Morocco - Tourism

• In recent years Morocco has benefited from its location which makes it feasible for low cost carriers to operate and makes an attractive destination for city breaks.

• 6.5 million tourists visited Morocco in 2006, compared to 5.9 million in 2005 and 4.3 million in 2001.

• 3m were international tourists, 3.5m were Moroccans resident abroad.

• The government’s Vision 2010 strategy aims to raise the number of tourists to 10m (including 7m international tourists) over the next four years.

• Overnights in Moroccan hotels increased by 7% and the occupancy rate saw a 2% increase over the previous year. Non-resident overnights grew by 9%.

• The largest percentage increase in overnights was for the UK market which grew by 40%.

• On a national level, overnights in 2006 grew by 30% over 2005. • Over the course of the year 2006, 8.5 million passengers

transited through Morocco’s airports. This represents a 1.33 million passenger increase over the previous year.

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Morocco – Major Developments and Development Trends

• Morocco has a rich tradition of hospitality, culture, breathtaking landscapes and over 3,400 kilometres of coastline that make the country one of the most diverse tourist destinations in the world. However, much of Morocco’s visitor-drawing potential has yet to be realised, and to this end the government has launched an aggressive series of plans and implemented legislative changes that should help fulfill the country’s tourism ability.

• An agreement between the government and the employer’s union (CGEM) under the title ‘Tourism: vision, challenge, determination’, outlines the objective of attracting ten million tourists by 2010.

• In order to cater for this growth, Morocco’s tourism infrastructure is being dramatically improved. However, Morocco is targeting the middle to upper tourism bracket, and aims to avoid mass tourism on a scale that is likely to damage the country’s image and resources.

• The government has particularly emphasized the need to diversify seaside tourism in order to compete with similar resorts in the Mediterranean and the Red Sea.

• This growth is in-line with ambitious plans to increase Morocco’s current capacity of 80,000 hotel rooms to 240,000 rooms within a decade – tripling capacity. The demand for additional accommodation is expected to come particularly from France and the rest of Europe.

• The government has implemented plans to create a new seaside resort in Taghazout, near Agadir, as well as two new seaside zones to the far south near Tan Tan, with a capacity of 10,000 and 15,000 rooms respectively. New resorts near Casablanca have also been identified at El Haouzia, and Diabet near Essaouira.

• The hospitality industry is also gearing up to ensure that service levels are maintained as greater numbers of tourists arrive in Morocco. More than 75,000 young Moroccans will undergo formal training in the hospitality sector in the run up to 2010. Almost 30 percent of this number have already begun tourism related courses.

• Last year UAE based companies announced £10bn of investment in tourism and infrastructure projects in Marrakech over the next 3 years.• Marrakech is expected to increase hotel room supply (currently around 32,000) by 7,000 by 2010 with 54 new hotel projects announced or

underway.• In December 2005 Morocco became the first non-European country to sign an Open Sky agreement with the European Union and this policy

is expected to open up the aviation sector to yet more foreign and new domestic operators.• The number of foreign nationals buying second homes are increasing rapidly.

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Marrakech Population

• Marrakech is one of the four imperial cities of Morocco, alongside Fez, Meknes and Rabat. The city is important because of its geographical position, namely where the north and south of the country meet, and where a number of major highways intersect.

• An oasis on the edge of a desert, it is at the same time located at the foothills of the majestic snow-capped Atlas Mountains, which are just 20 kilometres away.

• Absorbing influences from France, Spain and the rest of the Arab World, Marrakech has developed as one of Morocco’s most diverse cities, attracting artists and writers from around the world.

• The city itself has become one of Morocco’s greatest tourist draws. Originally built in 1070 A.D. and famed for its palaces, gardens, open markets and festivals.

• Marrakech is part of the Marrakech-Tensift-El Haouz region, which is one of the 16 regions of Morocco. The population of this region is estimated to be approximately 3.1 million, 1.2m living in urban areas and 1.9m in rural areas.

