New potential: Peruvians make an important contribution to the sector

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Foreign tourism is not the only segment that is important for industry growth. With a steadily rising middle class capable of spending more on leisure holidays, Peru is seeing an increase in local travel. The Export and Tourism Promotion Agency (PromPerú) estimates that Peruvians travelled 20% more throughout the country in 2011 than they did in 2010, due partly to improved internal connectivity and government campaigns that have worked with the private sector to cut travel expenses. Roxana Patricia Pérez, market research coordinator at PromPerú, also attributes this rise to heightened travel confidence. Professionals in the industry interviewed by OBG agree with this assessment, since in 2000 fear of armed revolutionary groups and state-applied repression still hung in the air, convincing many Peruvians to stay at home. But social, economic and political stability are now making it possible for people to experience their own country.

BY THE NUMBERS: According to the “2010 National Tourist Profile”, a study released by PromPerú, total spend per trip was estimated at an average of PEN425 ($155), 30% more than the amount recorded the previous year. While this figure is about 20% of what the average foreign tourist spends during a trip, the factors weighing in are quite different.

According to government investment promotion agency ProInversión, different destinations must be taken into account when comparing the activities of national and foreign tourists. Foreigners almost always visit the famous sites along the southern circuit, which include Machu Picchu, Puno as well as the Nazca Lines, whereas Peruvians on holiday tend to visit a wider range of destinations, spreading out their business across the country.

A beach culture is also developing in Peru, especially in the north in places like Máncora and Piura, but also in southern Peru. Paracas, some 300 km south of the capital, is witnessing this phenomenon, and ProInversión will soon open up bidding for new projects there, such as the construction of a tourist-oriented marina facility.

ASIA: Although the name appears foreign, the place itself is much closer to home. About an hour’s drive south of the capital, Asia is a city with a growing mall that only operates in the summer months from mid-December to April. But this is no ordinary mall. Its beachfront location, over 200 stores and restaurants, sports facilities and cultural centres, among others, make the Boulevard de Asia a desirable getaway for many of Lima’s middle and upper classes.

Régulo Navarrete, the chief of the Asia district’s municipal urban and rural development office, told local press in January 2012 that the entry road into the city would be expanded during the offseason of the same year to reduce traffic created by summer holidaymakers. According to Navarrete, during high season some 40,000 people arrive on the weekends, and he hopes the $7m infrastructure project will be ready in time for the 2013 summer.

The construction of vacation homes in Asia, meanwhile, has been popular among Lima residents during the last 10 years, but rentals are even more so, with rates in the summer reaching 40%, according to the Association of Southern Coast Real Estate Proprietors. However, the boulevard’s rapid expansion – 19 new companies were added to its catalogue this last year alone – will ultimately mean that the capital’s more exclusive holidaymakers will seek out alternative beaches, which will leave Asia to a predominantly middle-class market.

DEALS: Government incentives have played a key role in promoting domestic tourism. In February 2010 the Ministry of Foreign Trade and Tourism (MINCETUR) and PromPerú implemented a strong campaign to revive tourism in Cuzco after rains and mudslides affected the region’s main attraction of Machu Picchu. Advertised as “Cuzco Pone” (“Cuzco Contributes”), the campaign worked closely with airlines and hotels to offer reductions of up to 50% on normal prices. Flights from Lima to Cuzco were available for $49 and visitors could book a decent hotel for PEN70 ($25).

Measuring the success of the scheme did not take long. In the first month of the campaign, PromPerú reported that around 98,000 airline tickets has been sold, and MINCETUR said tourist activity in Cuzco had recovered 60-70% after having stalled. Authorities were quick to catch on and began developing similar campaigns under the same name for other parts of the country. These offers tend to last for one-two months, depending on the demand and time of year. Other government incentives have involved instituting extended weekends around holidays to allow people more travel flexibility.

CONNECTING THE DOTS: One cause behind the surge in domestic tourism is connectivity. Flights that operate between different provinces in Peru have been so successful that the government has proposed creating a new national carrier just for domestic flights. Many view this as a real opportunity to boost travel within the country, particularly to more isolated areas such as Iquitos or Madre de Dios in the Amazonian jungle. MINCETUR predicts an investment of $25m would be required to carry out such a project, with returns of $87m in the fourth year of operation. This would entail 10 planes able to carry 50-70 passengers and would add 39 routes to the existing flight chart.

While the notion that the airline industry needs to offer more routes with increased frequency has wide support, not all agree on a move to install another airline to do so. Heddy Espinoza, the president of the Peruvian Association of Tour Operators, believes the initiative is unnecessary and will drain national resources. She told OBG that both the national Star Perú and Central American-run TACA Airlines are investing to expand their operations.

Travel by bus is also quite popular, especially among Peruvians. However, less investment has been made to improve conditions. In 2010 some $28m was invested in bus travel, primarily destined to improve terminals. MINCETUR has identified several of the country’s major cities outside of Lima that require bus terminal improvements, including Chiclayo, Piura, Trujillo, Tumbes and Nazca. These terminals line the coast of Peru, proving that geography limits travel options. While it is possible to reach areas of the Andes by bus, its mountainous terrain still presents obstacles in terms of time and safety, and buses do not travel to all areas of the Amazon due to an inadequate road network. The expansion of domestic tourism to these sites will rely heavily on consolidating frequent and affordable flights.

PIONEERING THE WAY: The potential for increased local tourism has definitely been made clear, proving Peru to be among the pioneer countries in Latin America where this is even possible. The fact that the government has developed mechanisms to measure this kind of activity is in itself telling. As domestic travel carries on rising, so too will the economic benefits continue to spread to all corners of the country.

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The Report: Peru 2012

Tourism chapter from The Report: Peru 2012

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