. It has been agrees that the new National Tourism Strategy 2011-2015 will be private sector- led with public sector partnership, and the strategy response to the new realities of the industry at the local and global levels. Defined implementation activities and ambitious growth targets have been agreed on, and the crosscutting themes of competitiveness and sustainability are integrated to maximize the contribution tourism can make to economic and social development in Jordan, while contributing to business success and sustaining natural and cultural assets. The first National Tourism Strategy was developed through a publicprivate partnership and covered the period 2004-2010. It was based on four main pillars and helped guide the development and growth of the sector in each of these areas. Highlights for the coming five years As a result marketing and promotion efforts have been strengthened, the quality and variety of tourism products and services have improved, professional human resource practices have been more widely adopted across the industry, and important steps have been taken in creating a regulatory environment that is more conducive to tourism development. Collectively this led to great economic advantages, and today tourism accounted for over 12.4% of Jordan s GDP in 2010. The changed competitive environment in international tourism of recent years has indicated that Jordan s strategy for the coming five years must pace a stronger emphasis on raising the overall competitiveness of the industry by focusing on: 9 Delivering planned improvements and enhancements in the enabling environment that will empower the industry, deepen stakeholder partnerships and provide for world class regulation.
Raising overall tourism revenue by increasing the average length of stay of international visitors (particularly higher spend tourists), increase arrivals in the off-season, and stimulate the domestic tourism market. Reducing the impact of seasonality further by increasing tourist volumes during the shoulder and off-peak months. Better marketing and promotion of Jordan as a destination through further strengthening of the branding message and utilizing new distribution channels, with a priority on e-marking, social networking and web-based platforms. Specifically- targeted programs of work designed to build great visitor experience there by creating a competitive advantage for Jordan. Building on the excellent base already established to create and retain the best human resources in the region in order to drive industry success at every level. The strategic challenges facing Jordan s tourism development are undoubtedly complex, involving multiple supply and demand factors. Yet, in facing these challenges, the iconic quality of the Kingdom s tourism resources and the natural hospitality of Jordanians provide fundamental core strengths which can be used to effectively differentiate Jordan in unique ways, as well as to support its positioning and branding as a distinctive world-class destination. The National Tourism Strategy for Jordan 2011-2015 The new National Tourism Strategy 2011-2015 is designed to build on the solid foundation established since 2004 and provide the necessary direction for stakeholders in tourism by presenting a clear path forward to underpin future growth. Its development and implementation will be guided by a vision and a mission that are adapted from those within the first NTS in order to focus attention on the need to further develop a distinctive, unique and competitive tourism industry. 10
The NTS 2011-2015 retains the four-pillar framework, which has proven so successful, although these pillars and the related strategic objectives have been slightly amended to ensure that the need for increased competitiveness is at the forefront of all activities. The range of measures identified under the four pillars, when implemented, will significantly contribute to both securing the achievements seen to date in Jordan s tourism sector and to raising the overall competitiveness of the industry to maintain growth and underpin long-term sustainability Strategic Vision for 2011-2015 Strategic Mission for 2011-2015 Jordan will be a distinctive destination offering diverse, year-round visitor experiences that will enrich the lives of Jordanian s and their guests. Plan and implement the changes and actions necessary to: - Raise the overall competitiveness of Jordan s tourism industry; - Enhance the visitor experience through innovation in product development; - Better position and promote the tourism offering to global markets so as attract higher yield customers throughout the year; - Create a regulatory and operating environment which drives better business performance and releases the full energy of the private sector as the engine of growth. Strategic Goal Increase tourism receipts to 4.2 billion in 2015. 11
