The expected signing of a formal peace agreement between the government and the country’s main rebel group, the Revolutionary Armed Forces of Colombia (Fuerzas Armadas Revolucionarias de Colombia, FARC), promises to be a key event for the Colombian tourism industry in 2016.
Peace talks had been under way for over two years, and by late 2015 both parties were confident that a negotiated settlement could be reached before the end of March 2016. A settlement was expected to formalise and extend the reduction in political violence seen in recent years. Speaking at the annual conference of the World Tourism Organisation (WTO) held in Medellín in September 2015, President Juan Manuel Santos said, “With peace, opportunities will multiply and all these energies and efforts devoted to the war will go into social programmes … Tourism is the industry that is going to benefit the most because, we cannot deny it, many people still do not come due to the fact that we are on the list of countries with an ongoing internal conflict.”
Peace & Tax Breaks
At the conference, Santos announced the extension of existing tax breaks for hotel construction, noting that hospitality has been the third-largest sector for foreign investment, after oil and manufacturing. New hotel projects where construction begins before December 31, 2017 will qualify for a 30-year income tax exemption. The president’s office said this would help create 300,000 jobs in the tourism industry by 2018, particularly in key destinations such as Cartagena, the Caribbean island of San Andrés, Santa Marta and the Coffee Zone. Santos also said in his speech that aviation and transport links would be improved, with plans to modernise 58 airports in the country and to develop the road network.
The same point was made by María Claudia Lacouture, president of ProColombia, the country’s tourism promotion agency, who in October 2015 told press that a combination of the domestic peace settlement and a competitive exchange rate was giving Colombia an opportunity to become a first-class global tourism destination. Lacouture said the main constraint on the industry was a number of travel advisories or warnings related to security. “The moment we have peace, those warnings will no longer apply and that will allow tourists to look at Colombia in a different way, boosting the industry’s growth rate,” she told Reuters. Ingrid Calderón, commercial vice-president at Aviatur travel agency, agreed that a formal peace agreement will be positive for the industry, but does not expect a sudden boom. “What is more likely is an acceleration of the current gradual but steady process of improvement,” she told OBG.
Growing Impact
According to the World Travel and Tourism Council, the tourism industry’s direct economic contribution in 2014 was equivalent to 1.9% of Colombia’s GDP, while its total contribution reached 5.9%. It is responsible for the direct employment of 510,500 people, rising to 1.29m jobs including indirect employment, equivalent to 6.1% of the total workforce. Employment is projected to grow at 1.1-2.2% in the next 10 years. Spending by incoming tourists totalled COP10.6trn ($3.9bn) in 2014, or 8% of exports. Travel and tourism investment was COP6.95trn ($2.6bn), or 3.7% of total investment in the country.
The Ministry of Trade, Industry and Tourism notes that tourist arrivals are growing strongly. In 2014 over 2.5m foreigners visited Colombia, up 12.1% on the preceding year. The pace of growth almost doubled compared to 2013, when arrivals had been up by 6.1%. The ministry said that tourist numbers have risen by 87% since 2006. According to 2014 data, the vast majority of visitors (1.9m) arrived by air, with around 300,000 arriving by sea.
Luis Germán Restrepo, executive director of ProColombia, provided slightly different figures for 2014. He gave the total number of visitors at 2.88m (up 11% on 2013), including 592,522 Colombians living abroad (up 6.4%) and 314,207 who arrived on cruise ships (up 2.4%). The largest market was the US, with 376,410 visitors in 2014 (up 9.5% on 2013), followed by Venezuela (up 14%), Ecuador (up 11%) and Brazil (up 39%).
Restrepo is optimistic about the industry’s prospects. “Tourism has seen remarkable growth over the past decade,” he said. “Hotel infrastructure, economic stability, investment and product diversity are some of the reasons Colombia has become a top-notch destination. It is only two-and-a-half hours away from Miami, with no seasons and no visa requirements.” Restrepo said that there are 296 direct weekly flights connecting eight North American cities with six destinations in Colombia.
According to Cecilia Álvarez-Correa Glen, the minister of trade, industry and tourism, revenue from inward-bound tourism has been growing strongly. Sector revenue totalled $4.98bn in 2014, she said, and reached $1.45bn in the first three months of 2015, a 16% increase on the same period a year earlier. In 2014 tourism brought in more foreign currency than coffee exports, Colombia’s traditional top earner. The ministry’s target is to boost annual tourism revenues to $6bn by 2018.
