Can Latam tourism live up to its potential?

Latin American countries want to attract FDI to their tourism industries and make their economies less dependent on the commodities sector, which has taken a big hit during the past few years.

Leading players in the region’s tourism sector gathered at a conference organised by the Latin American Investment Forum in London at the start of November, where tourism ministers from El Salvador, Uruguay, Argentina, Venezuela, Brazil, Bolivia and Mexico showcased tourism investment opportunities in their countries.

Home-grown visitors

According to research by the World Travel Market Latin America, the region received $24bn in tourism revenues in 2015 with a total of 27.4 million tourists. Some 70% of Latin Americans holiday within their own region and the industry provides 8% of the jobs in the continent.

However, the Latin American market is still insignificant for foreign tourists from many countries: for example, only 1.5% of all British holidaymakers visit the region.

“Latin American countries must find other sources of income,” says professor Hannah Scobie, chair of London-based think tank the European Economics & Financial Centre. “Tourism is one of them. The region’s tourism assets now have attractive valuations because of the depreciation in the region’s major currencies.”

She adds that South American countries must take a number of steps to make their tourism sectors more attractive to foreign investors, saying it is vital to improve the quality of services; to offer a greater range of tourism attractions; to improve connectivity within a country; to develop aviation infrastructure; and to enhance a country’s general business climate.

Colin Stewart, director for the UK at Air Europa, the Spanish airline with connections to 18 Latin American destinations from its Madrid hub, says: “It’s essential that passengers have a consistent experience, that the level of comfort that people receive at the main airports in Latin America is consistent and of a high standard. I think that is something that is now being achieved.”

Perceptions of crime

Experts say that one of the factors discouraging Europeans and North Americans from travelling to Latin America is the perception of high crime rates. However, they emphasise that the level of violence differs markedly from country to country and that often the media exaggerate the threat level. Security between airports and hotels has improved considerably in the past decade.

High airfares to Latin America and within the region are also an issue for the tourism industry. “This boils down to a lack of competition between airlines in a number of countries,” says Ms Scobie. “If more airlines operated in the region, you would expect fares to come down.”

Experts also say that it is often cheaper for European travellers to visit Asia or Australia than Latin America, and this is a problem the region must address if it is to secure more foreign visitors in the long term.

In response to this, Mr Stewart says his airline has made agreements with several local airlines so that for a small additional charge it is possible for a passenger to also take a domestic flight within a country.

El Salvador erupts

The tourism sector has grown rapidly in many Latin American countries during the past five years. For example, in 2015 El Salvador attracted 1.9 million foreign tourists, compared with 1.4 million in 2009. The sector provides 150,000 jobs in the country, which has a population of 6.4 million people and a GDP of $26.6bn, according to the IMF. El Salvador has 3700 companies that operate in the tourism industry, a figure that is increasing by an average of 13% a year.

“For us, tourism is a strategic sector,” says José Napoleón Duarte, El Salvador’s minister of tourism. “One of the most important projects is the tourism development of the coastal zone. The international airport is being modernised and the government is investing in infrastructure to improve connectivity within the country.”

The government is actively promoting tourism to the 2730-hectare Cerro Verde national park, which is centred around a 2030-metre-high extinct volcano. It is also developing a 45-hectare hotel close to the volcano.

Bolivia's breakthrough

Bolivia is another country that is pushing its tourism industry. It has 3.5% of the world’s total rainforest and is home to seven Unesco World Heritage Sites, including the cities of Potosi and Sucre and the Noel Kempff Mercado National Park. Salar de Uyuni, located in the south-west of the country, is the world's largest salt flat at 10,582 square kilometres. Several of the hotels located there are made from salt blocks.

The government is backing a 9000-kilometre railway, known as the Bi-Oceanic Railway, to connect the Pacific and Atlantic oceans and pass through Peru and Brazil, as well as Bolivia. Currently, German and Swiss companies are undertaking the project’s feasibility studies.

The number of foreign tourists visiting the country is growing at 8.5% a year, according to the country’s Ministry of Tourism. It now receives about 1.1 million foreign tourists a year. Bolivia is also home to three Ibis hotels and one each from Hilton, Marriott and Radisson.

“The country has a strong rule of law and offers foreign investors in the tourism sector legal certainty,” says Joaquín Rodas Dorado, Bolivia’s deputy minister of culture and tourism. “The government has developed 9000 kilometres of new roads and Bolivia now has strong infrastructure links with all the countries that surround it.”

Viva Venezuela

Venezuela – with its 43 national parks and 36 national monuments – would also like to see a big uptick in foreign investment in its tourism sector (95% of the country’s exports are oil related and the economy has been rocked by the sharp fall in the international price of oil).

One of the country’s main attractions is Angel Falls, the world’s highest waterfall at 979 metres. It forms part of the 30,000-square-kilometre Canaima National Park, which is famous for its stunning table-top mountains, known as tepuis.

“We are very keen to attract foreign investors to the tourism sector,” says Alí Padrón, Venezuela’s deputy minister of tourism. “The country already has 143,000 hotel rooms and an additional 60,000 rooms are being built with the ministry’s help.”