• The region is a major agricultural producer, with tourism, mining and textiles forming the major industries.

• The official number of residents of the city is one million. However, the population including itinerant and seasonal workforce in tourism and construction is estimated to be around two million. The largest part of the population of Marrakech is of Berber origin. There is a large international community with estimates being approximately 5,000 permanent residents mostly of European origin (70% of which are French) with approximately the same number of second home temporarily resident with a similar majority of French people. However, research into down payment nationalities in the new developments under construction show a decreased dominance with a massive increase in German, Italian, English and Swiss nationals acquiring property. These new purchases will more than double the European second home community in the next 12 months. A new phenomenon is the rise in Arab second home owners primarily from the UAE which is being driven by the entry into the development market place of UAE developers who are apparently diversifying away from Dubai towards Morocco.

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Marrakech Tourism

• Marrakech is a strong leisure destination, capturing both the long-weekend leisure traveller and the leisure traveller touring Morocco for one or two weeks.

• An estimated 2 million tourists visited Marrakech last year and 3.5 million are expected by 2010.

• Hotel guests totalled 1.5 million and overnight stays in hotels reached 5.7 million

• Marrakech attracts visitors year round and is becoming a popular MICE destination.

• There was a 14% increase in Hotel Beds for the city of Marrakesh Over the previous year (2005).

• The occupancy figures for Marrakesh hotels was 68% in 2006.• Marrakesh hotels saw a 16% increase yielding 57,000 additional

overnights.• In 2006 Marrakesh Airport saw a 26% increase in passenger

movements over the previous year.

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Marrakech – Major Developments

• Marrakech is rapidly becoming one of the world’s great tourist destinations – an international luxury resort destination with global recognition - benefiting from being within approximately three to four hours’ flying time of most European cities.

• Marrakech offers 20 percent of the total number of hotel rooms in the country and 26 percent of arrivals stay in the city. With the expansion of tourism now in full flow, Marrakech is looking forward to receiving three and half million tourists by the year 2010.

• DHs 79 billion were invested in tourism projects in 2006 and more than 4,000 beds were added to the hotel capacity. • In Marrakech, the 2010 vision has led to the establishment of many tourist developments. Projects and plans include:

– Aguedal, which is located to the south of the city on the edge of the city limits, will be a mixture of hotel accommodation, a congress centre, residential accommodation, leisure facilities and some commercial development. The site will be dominated by hotel developments, which will create approximately 3,000 new hotel rooms through the construction of a total of 17 four-star and five-star hotels. We understand that all of the sites earmarked for hotels have been acquired by developers or operators, and much of the development has already started. According to the plan, the entire development of the Aguedal project has to be finished by the beginning of 2009.

– Chrifia, a new tourist zone in Marrakech that has just completed its initial planning stage, and will spread over 286 hectares within the city boundaries. Studies are currently in progress on commercial tenders and future marketing of the area. The tourism zone will accommodate five and four-star hotels, hotel apartments, restaurants, conference facilities, sports clubs, travel facilities and offices. A public transport system will carry tourists from the district up into the centre of the city.

– La Palmeraie will, over 24 hectares, offer 9,000 beds and a vast range of activities including golf and conference facilities. La Palmeraie’s accommodation will consist of small, one storey buildings that will be designed with a Moroccan flavour and blend in with the landscaping. Exclusivity is the marketing hook, with the upper section of the tourist market being the prime target. The majority of the resort’s 24 hectares will be planted with mature olive trees, which will include restaurants, an extensive spa, a conference centre, running track and various sports halls.

– The €1.04bn ‘Gateway to Morocco’ project will comprise an equestrian centre in Marrakech and a resort in Tangiers. The 38-hectare (94-acre) Marrakech Equestrian City will boast a mixed-use sporting and leisure complex featuring a horseracing track and grandstand as well as villas and apartments.