4. Sector Performance Indicators Tourism Receipts It is of great importance to determine the latest developments in the tourism sector so as to present a clearer picture of the tourism sector s performance. Particularly, the tourism industry in Jordan has been exposed to a number of external factors which affected the overall performance of the sector; such factors include the recent political instability in the region post the Arab Spring which came shortly after the global financial crisis that had its toll on global economies. The following graph depicts the value of tourism receipts over the past 5 year period. Tourism Receipts JD million 3500 3000 2884 2923 2500 2000 2067 2384 2130 1500 1000 500 0 2009 2010 2011 2012 2013 tourism receipts reached JD2.9 billion by the end of 2013 As can be seen from the above graph, since end of year 2009, tourism receipts have increased from JD2,067 million to JD2,384 million thus recording an uplift of 15% shown during year 2010. It is to be noted that the only decline in tourism receipts occurred during year 2011, whereby tourism receipts declined by almost 11%, which is very likely to be attributed to the (Arab Spring) revolutions and the termoil unfolding in the countries involved which bursted in 2011. Moreover, year 2012 witnessed the most significant surge over the last 5 years. As such, tourism receipts elevated by 35% reaching JD2,884 million as the influx of tourists increased due to the fact that neighboring countries such as Syria and Egypt had their share of internal political conflict which resulted in a shift among tourists towards Jordan for the advantage of having the most stable and secure environment in the region. Tourism receipts during year 2013 maintained their high levels after further increasing by 1.3% to reach JD2,923 million. 12
Statistics obtained from the Ministry of Tourism and Antiquities categorize tourism receipts according to country groups, namely, Jordanians residing abroad, Arab countries, and foreign countries Changes in tourism receipts associated with these country groups during the period of study are presented in the following graph: % Change in Tourism Reciepts According to Nationality Group 100% 80% 82.3% 60% 40% 20% 0% -20% -40% 25.7% 38.9% 11.7% 8.0% 14.8% 5.4% 12.6% -2.7% 2010 2011-16.6% 2012 2013 0.6% -31.2% Jordanians Residing Abroad Arabs (including Gulf) Foreigners In 2010, receipts generated by Aforementioned groups have all witnessed an increase of 25.7%, 14.8% and 12.6% respectively. Tourism receipts sharply increased during 2012 recording a 35% uplift in comparison to year 2011 figures The insignificant decline witnessed during 2011 was not able to hold a long lasting effect as tourism receipts in 2012 were on the upside once again, witnessing a notable increase of 35% compared to the year before. As such, Jordanians residing abroad contribution in terms of tourism receipts recorded the highest increase standing at 82.3% during 2012, followed by Arabs with an increase of almost 39%. Meanwhile, receipts from foreigners witnessed the lowest increase recording a growth of only 5.4% during the same period. Moreover, and during 2013, most receipts namely those generated from foreigners as well as Jordanians residing abroad recorded lower growth rates standing at 0.6% and 8% respectively, while receipts generated by Arabs recorded a minimal decline of 2.7% in comparison to year 2012 figures. 13
JD Million 1000 900 800 700 600 500 400 300 200 100 0 662.31 588 455.74 831 897.8 Tourism Receipts By Country Groups 599.63 585.43 511.8 449.03 389.2 361.6 384.8 262.63 835.8 780 Receipts generated by foreigners have increased by 49% during the period extended from 2009 until 2013, while receipts from Jordanians residing abroad improved by almost 53%, followed by Arabs recording a growth of 52% while visitors from Arab Gulf Countries recorded a modest decline in terms of tourism receipts generated that stood at 1.1% during the same period. Arab countries (including the Gulf States) contribute the most to total tourism receipts; however, such contribution has dropped from a high of 48.5% in 2009 to almost 40% as per the end of 2013. On the other hand, tourism receipts by Jordanians residing abroad maintained a share of around 30% of total receipts over the past 5 year period. In the same context, receipts generated by foreigners held almost 28% of total tourism receipts during the same period. 578 726.59 855.2 860.5 811.66 Jordanians Residing Arab Gulf Countries Arabs Foreigners Abroad 2009 2010 2011 2012 2013 Tourist Arrivals The number of arrivals showed a fluctuating trend over the past 5 years as it stood at nearly 8 million in 2010 compared to 7.1 million back in 2009 recording a growth of 12.6% However, this uptrend soon lost momentum whereby the total number of arrivals has dropped during year 2011 reaching 6.8 million. More recently, statistics for 2012 and 2013 show further drop in number of tourists arriving to Jordan recorded at 6.3 million and 5.4 million people respectively. During 2011 and amid the spread of the Arab Spring and the rising of political tensions in a number of Arab countries, the drop in tourism receipts was mainly attributed to the decline in the receipts of both Arabs and Jordanians residing abroad categories. Receipts attributed to the former group dropped by 17%, while the latter dropped by 31%. Meanwhile, receipts associated with foreigners were on the rise adding 11.7%. 14
