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section 6_final by babbian


									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
•   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.

                                                                      - 46 -
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
•   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.

                                                                                                                                                      - 47 -
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
•   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.

                                                                                           - 48 -
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
•   In 2006 Marrakesh Airport saw a 26% increase in passenger
    movements over the previous year.

                                                                          - 49 -
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
       –   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.

                                                                                                                                                                        - 50 -
Marrakech – Major Tourist Developments

                                         - 51 -
Feasibility Appraisals

                         - 52 -
Film Studios Complex - Feasibility Appraisal

                                               - 53 -
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…


                                                                           - 54 -
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
    ( ) 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
•   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.

                                                                                            - 55 -

•   We have recommended a working film studio (at right) approximately 23,600         Studio Facilities
    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       Facility                                Total m2 area
    Tour, which will be designed as a major tourist attraction similar to those
    facilities we have designed and have operating today in Hollywood, Orlando,       Large sound stage (1 each)                  5,000
                                                                                      Small sound stage (2 @ 2000 sm)             4,000
    Osaka, Spain and Germany.
                                                                                      Flexible sound stages (1)                   2,000
                                                                                      Post production studios/
•   The studio will be a full-time operation, staffed with a key marketing and        Live broadcast                                500
    business development team.                                                        Small screening theaters (2 @ 150 sm)         300
                                                                                      Large screening theater (1)                   700
                                                                                      Management office                             700
•   We expect the studio tour to be an immediate profit-producer once the entire
                                                                                      Production office                             500
    Resort is open for business, and that many of the facilities built for the film
                                                                                      Carpentry shop/scene shop                   1,000
    studio will be part of the Studio Tour as well.
                                                                                      Costume shop                                  600
                                                                                      Prop warehouse                              1,500
•   The strategy for this combined operation is to minimize the initial risk in       Backlot                                     6,000
    investment of the build-out. However, since the developers are already in the     Commissary                                    200
    film business and have enumerable contacts and partnerships, we feel              Maintenance and support facilities          1,000
    confident that the studios will be profitable on or before the projected break-   Parking                                       600
    even date.                                                                        Total area for working film studio          23,600

•   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.

                                                                                                                                              - 56 -
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.

                                                                                - 57 -
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.

                                                                            - 58 -
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.

                                                                                                                                                          - 59 -
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.

                                                                                                                                                       - 60 -
Film Studios - Production Facilities Investments

We have identified each of the major production entities        • Maintenance                               €115,000
within the working studio sector. These are the                        –Mill equipment
estimates for financial requirements to fit-out the offices,           –Table saws
sound stages, and various shops.                                       –Lay-out tables
                                                                       –Wood lays
                                                                       –Panel saws
Our recommendation is that the Studio Operators                        –Plainers
position their studio facilities as the ‘most technologically          –Sawdust collector
advanced studios in the industry’. This does not require               –Air compressor
a huge investment to attain this position, however, the
studio’s fit out must be first-rate with the latest             •   Blacksmith-Welding Shop                 €60,000
technological support system. A full-time IT person                    –Welders and grinders
should be part of this staff, along with a competent props             –Brakes -- brakes metal
and carpentry department.
                                                                • Paint & Sign Shop                         €60,000
Here are the estimated investment requirements for                     –Paint booth
each operating department                                              –Racks/shelves
                                                                       –Paint mixers
                                                                       –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)

                                                                                                                       - 61 -
Production Facilities Investments

• Electrical                                  €115,000
      –Lighting equipment
                                                         • Transportation                                  €190,000
      –Racks and shelving                                      –Honey wagons
      –Expendables: Gels, screens, tapes                       –Dressing room trailers
      –Cable                                                   –5-ton trucks for grip, electrical, props

• Make-up/Wardrobe facilities                 €25,000    • Motor Pool                                      €190,000
      –Make-up stations/mirrors/cabinets                       –Studio vehicles -- sedan
      –Driers, chairs                                          –Tractors and generators
                                                               –Fork lifts and pick-up trucks