– The Four Seasons Hotel and Resort in Marrakech is a luxury five-star resort, scheduled to be opened in 2008. The complex started construction in early 2005 and will consist of the hotel and amenities as well as a series of five-star villas, some of which are to be sold to private ownership and then fully serviced by Four Seasons. This luxury development of 40 properties will offer a choice of two- and three- bedroom riads (townhouses) and detached three- and four- bedroom villas. Each property will feature a central courtyard and will be finished to the highest standards, offering the best in both indoor and outdoor living.

– Amelkis, a luxury residential golfing development in Marrakech, has announced a further phase of development.

• Projects announced or underway are listed overleaf.

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Marrakech – Major Tourist Developments

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Feasibility Appraisals

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Film Studios Complex - Feasibility Appraisal

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Moroccan Film Heritage

• A rich history in cinema…. • The deserts of Morocco have been home to cinema since its early

days, when film production first began in 1887 when Louis Lumiere filed Le Chevrier Marocain in 1887. Hollywood was not even born yet.

• Indeed, Morocco is a land where directors and cinema-photographers fall in love because of the country’s extraordinary landscapes and light. It is the ‘light’ that shimmers across the desert landscape from early sunrise to sunset that bring such a rare array of colors and moods that are treasured by film makers There is no other place in the world that seems to capture sunlight and shadows like Morocco.

• So it will always be.

• In our memory forever is Peter O’Toole on camelback ambling along the desert sand dunes in David Lean’s Lawrence of Arabia, shot in Morocco in 1954. And today, one looks in awe a the thousands of warriors gathered on the beach in Brad Pitt’s Troy.

• The impressive roster of renown directors who have chosen Morocco include Oscar winners Martin Scorsese, Oliver Stone, Sergio Leone, and Franco Zeffirelli….and who can forget the works of Jean Dellanoyt, Ridley Scott, Henri Chabat, Rachid Bouchareb and Alejandro Gonzales.…all of whom who have fallen in love with Morocco. And for film buffs, there was Orson Wells (The Tragedy of Othello and The Moor of Venice), and the unforgettable Marlene Dietrich and her desperate chants in Joseph Von Sternberg’s Morocco.

• Rich in history and the perfect setting for a Studio Tour and Studio Production facility…

:

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Film Studios

• Why Marrakech?• One cannot ignore the advantages of Morocco for the film industry. with its

rich, natural assets. During its peak year in 1999, there were 36 features, 120 shorts, 70 commercials. But after 9/11 in the United States, the movie industry in many foreign lands came to a standstill -- crews and talent were afraid to fly…anywhere. Several major film projects were cancelled in Morocco.

• But since 2004, directors and major production companies have been flocking to Morocco. According to a market research study conducted by Jeunes du Maroc (www.jeunesdumaroc.com ) website, almost 1,200 films have been made in Morocco In the past five years

• Foreign productions have injected more than $165 million alone in the Ouarzazate region, which is the most popular location because of its deserts that stretch for miles, the palm grove in Skoura, the oasis in Fint and the general breathtaking beauty of its natural environment. Film shoots account for more than a third of tourism revenue. Other locations, such as Casablanca, Tangier, Essaouira and, of course, Marrakech, with its glamorous festival ˆ continue to lure film professionals.

• In 2001, producer Sarim Fassi-Fhiri started a number of modern studios north of Casablanca.

• In 2005, a consortium formed by Italian producer Dino de Laurentiis, the Italian studios of Cinecittà and a Moroccan businessman, Saïd Allag invested in the 160-hectare Cla studios.

• As recently stated in a review of the Moroccan film industry, the country offers significant tax advantages and incentives to new production facilities companies, preferential hotel rates, an abundant workforce and low costs for technicians and extras, as well as an army for crowd scenes.

• In spite of these alternative studios none of them will really compete with MFC because Ouarzazate lacks sound stages and technology and the other studios are utilized primarily for the in-house production of their owners.