Following an increase of 14% in total number of arrivals in 2010, last year witnessed a decline of almost 15% as the number of arrivals stood at 5.4 million compared to 6.3 million recorded by the end of 2012. Total Number of Arrivals Tourists (Overnight visiors) Total Number of Tourist Arrivals Overnight visitors represent the majority of tourists with a share of 60% of total arrivals 9 8 7 6 Same Day Visitors 7.1 8.1 6.8 6.3 5.4 Millions 5 4 3 2 3.8 3.3 4.2 3.9 4.0 2.9 4.2 2.2 3.9 1.4 1-2009 2010 2011 2012 2013 Although the number of overnight visitors has increased by 10.5% during 2010, a decline of almost 5% was recorded in the year to follow. Furthermore, and during 2012, the number of overnight visitors gained momentum to reach the levels recorded during 2010, whereby the number of overnight visitors regained the 5% lost during 2011. As for year 2013, overnight visitors numbers retracted to reach 3.9 million compared to 4.2 million recorded by the end of 2012. It is to be noted that numbers of same day visitors maintained a downward trend since end of year 2010 whereby 3.9 million people were recorded as same day visitors to be reduced to 2.9 million by the end of 2011 and further shedding 24% during 2012. Additionally, same day visitors recorded their lowest numbers during year 2013 whereby numbers have dropped from a high of 3.9 million witnessed in 2010 to 1.4 million as of end of year 2013. Moreover, overnight visitors contribute on average to about 60% of total number of arrivals while same day visitors contribute on average to the remainder of 40%. The former type of visitors are more likely to have higher spending during their relatively longer visits compared to the same day visitors, especially in terms of accommodation and thus contribute to a higher occupancy rate and higher tourism receipts. 15
Arrivals during the years 2009, 2010, 2011, 2012 and 2013 are distributed according to six groups as presented in the following table: Nationality 2009 2010 2011 2012 2013 Change in 2013 Africa 15,042 15,928 18,542 22,807 23470 2.91% America 223,955 250,246 216,890 226,374 215070-4.99% Asia 218,294 274,724 284,012 284,223 287743 1.24% Europe 924,191 1,117,015 897,387 767,148 671599-12.46% Arabs 4,834,879 5,471,358 4,405,853 3,933,525 3083848-21.60% Jordanians Residing Abroad 868,192 949,113 989,754 1,080,174 1107187 2.50% Total 7,084,553 8,078,384 6,812,438 6,314,251 5,388,917-14.65% Arab visitors remain to hold the highest numbers in terms of tourists coming to Jordan Arab visitors constitute - by far - the largest share of total arrivals to the Kingdom, as they represented 57% of total visitors during 2013, followed by Jordanians living abroad (21%) and Europeans (13%), while visitors from all other countries constitute the remaining (9%). Arrivals By Nationality Relative Importance 2012 Arrivals By Nationality Relative Importance 2013 Jordanians Residing Abroad 17% Africa 0% America 4% Asia 5% Europe 12% Jordanians Residing Abroad 21% Africa 0% America 4% Asia 5% Europe 12% Arabs 62% Arabs 57% It is noted that visitors from most nationalities have decreased in number during 2013. However, it is shown that visitors from Africa, Asia as well as Jordanians Residing Abroad have increased by 2.9%, 1.2% and 2.5% respectively. The drop in total number of arrivals recorded last year is mainly attributed to the 21.6% drop in Arab arrivals. 16
Number of Arrivals by Nationality 4.5 4.0 3.5 3.0 57% 70% 60% 50% Millions 2.5 2.0 21% 40% 30% 1.5 1.0 0.5 0% 4% 5% 12% 20% 10% 0.0 Africa America Asia Europe Arabs Jordanians Residing Abroad 0% 2012 2013 Relative Importance 2013 As for the previous year namely 2012, most arrivals of the various nationalities have increased except for visitors from Europe and the Arab world as these two nationalities recorded a decline of 15% and 11% respectively. Having said that, the number arrivals to Jordan during 2011 stood at 6.8 million compared to 8.1 million recorded back in 2010, although representing a drop of 16% over 2010, the following years maintained a somehow steady average of arrivals into the kingdom. Tourist Sites Jordan has a rich archaeological heritage and a treasure of antiquities with which is considered to be one of the most important attractions in the world. Having such remarkable historical and religious sites, the kingdom is considered to be a hot spot for visitors from around the world. Along with the kingdom s desirable climate and cultural resources, Jordan is a destination with many iconic tourist attractions, such as Petra, Wadi Rum, Jarash, Ajlun and Madaba, just to name a few. The Ministry of Tourism and Antiquities makes reference to tourist numbers arriving at the main tourist attractions as presented in this section. The number of visitors to main tourist sites in Jordan has dropped by a mere 2% during 2013 compared to year 2012 whereas total visitors to main sites reached 2.39 million by the end of 2013 compared to 2.44 million recorded in 2012. 17
Location Jordanian Foreign total 2010 2011 % Chg. Number of Visitors to Main Touristic Sites Jordanian Foreign total % Chg. 2012 Jordanian Foreign total % Chg. 2013 Jordanian Foreign total Petra 99,067 876,218 975,285 27% 121,346 508,518 629,864-35% 113,856 522,290 636,146 1% 110,372 498,672 609,044-4% Jarash 58,141 354,508 412,649 21% 62,200 179,700 241,900-41% 66,200 162,150 228,350-6% 72,447 156,103 228,550 0% Um Qais 43,070 82,290 125,360 3% 155,795 46,098 201,893 61% 162,825 37,567 200,392-1% 195,125 36,368 231,493 16% Mount Nebo 1,566 393,427 394,993 30% 1,381 206,440 207,821-47% 794 188,394 189,188-9% 1,574 171,636 173,210-8% Ajlun 69,743 122,523 192,266 23% 91,754 64,143 155,897-19% 114,181 69,936 184,117 18% 142,066 65,384 207,450 13% Madaba (Map) 1,740 397,317 399,057 45% 920 216,598 217,518-45% 829 211,721 212,550-2% 1,602 205,419 207,021-3% Wadi