• Grip facilities                             €190,000
      –Scaffolding                                       •Post Production Facilities                       €20,000
      –Dollies                                                 –4 suites, chairs, desks, cabling
      –Apple boxes
                                                         •Screening Room                                   €155,000
      –Black-out materials                                     –Seats (100 sq. meters; 300 sa. meters)
      –Expendables                                             –Sound and acoustical systems
                                                               –Projection equipment
• Production Trailers                         €40,000
      –Office furntture
      –18 offices
                                                         • Commissary                                      €325,000
                                                               –Full service, 1250 sq. meters
• Management offices                          €50,000          –Professional kitchen equipped
      –Office furniture, computers, copiers                    –Furniture, dishware
• Camera Department                           €25,000
      –Racks and shelves                                 •Total facilities investment                      €1,950,000
      –Hi-8 Pro, others (TBD)

                                                         This does not include the capital/construction costs contained
• Stages                                      €230,000   elsewhere in this Report. These are best estimates for current
      –Miscellaneous equipment
      –3 stages per plan (??? check out)
                                                         capital costs/


                                                                                                                          - 62 -
Film Studio - Conclusion and recommendations

Conclusions regarding the Film Studio                                      •   Negative elements
                                                                           •   Studio is new and not proven
Positive elements                                                          •   Low awareness-- will take time to build out and meet projections
• The Morocco City Film Studios will be new, high tech, and most           •   Demand may weaken if there is another 9/11, inhibiting foreign
  modern in Western European market                                            travel (production companies will not come)
• The new studios will provide superior facilities, equipment and be       •   Atlas Studios is a strong competitor and may respond with new
  designed to surpass Atlas Studios in every way                               offers and incentives
• Location of studios to Marrakech is a distinct advantage                 •   Other planned Marrakech studio facilities could come online and
• New studio will generate a natural ‘buzz’ that will stimulate interest       we question the room for two new studios in Marrakech
  and increase brand awareness
• Combining Studio Tour operations and Studio facilities will              •   Conclusions
  maximize revenue potential vis a vis traditional studio operations       •   The combination of a strong, professional and exciting Tour
• Total Resort facilities and amenities provide natural sets and               Operations with a strong, professionally run Studio Facility is a
  landscapes                                                                   powerful combination…superior to any other existing competitor in
• When studio stages and other facilities are not being utilized, they         Morocco
  can be rented out to a built-in Resort clientele for corporate events    •   Joint marketing and sharing of facilities eases the burden to
• Availability of economic labor from Marrakech                                generate the ROI for both operations (Tour and Studio)
• Provides easy access to magnificent Moroccan locations                   •   Studio can coat-tail on the Resort’s global marketing effort and
• Rich history is a ‘easy to promote’ with foreign production                  thereby reduce its marketing expense
  companies seeking unique venues                                          •   Strong corporate business will fill stages when not in use
• Resort Marketing program will provide a strong ‘coat-tail’ effect for    •   Ability to sell Studio services to Tour and other Resort entities
  the studios own marketing program                                            generates additional revenues not normally factored in a typical
• The Film Fund will almost certainly guarantee a stream of product            studio operation.
  flowing through the studio so that it should be easy to achieve the      •   We believe this is a win-win proposition for the Resort
  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

                                                                                                                                                   - 63 -
    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

                                                                                                                                          - 64 -
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.

                                                                                                                 - 65 -
Film Studios Tours – Financial Projections

                                             - 66 -
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
•   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
•   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.

                                                                            - 67 -
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
       –   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

                                                                                - 68 -
Film Studios Tour – Attendance Projections

•   The attendance forecasts are, once again, based on applying
    market penetration rates to the key resident and tourist market
•   The table opposite presents a summary of the available markets,
    market growth projections and penetration rates for each market
•   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.

                                                                                - 69 -
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
•   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.

                                                                            - 70 -
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

                                                                             - 71 -
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
•   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.

                                                                                 - 72 -
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
•   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.

                                                                                    - 73 -
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.

                                                                          - 74 -
Moroccan Gardens - Feasibility Appraisal

                                           - 75 -

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