• Based on the this remarkable history and overall attractiveness of the current film industry in Morocco, we feel confident that the proposed film studio facilities and studio tour are perfect additions to this sector of the economy.

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Recommendations

• We have recommended a working film studio (at right) approximately 23,600 sq. meters that would serve the film, television, commercial and video industry. This studio would also be a key element, of course, in the Studio Tour, which will be designed as a major tourist attraction similar to those facilities we have designed and have operating today in Hollywood, Orlando, Osaka, Spain and Germany.

• The studio will be a full-time operation, staffed with a key marketing and business development team.

• We expect the studio tour to be an immediate profit-producer once the entire Resort is open for business, and that many of the facilities built for the film studio will be part of the Studio Tour as well.

• The strategy for this combined operation is to minimize the initial risk in investment of the build-out. However, since the developers are already in the film business and have enumerable contacts and partnerships, we feel confident that the studios will be profitable on or before the projected break-even date.

• We have recommended four sound stages, which can also be used for corporate parties and as part of the tour when not in use. Our experience has shown that when a working, active studio is in operation, it only enhances the allure and profitability of the tour business.

• Income projections are presented overleaf with costs at Atlas Studios shown for comparison.

Studio Facilities

Facility Total m2 area

Large sound stage (1 each) 5,000

Small sound stage (2 @ 2000 sm) 4,000

Flexible sound stages (1) 2,000

Post production studios/

Live broadcast 500

Small screening theaters (2 @ 150 sm) 300

Large screening theater (1) 700

Management office 700

Production office 500

Carpentry shop/scene shop 1,000

Costume shop 600

Prop warehouse 1,500

Backlot 6,000

Commissary 200

Maintenance and support facilities 1,000

Parking 600

Total area for working film studio 23,600

•

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Film Studios Revenue Projections

• Preliminary income projections over a three year period have been prepared for the studios with income estimates made for sound stage hire for filming, use of the studios for other events such as exhibitions and themed events, studio production and office rental, backlot hire and from the commissary and café.

• The assumption is that the studios will be able to charge a small premium over charges at atlas Studios which are shown below.

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Film Studios Feasibility Appraisal

• Total income, excluding any profits on studio production or distribution, has been estimated at €2.1m in Year 1 rising to €2.9m by Year 3.

• Expenses, again excluding any in-house production costs have been estimated at just over €0.5m in Year 1 rising to €0.6m by Year 3.

• Profits relating solely to hiring out the facilities are projected to rise from €1.6m in Year 1 to €2.3m in Year 3.

• Further value will be generated through film production facilitated through the film fund.

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Film Revenue Values

• At the centre of the Morocco Film City development is the operating film studio. • The management of the operation of the studio has been granted to Europe Vision Plc pursuant to the contract whereby their wholly owned

subsidiary Tritel Media Ab acquired 11% of Tritel Management Group Inc (TMG) together with Scandinavian rights (outright) to all motion pictures produced by TMG within the Moroccan facility and for which the Scandinavian rights are available because they have not been pre-sold as part of the financing structure.

• It is the business philosophy of TMG that in order to generate business into the studio complex being constructed, there must be financial incentives offered to producers so that those that have developed projects bring them to Morocco Film City to be made.

• Accordingly a film fund has been established by TMG. This has been funded as to €360m by TMG who itself has received these funds from its shareholders Europe Vision Plc and Lombard International.

• The management of the Fund has been granted to Europe Vision Plc as part of its overall management responsibilities in connection with the running of the film Studio Complex. All matters relating to choice of product, financial structuring etc are at the discretion of Europe Vision Plc except that the Fund shall not provide more than 50% of the financial requirement for any one picture, that recoupement must be in first position against designated rights and/or territories (save that the Fund may recoup pro rata and pari passu with an investment of up to 10% of the budget of the project in question provided by the investment from the film Studios of their services). The balance of production fund must be provided by third parties.