Rum 19,842 265,724 285,566 67% 9,778 124,184 133,962-53% 22,259 118,817 141,076 5% 25,364 84,779 110,143-22% Karak 14,599 171,671 186,270 17% 14,950 82,600 97,550-48% 11,300 56,006 67,306-31% 6,100 24,691 30,791-54% Maghtas 10,743 149,930 160,673 20% 9,514 88,106 97,620-39% 8,762 79,900 88,662-9% 9,953 76,386 86,339-3% Dead Sea 7,072 9,801 16,873-6% 8,057 7,554 15,611-7% 8,236 8,264 16,500 6% 6,497 7,065 13,562-18% madaba visit center Um Aljmal 648 1,117 1,765-37% 770 1,147 1,917 9% 406 536 942-51% 1,400 1,042 2,442 159% Shobak 3,729 31,489 35,218 19% 3,379 17,681 21,060-40% 1,622 10,644 12,266-42% 1,983 11,479 13,462 10% Afra 26,131 2,368 28,499-28% 32,122 4,431 36,553 28% 40,765 4,926 45,691 25% 35,464 801 36,265-21% Folklore Museum 46,850 115,600 162,450 9% 51,100 68,250 119,350-27% 64,145 60,050 124,195 4% 78,465 66,200 144,665 16% Jordan's Museum 26,650 233,600 260,250 70% 43,850 133,400 177,250-32% 48,850 118,900 167,750-5% 54,350 110,050 164,400-2% Aqaba Museum 4,139 8,650 12,789-27% 4,030 6,497 10,527-18% 2,853 4,231 7,084-33% 1,718 3,326 5,044-29% Madaba Museum 1,600 21,900 23,500-3% 1,950 11,350 13,300-43% 2,650 13,000 15,650 18% 2,475 16,100 18,575 19% Salt Museum 1,468 956 2,424 54% 1,156 621 1,777-27% 733 414 1,147-35% 293 345 638-44% Mar Elyas 9,960 5,922 15,882-8% 8,605 6,011 14,616-8% 6,054 6,682 12,736-13% 9,273 4,120 13,393 5% Total 447,715 3,472,678 3,920,393 28% 623,402 1,883,575 2,506,977-36% 677,740 1,766,280 2,444,020-3% 757,370 1,632,183 2,389,553-2% % Chg. September 2014 The following table shows the number of visitors to main touristic sites in Jordan during the past four years 957 227,667 228,624 32% 745 110,246 110,991-51% 420 91,852 92,272-17% 849 92,217 93,066 1% 18
The most visited attractions/sites in Jordan, namely, Petra, Jarash, Um Qais, Mount Nebo and Madaba (map) together contribute to approximately 61% of the total number of visitors to tourist sites in 2013. The following charts illustrate the relative importance for tourist sites in Jordan for years 2012 and 2013: Number of Tourists to Main Tourist Attractions Relative Importance - 2012 Number of Tourists to Main Tourist Attractions Relative Importance - 2013 Other 40.0% Other 39.3% Um Qais 8.2% Um Qais 9.7% Madaba (Map) 8.7% Mount Nebo 7.7% Jarash 9.3% Petra 26.0% Madaba (Map) 8.7% Mount Nebo 7.2% Jarash 9.6% Petra 25.5% The relatively higher share of Mount Nebo and Madaba in terms of visitors, with each contributing to approximately 8% to total visitors may well be related to their religious significance especially amongst the Christian community which represents the majority of visitors from America and Europe visiting these sites. On the other hand, Jarash, one of the major and most beautiful cities of the Roman Empire, contribute to a 9% share of Jordan s visitors. The vast majority of tourists arriving at these sites were foreign visitors. In fact, their share of total visitors accounts for almost 70% of total visitors while Jordanian visitors account for the remaining 30%. The following charts present the relative importance of visitors to main sites in terms of Jordanian and Foreigners for the years 2012 and 2013: 19
Visitors to Main Tourist Sites Relative Importance 2012 Visitors to main Tourist Sites Relative Importance 2013 Jordanians 28% Jordanians 32% Foreigners represent around 70% of visitors to main tourist attractions Foreigners 72% Foreigners 68% Occupancy Rates The occupancy rate for Jordan that takes into account the total number of rooms and beds in Jordan, the room turnover ratio has dropped since year 2010 constantly to record 12.5, 15.3 and 13.3 for years 2011, 2012 and 2013 respectively after a sharp increase witnessed during 2010 in comparison to 2009 that elevated from 13.3 to 16.4. 2009 2010 2011 2012 2013 No. of Rooms 215,520 195,977 221,492 213,789 229,626 No. of Beds 440,548 364,099 441,594 427,241 456,328 Room Turnover Ratio 13.3 x 16.4 x 12.5 x 15.3 x 13.3 x 80% Overall Occupancy Rate in Jordan 70% 60% 50% 45.8% 43.7% 41.1% 50.30% 43.80% 40% 30% 20% 2009 2010 2011 2012 2013 20
Typical with the tourism industry, tourism in Jordan is more of a seasonal industry as depicted in the following graph showing occupancy rate in Jordan on monthly basis: Occupancy Rate - Monthly Basis Highest occupancy rates are recorded in April, August and October 70% 65% 60% 55% 50% 45% 40% 35% 30% 25% 20% 2010 2011 2012 2013 The occupancy rate in Jordan is usually the highest during April, August and October. As noted from the above graph, occupancy rates build up during the first four months of the year reaching their peak in April, which traditionally has the highest occupancy rate. On the other hand, the lowest occupancy rates are largely those recorded during January, February and December. Another informative indicator is related to the number of nights spent according to the city destination within Jordan. Such data is shown in the following table: 2012 2013 % Change Amman 4,010,442 3,029,093-24% Aqaba 959,338 1,093,575 14% Dead Sea 460,955 486,042 5% Petra 268,589 263,133-2% Madaba 34,799 23,148-33% Irbid 17,617 12,564-29% 21 The capital city of Amman has the highest number of nights spent. This is largely attributed to the fact the kingdom s major airport is located in Amman, which is host to a large number of the well-known hotel chains, while most of other governorates lack upper scale services and accommodation.