Coordination
Gustavo Adolfo Toro Velasquez, executive president of Cotelco, Colombia’s hotel and tourism association, told OBG, “The industry is on a good path: although the IMF is forecasting that GDP growth will slow in 2016, the tourism sector will be the least affected. The depreciation of the Colombian peso means that more Colombians will take their holidays in the country, and more foreigners will find Colombian prices very attractive.” Toro also pointed out that with growth in arrivals running at 10-12%, Colombian tourism has been expanding at roughly three times the global rate of tourism growth of 4%. The imminent peace settlement would also raise the country’s profile as a desirable destination for visitors.
The industry may need to make some adjustments to cater to the expected increase in demand. Toro cited greater regional commitment as one area of work. While tourism infrastructure is well developed in big cities and the established Caribbean resorts, there are gaps elsewhere.
Of the three levels of government in Colombia (national, departmental and municipal), it is the municipalities that can have the greatest direct impact on the quality of a visitor’s experience, and they do not always give the industry the priority it requires. Toro said that there are municipalities on the Caribbean coast that need to urgently improve water supplies, for example, to keep up with the growth in hotel facilities. Another key challenge for the industry is to develop the product, creating themed tours. Some already exist, such as “coffee trail” itineraries. Others – such as a cultural tour linked to the life of Colombia’s most famous novelist, Gabriel García Márquez, offer great potential, but require a coordinated approach by a range of stakeholders, including municipalities, tour operators, hotels and attractions.
There is also strong potential in different types of niche segments, such as trekking, adventure, wildlife, food and culture. More research of Colombia’s largest natural tourism market – the US – could lead to development of these areas.
Competition
While Colombia has very strong tourism potential, it has to fight for its place in a competitive regional market. Calderón said that because of the diversity of its offer, Colombia has several rivals. The resorts on its Caribbean coast are competing with the Caribbean islands in the “sun and beach” category; the Amazon region is competing with Costa Rica for ecotourism; Colombia’s Andean region is up against Peru and Ecuador; and the eastern llanos (plains) compete with Venezuela. According to Paula Cortés, Anato Travel Agents’ Association president, “Today the focus of travel agencies is to offer packages and services that will allow the tourist to have a different experience and that has been precisely the success of our country in terms of incoming tourism. Colombia recognises that the competition that exists with other countries in the region is strong, and that is the reason we must continue to work on diversifying and improving the quality of our products and services.”
The industry has some concerns over factors that may impair its competitiveness. A big issue is whether it can develop an effective strategy to seize the opportunities and counter the threats raised by online sales and marketing, and the explosion of social media. Among the opportunities is the creation of a stronger online presence. However, threats include the development of international accommodation sharing and renting services such as AirBnB. There is also concern that foreign firms may sell Colombia package tours and, in effect, bypass local tour operator companies.
In the World Economic Forum Travel and Tourism Competitiveness Index 2015, Colombia is ranked 12th in the Americas and 68th in the world. It received its highest scores for health and hygiene, human resources, IT and business environment. Its weakest point was safety and security, but improvements on that front should help put the country back on the tourist map.
Hotel Chains
Since 2010 Colombia has opened 175 new hotels, representing around 20,000 additional rooms. The income tax exemption is expected to add another 46 hotels over the next four years. International hotel brands have been establishing or strengthening their presence. The Four Seasons luxury chain opened the first of two Bogotá hotels, The Four Seasons Hotel Casa Medina, in October 2015. The second, to be known as Four Seasons Bogotá, is scheduled to open in early 2016. The company has said it may consider a third hotel to be located in Cartagena.
In September 2015 Hilton Worldwide announced that its DoubleTree by Hilton brand was being introduced in Colombia, with two Hoteles Cosmos properties in Bogotá being converted into DoubleTree units. The 132-room DoubleTree Parque 93 and 88-room DoubleTree Calle 100 would con-tinue to be operated by Cosmos under a franchising agreement. The same month, Spain’s NH Hotels Group reported it was launching 15 rebranded hotels with 1700 rooms in Colombia, acquired in the takeover of Hoteles Royal. It said that Colombia was a strategic market for the development of the group in Latin America. Marriott International, meanwhile, announced the opening of the 144-room Courtyard by Marriott Hotel in Bogotá.
Fernando Sánchez Paredes, president of the Blue Doors boutique hotel chain, has described tourism as “a locomotive for the development of Colombia”. He believes the capital is experiencing a hotel boom, based on greater levels of security, tax incentives for hotel construction and government policies aimed at boosting tourism. Typically, around 60% of demand for hotel rooms comes from business travellers, 30% from those attending conferences and conventions, and 10% from tourists. While Sánchez expects business travellers to remain the main users of Bogotá hotels, he predicts an increased share for tourists and those attending conferences and conventions (the latter will be boosted by the opening of a new convention centre, Corferias, in 2016).