• Therefore effectively movie makers can come to Morocco Film City and expect that the film Fund will provide them with half of their budget and in case of need the Studios may assist further by investing Studio services thereby topping up the investment to 60% of the budget.

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Film Revenue Values

• Since 1988 accounting standards agreed with the American IRS have dictated that in the USA, motion picture companies may carry the value of their unexploited motion picture inventory at cost i.e. if a company has a film which has cost 20 million Euros to produce but which is not yet distributed it may carry the value of the inventory at 20 million Euros. Obviously the net value to the company of the asset will be diminished by any third party entitlement such as from loans or investment etc i.e. the movie that has cost 20 million Euros to manufacture will have a gross value of 20 million Euros but if this manufacture has been financed by either a loan or a third party financing of say 10 million Euros then the net value will be 10 million Euros. It is suggested by Global Universal, the eminent film consultancy who have advised on the value to TMC of the film production capacity of the Moroccan Studios that it is appropriate and conservative to adopt the American accounting principles so that although over a 6 year period the total amount of production will if fully drawn (which must be assumed will be the case) be approximately 1.0 to 1.2 billion US dollars in total, in fact 360m Euros will represent the net equity value of the films to TMG.

• This results in a present day actual value of film production in the hands of TMG of 268 million Euros. This value assumes that all of the criteria of the film Fund are honored, that the Fund is utilised in full and that TMG does not authorize any faster draw down than the straight line proposed (a faster drawdown would increase the value of the films in production). Cost under-runs have been ignored because in practice this is so rare as to be not taken into account and cost overruns are assumed to be irrelevant even if they occur because it is a requirement of funding that each project enjoys a completion bond re-insured with either Lloyds (or a substantial insurance group) guaranteeing delivery of the product on time and on budget failing which either cost overruns are paid by insurers or, in the case of a late delivery, full reimbursement of funding. It assumes that no adjustments (up or down) are required in respect of the actual performance of the films during the period.

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Film Studios - Production Facilities Investments

We have identified each of the major production entities within the working studio sector. These are the estimates for financial requirements to fit-out the offices, sound stages, and various shops.

Our recommendation is that the Studio Operators position their studio facilities as the ‘most technologically advanced studios in the industry’. This does not require a huge investment to attain this position, however, the studio’s fit out must be first-rate with the latest technological support system. A full-time IT person should be part of this staff, along with a competent props and carpentry department.

Here are the estimated investment requirements for each operating department

• Maintenance €115,000–Mill equipment–Table saws–Lay-out tables–Wood lays–Panel saws–Plainers–Sawdust collector–Air compressor

• Blacksmith-Welding Shop €60,000–Welders and grinders–Benders–Brakes -- brakes metal

• Paint & Sign Shop €60,000–Paint booth–Racks/shelves–Paint mixers–Projectors–Computer equipment/cutters–Lay-out tables

• Prop Warehouse €75,000–Racks and shelves–Portable carts–Computer system–Prop inventory on as needed basis

• Costumes €85,000–Rolling/standard racks–Racks and shelves–Sewing machines–Cutting/lay-out tables–Fitting rooms (10)

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Production Facilities Investments

• Electrical €115,000–Lighting equipment–Racks and shelving–Expendables: Gels, screens, tapes–Cable

• Make-up/Wardrobe facilities €25,000–Make-up stations/mirrors/cabinets–Driers, chairs

• Grip facilities €190,000–Scaffolding–Dollies–Reflectors–Tri-pods–Apple boxes–Black-out materials–Expendables

• Production Trailers €40,000–Office furntture –18 offices

• Management offices €50,000–Office furniture, computers, copiers

• Camera Department €25,000–Racks and shelves–Hi-8 Pro, others (TBD)–Miscellaneous

• Stages €230,000–Miscellaneous equipment–3 stages per plan (??? check out)

•

• Transportation €190,000–Honey wagons–Dressing room trailers–5-ton trucks for grip, electrical, props