Employment in the Sector However, Amman witnessed a drop of 24% in terms of the number of nights spent in 2013 relative to 2012, yet the most notable decline was recorded in Madaba. The number of nights spent in Madaba dropped by 33% over the past year as well as the city of Irbid which recorded a drop of 29%. On the other hand, a 14% increase in nights spent was recorded in the city of Aqaba along with a 5% increase in the nights spent at the Dead Sea. The Tourism sector is a host to approximately 48,000 employees as per the end of 2013, of which a total of 39,366 are Jordanian employees and 8,785 are non-jordanians. Worth mentioning is that non-jordanian employees constitute around 18% of total employment in the sector, mainly concentrated in the tourist restaurant segment, whereby they contribute to almost 33% of total employment in that segment in particular. During year 2013, Jordanian employees formed 88.6% of the hotels employment -representing 16,226 employees out of 18,307 working in this sector- due to training programs provided by hotel institutions, in addition to privileges provided for the employees as well as having a specific stream for the hotels and hospitality industry within the Jordanian Secondary Education Diploma (Tawjihi). 22
Employment in The Tourism Sector - 2013 Jordanian Non- Jordanian Total share Hotels 16,226 2,081 18,307 41.22% Travel Agencies 4,602 181 4,783 11.69% Tourist Restaurant 13,111 6,401 19,512 33.31% Car Rental Offices 1,460 16 1,476 3.71% Tourist Shops 901 39 940 2.29% Tourist Guides 1,200 0 1,200 3.05% Horses Guides 713 0 713 1.81% Tourist Transportation 1,000 47 1,047 2.54% Diving Centers 34 14 48 0.09% Water Sports 119 6 125 0.30% Employment According to Activity Type Tourism Sector - 2013 Tourist Transportation 2% Hotels 38% Travel Agencies 10% Jordan s Tourism Sector employes over 48,000 workers Other Activities 6% Car Rental Offices 3% Tourist Restaurant 41% Employment in the tourism sector is rather concentrated within two segments, namely, tourist restaurants and hotels, as both segments are responsible for almost 79% of the sector s total employment by the end of 2013 as they collectively employ around 38 thousand employees. The following graph depicts growth rates in terms of employment figures in the tourism sector in accordance with each activity (segment type). 25,000 19% Employment in the Tourism Sector Latest Developments 2012 2013 20% 20,000 12% 15% 15,000 8% 10% 6% 10,000 5,000 1% -1% 2% 0% 5% 0% 0-5% 23
The most notable increase in terms of employment numbers has taken place within the Hotels and Tourist Transportation segments witnessing a growth of 18.7% and 11.5% respectively, whereby total employment in the tourism industry recorded a 9.6% over the past year as total employees reached 48,151 by the end of 2013 compared to 43,942 during the year before. 5. Sector Performance H1 2014 Tourism Receipts This section of the report shows the latest developments related to the tourism sector during the first half of 2014 in relation to tourism receipts, number of visitors (overnight visitors and same day visitors), occupancy rates and employment. Tourism receipts reached JD1.6 billion during the first half of 2014 1650 1600 1550 Tourism Receipts JD Million H1 2013-2014 1599.9 1500 1450 1400 1408.7 1350 1300 H1 2013 H1 2014 It is clear that the tourism industry began to improve during the first half of 2014, this is shown in the above graph as tourism receipts have increased by almost 14% reaching JD1599.9 million by the end of June 2014 compared to JD1408.7 million recorded during the same period of 2013. Moreover, the following graph represents tourism receipts by country groups over the first half of 2014: 24
Tourism Receipts By Country Groups JD Million 700 600 500 400 300 200 430.6 487.7 187.2 209.8 430.3 485.3 547.8 626.9 100 0 Jordanians Residing Arab Gulf Countries Foreigners Arabs Abroad H1 2013 H1 2014 Occupancy Rates As illustrated by the graph above, tourism receipts generated by the four main groups have increased over the first 6 months of 2014 in comparison to the same period of 2013. Mainly, the largest increase was recorded by Arabs (excluding GCC countries) as receipts generated by this group inclined by 14.4% by the end of the first half of 2014 compared to the same period of 2013, following that, tourism receipts generated by Jordanians residing abroad have also uplifted by 13.3% during the same period while those generated by foreigners and the Arab Gulf uplifted by 12.8% and 12% respectively. Post checking year 2014 s occupancy rates it was found that during the first half of 2014, overall occupancy rates in Jordan stood at 43.7% in contrast to 45.8% recorded during the same period of year 2013. 