For Max Eidelman, president at Max Eidelman & Leisure Advisors, “Part of the success of a hotel lies in the strength of the events it can host. In this sense, Bogotá’s hotels compete between themselves but also against the growing interest in organising events in hotels in medium-sized cities.”He estimates the total number of three- to six-star hotel rooms in Bogotá at 15,000, and told OBG that the industry should be aiming to double that over the next 10 years. Maintaining strong growth may require further expansion at Bogotá’s El Dorado International Airport.
Calderón told OBG that the capital now has well-developed hotel facilities and capacity, but because of the predominance of business travellers, one of the issues hotels now face is to boost occupancy rates over weekends.
Future Development
The potential for the development of new tourist attractions in Colombia is considered very significant. One example is the 2800-year old “lost city” of Tairona, a set of ruins in the Sierra Nevada near the Caribbean coast. At present reaching the ruins, which were discovered in 1972, requires a six-day trek through 30 miles of dense tropical jungle. But Jean Claude Bessudo, president of Aviatur, has proposed building a helicopter-landing site that would allow tourists to visit the site from the coastal resort of Santa Marta. Aviatur was reported to have approached the Colombian Institute of Anthropology to discuss options for building a site that would be sensitive to the preservation of the area.
There is major potential for the development of tourism in Colombia’s Amazon region, which is described by Sánchez as “the world’s most phenomenal ecotourism product”. Torres agrees on the Amazon’s potential, but told OBG, “In the Amazon we have one of the world’s greatest concentrations of different flora and fauna species, but we need to develop a better framework for regulation and environmental protection.”
Outward Bound
After long negotiations, in May 2015 the EU agreed to lift Schengen visa requirements for Colombians and Peruvians visiting Europe. This means that Colombians will for the first time be able to visit 26 EU countries for stays of up to 90 days without having to request a prior visa. The change is important for Colombian travel and tour agencies catering to outward-bound tourism by Colombian nationals. A statement from the Colombian Foreign Ministry thanked Mariano Rajoy, prime minister of Spain, for his efforts in persuading the European Commission (EC) to agree to the move. Rajoy had first suggested it in 2013. Foreign minister of Colombia, María Ángela Holguín, said there were only a few steps remaining to complete the formal agreements.
More widely, the lifting of the Schengen visa requirements signalled an important change in perceptions of Colombia, with positive implications for both outward and inward-bound tourism flows. “Colombians have an unfair stigma due to a mix of the war on drugs and the violence the country has suffered over 50 years. But this is not based on reason,” Pablo Martínez, head of public relations at Germany’s GoEuro Travel, said. “Colombians abroad are known for being happy, hard-working people. Now that Colombia is becoming a trending tourist destination, and as the world gets to meet Colombia and its people, this stigma will fade.” An EC report prepared prior to the Schengen decision highlighted improvements in internal security, economic growth and trade, along with a decrease in illegal immigration trends.
The US may eventually match the European move to ease visa requirements. US secretary of state, John Kerry, has said, “We would very much like to be able to grant a visa waiver” for Colombians similar to that offered by Europe. However, analysts believe this could take at least two years to approve. Kevin Whittaker, the US ambassador to Colombia, has expressed support for the government’s policies on drug smuggling and peace negotiations with the guerrilla movements, but said that the visa refusal rate, currently at 11%, would need to come down to below 3% before a waiver programme could be considered.
Travel Agencies
Over the years the country’s travel agents have shown flexibility and resilience, adjusting to changes in the market. In the 1980s and 1990s they shifted focus from receptive to outward-bound tourism because of the security situation in the country. According to Torres, there are now three main segments. “Inward-bound is doing well, aided by a competitive exchange rate, though we still have an issue over perceptions of security. Outward-bound is having difficulties because, due to the exchange rate, the cost of overseas travel has risen, but we are still in positive growth territory. Third, domestic tourism is performing strongly, though this is not captured in the data, “ he told OBG. “Hotel occupancy rates are good, and Colombians are now more confident of their security travelling by road”.
Outlook
The Colombian tourism industry looks set for strong growth in 2016 and subsequent years. In the short term double-digit growth in arrival numbers is likely to be maintained. Tourism arrivals rose by 12.1% in 2014, while data for the first half of 2015 shows growth of 12%, with a 16.3% drop in cruise ship arrivals offset by an 18.2% increase in arrivals by air. Those coming for vacations were up by 22.3%, those coming to study rose by 20%, while those coming for work purposes fell by 28.8%. Bogotá remained the most popular city for visitors, followed by Medellín, but both lost some of their share to the Caribbean coast and other resort destinations.
A peace settlement ending the long internal conflict is a big positive development for the sector. “Once the peace agreement is signed we can expect tourism to grow by as much as 20% per year,” Toro told OBG. Bessudo is also very optimistic about future prospects: with a settlement, he said, “In five to 10 years we could triple the number of tourists that are coming to Colombia.”
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