• Motor Pool €190,000–Studio vehicles -- sedan–Tractors and generators–Fork lifts and pick-up trucks

•Post Production Facilities €20,000–4 suites, chairs, desks, cabling

•Screening Room €155,000–Seats (100 sq. meters; 300 sa. meters)–Sound and acoustical systems–Projection equipment

• Commissary €325,000–Full service, 1250 sq. meters–Professional kitchen equipped–Furniture, dishware–Miscellaneous

•Total facilities investment €1,950,000

This does not include the capital/construction costs contained elsewhere in this Report. These are best estimates for current capital costs/

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Film Studio - Conclusion and recommendations

Conclusions regarding the Film Studio

Positive elements• The Morocco City Film Studios will be new, high tech, and most

modern in Western European market• The new studios will provide superior facilities, equipment and be

designed to surpass Atlas Studios in every way• Location of studios to Marrakech is a distinct advantage• New studio will generate a natural ‘buzz’ that will stimulate interest

and increase brand awareness• Combining Studio Tour operations and Studio facilities will

maximize revenue potential vis a vis traditional studio operations• Total Resort facilities and amenities provide natural sets and

landscapes• When studio stages and other facilities are not being utilized, they

can be rented out to a built-in Resort clientele for corporate events• Availability of economic labor from Marrakech • Provides easy access to magnificent Moroccan locations• Rich history is a ‘easy to promote’ with foreign production

companies seeking unique venues• Resort Marketing program will provide a strong ‘coat-tail’ effect for

the studios own marketing program• The Film Fund will almost certainly guarantee a stream of product

flowing through the studio so that it should be easy to achieve the target of 6 motion pictures per year financed and produced within the system starting 2008. No production will be undertaken unless it enjoys the benefit of a completion bond guarantiing delivery on time and on budget underwritten by Lloyds of London

• Negative elements• Studio is new and not proven• Low awareness-- will take time to build out and meet projections• Demand may weaken if there is another 9/11, inhibiting foreign

travel (production companies will not come)• Atlas Studios is a strong competitor and may respond with new

offers and incentives• Other planned Marrakech studio facilities could come online and

we question the room for two new studios in Marrakech

• Conclusions• The combination of a strong, professional and exciting Tour

Operations with a strong, professionally run Studio Facility is a powerful combination…superior to any other existing competitor in Morocco

• Joint marketing and sharing of facilities eases the burden to generate the ROI for both operations (Tour and Studio)

• Studio can coat-tail on the Resort’s global marketing effort and thereby reduce its marketing expense

• Strong corporate business will fill stages when not in use• Ability to sell Studio services to Tour and other Resort entities

generates additional revenues not normally factored in a typical studio operation.

• We believe this is a win-win proposition for the Resort

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Film and TV Industry Related Commercial

• Morocco Film City will be the heart of the Moroccan Film and TV industry.• In addition to the major film studio and studio tour, 50,000 sq meters of ancillary production space and offices are planned. • We envisage this as a cluster of media, technology and entertainment companies.• Entertainment Centre - 10,000 sm of the following:

– Film production studio offices– Talent management companies– Morocco State Film Institute (promotion of film production/location shooting in Morocco)– Film School, funded by the fees charged and Government subsidy.– Morocco Film Hall of Fame — lionizing the best of Morocco’s rich film heritage– Morocco Awards Presentation Hall — similar to Kodak Theatre for Hollywood’s Academy for the Motion Picture Arts and Sciences– Entertainment-based financial/investment firms

• Technology Centre --- 30,000 sm of the following:– Telecom companies — servicing the top cellular and high-speed Internet technology companies– Computer sales and management offices– Software companies serving North Africa continent– Call centres — featuring hi-speed telephone/ordering facilities– Energy companies– Information services companies– Life sciences– Nanotechnology– Communication and Network technologies– Emerging technology centre– Morocco Entrepreneur Institute (foundation to help new companies)

• Media and Broadcast Studios — 10,000 sm of the following:– Media headquarters offices for Morocco media companies (print/broadcast/Internet)– Broadcast studios — Morocco public and private media companies– Digital recording studios– Digital production studios

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Film and TV Industry Related Commercial

• At an average rental of €12 per square metre month (€144 per sq m annually) including common area charges.• Taxes and insurances are estimated at 15% per month• Once fully built out, rental income before taxes and insurance is estimated at €8.3m.