80% Overall Occupancy Rate in Jordan 70% 60% 50% 40% 30% 45.8% 43.7% 20% H1 2013 H1 2014 So as to shed more light on the overall occupancy rates in Jordan, the following chart exemplifies the overall occupancy rates on a monthly basis for the first half of 2014 in comparison to the same period of 2013: 25
Occupancy Rate - Monthly Basis 60% 56.4% 50% 49.3% 54.7% 50.4% 40% 34.6% 40.5% 44.4% 48.3% 42.2% 40.2% 30% 33.1% 34.2% 20% H1 2013 H1 2014 Employment in the Sector As previously explained, the occupancy rates in Jordan are usually the highest during April, this is clearly illustrated by the above graph, occupancy rates build up during the first four months of the year reaching their peak in April, which traditionally has the highest occupancy rate, while the lowest occupancy rates are those recorded during January and February. During the first half of 2014, Jordanian employees formed around 82% of the overall employment in the tourism sector, the main concentration of employees relies within the hotels industry as well as tourist restaurants, additionally the number of Jordanian employees within the mentioned two reached 16,393 and 12,847 respectively. The following chart illustrates the concentration of employees within the various tourism industries: Employment According to Activity Type Tourism Sector - H1 2014 Hotels 38% Travel Agencies 10% Other 12% Tourist Restaurant 40% As explained before, it is shown that 40% of employees working in the tourism sector held jobs at tourist restaurants while the second highest employment rate was recorded by the hotels industry that hosts 38% of total employees while 10% work within travel agencies. 26
Employment in The Tourism Sector - H1 2014 Jordanian Non-Jordanian Total share Hotels 16,393 2,103 18,496 41.53% Travel Agencies 4,786 102 4,888 12.13% Tourist Restaurant 12,847 6,157 19,004 32.55% Car Rental Offices 1,460 16 1,476 3.70% Tourist Shops 919 39 958 2.33% Tourist Guides 1,200 0 1,200 3.04% Horses Guides 713 0 713 1.81% Tourist Transportation 1,000 47 1,047 2.53% Diving Centers 34 14 48 0.09% Water Sports 119 6 125 0.30% Total 39,471 8,484 47,955 100% Tourist Arrivals Total Number of Arrivals Tourists (Overnight visitors) Same Day Visitors Total Number of Tourist Arrivals 3 3 2.7 2.7 Total number of arrivals increased Millions 2 2 1.9 2.0 by 3% during the first half of 2014 in comparison to the same period of 2013 1 1-0.7 0.7 H1 2013 H1 2014 Visitors during the first half of 2014 and their comparative 2013 figures are distributed according to the different nationalities as shown in the following table: Arrivals By Nationality H1 2014 Nationality H1 2013 H1 2014 % Change Africa 10,349 11,204 8% America 104,598 118,479 13% Asia 148,713 164,609 11% Europe 345,618 354,943 3% Arabs 1,525,573 1,498,471-2% Jordanians Residing Abroad 534,241 590,192 10% Total 2,669,092 2,737,898 3% 27
Arab visitors (including Gulf countries) constituted almost 55% of total visitors during the first half of 2014, followed by Jordanians living abroad (21.6%) and Europeans (13%), while visitors from all other countries constitute the remaining 10%. By looking at the previous table, the number of Arab visitors dropped by 2% during the first half of 2014, recording almost 27 thousand less arrivals compared to the same period of 2013. On the other hand, arrivals from all other nationalities have increased over the same period, led by the sharpest increase in American arrivals that stood at 13% followed by Asian arrivals with an increase of 11% as well as an 8% increase in arrivals from African countries while Jordanians residing abroad have increased by 10% during the first half of 2014. As such the following charts represent the relative importance of arrivals in terms of nationality for the first 6 months of years 2013 and 2014: Arrivals By Nationality Relative Importance H1 2013 Arrivals By Nationality Relative Importance H1 2014 Jordanians Residing Abroad 20% America, 4% Africa 0% Asia 6% Europe 13% Jordanians Residing Abroad 22% Africa 0% America 4% Asia 6% Europe, 13% Arabs 57% Arabs 55% As illustrated above, and with reference to the main concentration in terms of arrivals of different nationalities, it is clear that Arabs remain to have the highest concentration recording a share of 55% during the first half of 2014 in comparison to 57% recorded during the same period the year before. Following that, Jordanians Residing Abroad held a share of almost 22% during the same period while Europeans constituted 13% leaving Asia and the United States with shares of 6% and 4% respectively in terms of numbers of arrivals. 28