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Film Studios Tours – Financial Projections

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Market Appeal

• Studio tours ranging from destination Parks to small TV studio tours are popular and profitable.

• They provide a further means of exploiting both the studio brand and production IPR.

• The visitor gets to see the backlot, sets, production areas and sound stages (developed for the studios and not generating income on a significant number of days each year) with a small number of rides and stunt shows adding to the overall experience.

• For little extra cost visitor viewing areas into broadcast facilities can be created and when not in use visitors can try broadcasting themselves.

• Whenever a new film is produced, new IPR is produced and visitors come in the hope of seeing the stars and movie-making experience.

• The government passed a law in February 2003 liberalizing the audiovisual sector and lifting the government monopoly over all radio and television transmissions.

• Licenses have recently been granted for 10 radio and 1 TV station and this is expected to increase locally driven television production and diffusion which the studios will service.

• A 24 hours English language FM local music station aimed at the non-French speaking tourists and Moroccan youth is proposed, giving fashionable visibility in the local market place, as well as generating income.

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Film Studios Tour – Operating Assumptions and Pricing Policy

• To prepare financial projections for the Studios Tour it has been necessary to make some broad assumptions.

– The Studios Tour business will be owned by the Studios.– Visitor operations including evening functions will be operated by

an in-house team, overseen and managed by the Moroccan Gardens management team under an operational management contract.

– The Studios Tour will be open daily– Access to live filming and production areas will be strictly

controlled and generally only possible by prior arrangement (for example, as part of a VIP tour).

– Any IPR used will be owned by the film studio – no allowance has been made for any royalty payments.

– The Studios Tour will open from 10.00am until 7.00pm for the general public with VIP tours including access to the actual studios on certain evenings when the filming schedule permits.

• The table opposite presents the proposed ticket prices for the standard tour.

• Unlike the Moroccan Gardens the ticket price is all-inclusive of the shows and entertainments.

• Annual real increases in ticket prices of 2% are projected.• It will be necessary to test these prices amongst local residents

during the next phase or work. They are very low by western standards and there is unlikely to be any price resistance from tourists.

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Film Studios Tour – Attendance Projections

• The attendance forecasts are, once again, based on applying market penetration rates to the key resident and tourist market populations.

• The table opposite presents a summary of the available markets, market growth projections and penetration rates for each market segment.

• Projections show attendance rising from 237,000 to 291,000 over the first 5 years of operation, primarily due to increases in tourist visits to Marrakech.

• A higher proportion of visitors from the secondary market is projected than for the Moroccan gardens. Unlike an amusement park it will be unique in the Moroccan market.

• The proportion of visits by tourists projected is very high (50% by Year 5) for the following reasons:

– Film Studio tours have proven appeal amongst western markets (a similar sized development in the UK – Granada Studio Tours -attracted up to 750,000 visitors when it first opened). Babelsberg Studios in Germany attracts over 400,000 visitors annually and Futuroscope (a theme park of film-based attractions) is one of the most popular parks in France.

– To tourists visitors the admission price will be very inexpensive.

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Studios Tour - Design Day Analysis

• Design day analysis has been conducted to ascertain the optimum level of customer facilities, and to ensure that the proposed shows and other activities are of sufficient scale to accommodate expected attendance levels on busy days.

• We have estimated the peak month at 14% of annual visits and that 25% of weekly visits will be on the busiest day of the week.