6. Financial Analysis Income Statement & Balance Sheet September 2014 In an attempt to provide an overview of the financial performance of the tourism industry, the following section of the report studies the performance of five listed companies that are representative of the hotel sector within the larger Jordanian tourism industry. Although our sample of five companies may not provide a broad and full representation of the tourism industry, it nevertheless, reflects the performance of an integral part of the industry and sheds light on its financial performance and its overall profitability. Also, the fact that the five companies representing our sample are listed on the ASE facilitates access to their financials, and hence, grants a necessary tool for conducting financial analysis on a sample of companies that share the same business nature and run similar operations. Our sample includes five listed companies representing the hotel industry on the ASE, which are the following: Zara Investment Holdings (ZARA), Mediterranean Tourism Investment (MDTR), Jordan Hotels and Tourism (JOHT), Arab International Hotels (AIHO) and Al- Dawliyah for Hotels & Malls (MALL). As a first step, we shed light on the income statements of the five listed companies. Therefore, sales revenues, cost of revenue, gross profits and gross profit margin are analyzed and compared. Code Sales Revenue Cost of Sales Gross Profit H1 2013 H1 2014 Growth H1 2013 H1 2014 Growth H1 2013 H1 2014 Growth ZARA 39,876,062 44,366,912 11.26% 29,289,976 31,285,007 6.81% 10,586,086 13,081,905 23.58% MDTR 9,493,942 9,676,001 1.92% 5,985,954 6,341,434 5.94% 3,507,988 3,334,567-4.94% JOHT 11,453,407 13,243,087 15.63% 8,175,328 8,798,940 7.63% 3,278,079 4,444,147 35.57% AIHO 5,544,379 6,029,770 8.75% 3,830,320 4,141,238 8.12% 1,714,059 1,888,532 10.18% MALL 8,495,773 8,634,468 1.63% 5,199,659 5,481,103 5.41% 3,296,114 3,153,365-4.33% Total 74,863,563 81,950,238 9.47% 52,481,237 56,047,722 6.80% 22,382,326 25,902,516 15.73% 29 Total sales revenues for the sample grew by 9.47% during the first half of 2014, thus reaching JD81.95 million compared to JD74.86 million recorded during the same period of 2013, while on the other hand; cost of revenue grew by 6.8% during the same period. Accordingly,
gross profit for the sample witnessed a growth of 15.73% in the first half of 2014, standing at JD25.4 million compared to JD22.4 million during the same period of 2013. The contribution of each company to the overall sector s gross profit varies with ZARA being at the top of the list capturing almost (50.5%) followed by JOHT (17.2%), while at the bottom of the list comes MDTR (12.9%), MALL (12.2%) and AIHO (7.3%). 80 Sales Revenue vs. Cost of Sales (Gross Profit) JD Millions 70 60 50 40 30 20 10 Cost of Sales - ZARA MDTR JOHT AIHO MALL The sample s overall gross profit margin was recorded at 31.61% by the end of June 2014 compared to a gross profit margin of 29.9% during the same period of 2013. In particular, MALL recorded the highest gross profit margin among the sample companies as it stood at 36.52%, while the lowest margin was associated with ZARA at 29.49%. 40% 35% 30% 25% 20% 15% 10% 5% 0% 29.5% 26.5% Gross Profit Margin H1 2013 36.9% 34.5% 33.6% 28.6% 30.9% 31.3% 38.8% 36.5% ZARA MDTR JOHT AIHO MALL Net operating profits for our sample surged to JD9.45 million by the end of the first half of 2014 compared to JD6.15 million recorded during the same period of last year. Meanwhile, Operating expenses have recorded an incline of almost 1.4% as they were recorded at JD16.5 million compared to JD16.2 million during the first half of last year. 30
Again, ZARA was on top of the list in terms of net operating profits among the sample s companies recording JD3.01 million during the first half of 2014 compared to JD599 thousand recorded during the same period of last year. Code Operating Expenses Net Operating Profits H1 2013 H1 2014 Growth H1 2013 H1 2014 Growth ZARA 9,987,208 10,070,724 0.84% 598,878 3,011,181 402.80% MDTR 1,399,740 1,453,052 3.81% 2,108,248 1,881,515-10.75% JOHT 2,354,624 2,479,277 5.29% 923,455 1,964,870 112.77% AIHO 1,307,833 1,275,257-2.49% 406,226 613,275 50.97% MALL 1,178,229 1,175,913-0.20% 2,117,885 1,977,452-6.63% Total 16,227,634 16,454,223 1.40% 6,154,692 9,448,293 53.51% Overall net profits for our sample surged by 53.5% standing at JD9.45 million by the end of June 2014, up from JD6.15 million recorded during the same period of 2013. All companies within the sample have witnessed a growth in their net profits, however, most notable, net profits for ZARA have surged to JD3.01 million accumulating a growth of more than 400% and contributing 31.9% to overall net profits for the sample. Similarly, net profits for JOHT have witnessed a growth of 113% during the same period of comparison, however constituting only 20.1% of overall net profits for the sample. 45% 40% 35% 30% Net Profit Margin H1 2013 H1 2014 39.2% 25% 20% 15% 19.7% 16.6% 12.8% 19.8% 21.4% 19.6% 10% 5% 0% 4.1% 6.9% 0.2% ZARA MDTR JOHT AIHO MALL 31
Financial Indicators Profitability Indicators Looking at the sector s profitability ratios shown below, net profit margin for the sample was recorded at 11.2% by the end of June 2014 up from 7.6% recorded during the same period of last year. Due to the seasonality of the hotel industry, semiannual results are not considered reliable to calculate the return on assets (ROA) and return on equity (ROE). Therefore, ROA & ROE are compared for the years 2012 and 2013 as shown in the following table: Code Net Profit Margin ROA ROE H1 2013 H1 2014 2012 2013 2012 2013 ZARA 0.21% 4.15% 0.43% -0.49% 0.68% -0.75% MDTR 19.68% 16.65% 4.45% 5.61% 4.68% 5.95% JOHT 6.86% 12.80% 4.85% 3.19% 6.72% 4.39% AIHO 19.83% 39.15% 3.23% 2.35% 4.07% 2.93% MALL 21.44% 19.63% 4.88% 4.67% 5.41% 5.14% TOTAL 7.56% 11.23% 2.19% 1.59% 3.00% 2.12% Liquidity Indicators As shown in the above table, both ROA & ROE have dropped during 2013 relative to 2012 as they were recorded at 1.6% and 2.1% compared to 2.2% and 3%, respectively. The sector s current ratio has emained constant during H1 2014 as it was recorded at 1.1x compared to 1.09x in 2013, this is mainly due to the relatively similar decline in the sector s current assets compared to the decline in current liabilities. Similarly, the sector s average total assets turnover stood at 30% in 2013 compared to 30.1% in 2012, also due to the matched decline that sales and average assets registered for the year 2013 at (2%). Code Current Ratio Total Assets Turnover H1 2013 H1 2014 2012 2013 ZARA 1.23 1.20 30.7% 30.4% MDTR 2.57 2.56 32.6% 34.9% JOHT 0.44 0.57 58.2% 60.1% AIHO 1.10 0.96 15.2% 13.7% MALL 0.55 0.68 26.3% 26.4% TOTAL 1.09 1.10 30.0% 30.1% 32
Financial Leverage Indicators Debt to equity ratio for the sector stood at 27.8% by the end of June 2014, representing a decline of 4.7% from the ratio of 32.5% recorded in the same period of 2013. This decrease was the result of a decline of over 14% in total liabilities, while shareholders equity rising by a mere 0.5%. Total assets dropped by a 2.9% during the first six months of 2014 compared to the slight decrease of 0.5% in total shareholders equity. As such the equity multiplier representing the entire sector dropped to 1.33x in H1 2014 compared to 1.38x in the first half of 2013. Code Debt to Equity Ratio Equity Multiplier H1 2013 H1 2014 H1 2013 H1 2014 ZARA 46.62% 39.17% 1.59 1.51 MDTR 6.93% 6.36% 1.07 1.06 JOHT 42.95% 35.96% 1.43 1.36 AIHO 25.67% 23.79% 1.26 1.24 MALL 14.51% 13.13% 1.15 1.13 TOTAL 32.51% 27.79% 1.38 1.33 Stock Performance Indicators Market capitalization for the sector reached JD342.5 million by the end of June 2014, which is 0.7% lower than the JD345 million recorded by the end of 2013. Code Closing Prices - JDs Outstanding Shares Market Capitalization 2013 H1 2014 2013 H1 2014 2013 H1 2014 ZARA 0.54 0.62 148,256,589 148,256,589 80,058,558 91,919,085 MDTR 2.35 2.22 45,000,000 45,000,000 105,750,000 99,900,000 JOHT 5.61 5.51 10,000,000 10,000,000 56,100,000 55,100,000 AIHO 1.90 1.61 32,000,000 32,000,000 60,800,000 51,520,000 MALL 0.98 1.02 43,200,000 43,200,000 42,336,000 44,064,000 33