• On the basis of these assumptions we would recommend that the designs ensure that a daily attendance of around 2,000 can be accommodated.

• With operating hours of 10.00am until 7.00pm and an expected average length of stay of 2.5 hours, the peak on site is likely to be just under 50% of the daily attendance, resulting in the need to provide sufficient entertainment and customer services and facilities for around 1,000 visitors.

• Like amusement parks, studio tours typically provide sufficient entertainment capacity to enable visitors 1.3 entertainment activities per hour.

• The Studios Tour has been designed to provide 1,200 units of entertainment capacity initially with plans for a further 800 should attendance grow significantly.

• Provision will also be needed for over 0.6 hectares of parking.

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Studios Tour – Ticket Income

• This pricing strategy gives an average ticket yield per paying visitor of €7.06 in Year 1 rising to €7.64 by Year 5, after allowing for:

– Special promotions– Commissions on credit card sales. – VAT at 20% on all ticket sales.– 6% of visitors paying no admission

• The projections assume small real increases in ticket prices over the years.

• Total income from ticket sales is projected to rise from just under €1.7m in the first full year of operations to €2.2 million in Year 5

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Studios Tour – Total Income & Gross Profit

• The average net per visitor spend on merchandising is estimated at €2.00. This assumes that a range of branded merchandise will be developed.

• The average food and beverage spend is estimated at €1.50 per visitor, lower than projected for the Moroccan gardens due to the shorter length of stay.

• Income from photography and other sundry sources is estimated at €0.50 per visitor.

• Projections of income from evening functions are based on a VIP tour (marketed primarily to tourist groups) of the studio tour theatres, the actual filming studios seeing live TV in production and culminating with a dinner in the commissary restaurant. With 3 tours a week projected and an average of 100 guests per tour paying €30.00, net income of €375,000 is projected by Year 3.

• Total income is estimated at €2.5m in Year 1 rising to €3.3 by Year 5.• The following cost of goods estimates are based on costs achieved

at comparable well-managed facilities:– Merchandise – 40%– Food and Beverage – 30%– Photography and sundry – 30%– Function catering (by external caterers) – 30% of net ticket price.

• The projected gross profit rises from €2.5m in Year 1 to €3.3m by Year 5.

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Studios Tour – Salaries and Wages

• The outline staffing structure and payroll model for the attraction, presented opposite is again based on separate operating models for ‘quiet, ‘busy’ and ‘normal’ days.

• We anticipate that the park will require in the region of 21 full-time staff, supported by 34 full-time equivalent temporary, seasonal and part time positions.

• In total, salaries, wages and other personnel costs are estimated at around 14% of turnover.

• These figures exclude the cost of contracted performers and evening performance artists (a further 10% of turnover).

• The figures assume that the an in-house team of local employees are overseen and managed by the Moroccan Gardens operator under a management contract.

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Studios Tour - Operating Costs and Net Profit Projections

• Marketing costs are estimated at 10% of turnover in Year , 7% of turnover thereafter.

• Utility costs are estimated at 3% of turnover, below the industry average of 4% reflecting lower local costs.

• Repairs and maintenance costs are estimated at 5% of turnover (less in Year 1 when the equipment will be under warranty).

• Property tax and insurance costs have been estimated at 2% of turnover, assuming that no rent is payable to the Studios.

• Costs for operating supplies, services and equipment have been estimated at 3% of turnover.

• Stunt and animal show contracts have been estimated at 10% of turnover, based on 2 performances of each show on quiet days and 3 on busier days, and an average cost of €200 per stunt show and €100 per animal show.

• Management fees are estimated at 3% of turnover, with office, admin and other costs estimated at 5% of turnover.

• A total operating profit (before interest, depreciation, lease amortization and tax) of €937,000 is projected in Year 1, rising to over €1.4million by Year 5.

• An operating profit margin of around 35% is projected.

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Moroccan Gardens - Feasibility Appraisal

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