Thanks to its unique historic, cultural and natural offerings, including Machu Picchu, the Andean mountain range and one of the world’s most exciting cuisines, Peru is one of the fastest-growing tourism destinations in the region and the world. For the sixth consecutive year, in December 2017 Peru was named the World’s Leading Culinary Destination at the World Travel Awards. The capital city of Lima ranks alongside New York, London and Mexico City for having some of the world’s best-ranked restaurants.
Global Standing
Peru’s tourism sector ranks 46th out of 185 countries in terms of the relative importance of travel and tourism’s total contribution to GDP, according to the “Economic Impact 2018 Peru” report by the World Tourism & Travel Council (WTTC). In 2017 Peru’s travel and tourism sector was directly worth PEN26.5bn ($8.2bn), or 3.8% of GDP, a figure which is forecast to rise by 4.5% in 2018, and to rise by 4.7% per year from 2018 to 2028, to PEN43.7bn ($13.5bn), or 4.2% of total GDP, by 2028. The sector’s total contribution — direct and indirect — was PEN68bn ($20.9bn), a considerable 9.8% of GDP. This is forecast to rise by 4.7% in 2018 and 4.5% per year to PEN110.8bn ($34bn), or 10.6% of GDP, in 2028, highlighting the continued importance of the tourism sector to the overall economy.
The significance of tourism’s contribution to the national economy was not lost on the previous government administration, which set a target of 7.6m international tourists by 2021, although the WTTC forecasts a more conservative estimate and timeline, projecting 5.2m international visitors by 2028.
As a labour- and services-intensive industry, tourism will continue to be a significant source of job creation in the short and medium term. As a whole, the sector directly supported 400,000 jobs in 2017, or 2.5% of total employment, and according to WTTC estimates, this is set to rise by 3.5% in 2018, and then by 2.8% per year to 548,000 jobs or 2.8% of total employment by 2028. Including indirect employment, tourism supported nearly 1.3m jobs in 2017. At 8% of total employment, and with this figure forecast to rise to approximately 1.7m in 2028, the sector is poised to account for 9% of total employment in the country by 2028, according to the WTTC.
In terms of absolute contribution Peru consistently ranks above the Latin American average for all indicators in the 2018 WTTC report except one – it continues to be just short of the regional and global average in terms of national investment, at PEN7.2bn ($2.2bn), or 4.8% of total investment in 2017. It is expected to rise to 6.3% in 2018 and to continue rising by 4.3% per year between 2018 and 2028 to PEN11.8bn ($3.6bn), or 5% of total national investment. In an effort to move ahead in the WTTC rankings, Peru is marketing its brand to even further diversify the sector.
Historical Destinations
Machu Picchu is one of the seven wonders of the world and was awarded “Best Tourist Attraction” in 2017 by the World Travel Awards. It is also the primary reason why international tourists visit the country. Visited by a record 1.3m people in 2017, Machu Picchu faces increasing demands such as overcrowding and physical degradation, so much so that UNESCO threatened to list it as a world heritage site in danger. In response, the Ministry of Culture have revised entry regulations and visiting practices to protect the site. New regulations include timed two-hour visits, where visitors are only granted entry if they are accompanied by a certified guide and are limited to selected pathways around the site.
As a means by which to alleviate the growing pressure on Machu Picchu, the Peruvian government is investing in other cultural historical sites, such as the pre-Incan Kuélap, a fortress city in the Amazonas region in northern Peru. Once hidden in the remote and difficult to access cloud forest, the government opened up the site to tourists by investing $21.7m to build a 4-km long cable car, carrying 26 gondolas which can carry up to eight passengers each. Inaugurated in March 2017, the Nuevo Tingo to Kuélap cable car carried almost 103,000 visitors in its first nine months of operation.
Following the success of Kuélap, another historical site has been identified to have high visiting potential. Choquequirao is a 16th-century Incan citadel on a truncated mountain top in southern Peru, similar in structure and architecture to Machu Picchu. The previous administration of President Pedro Pablo Kuczynski pledged an $80m access infrastructure investment, also in the form of a cable car due to the site’s limited road access – currently it is only accessible by a two-day hike. Once the site becomes accessible, it is projected that there will be 150,000 visitors in the first year with expectation for higher numbers still as the site gains more visibility. However, the ecological impact of creating another highly trafficked site so close to Machu Picchu and within the protected archaeological park remains unclear.
Sustainable Tourism
There are, however, a total of 63 protected natural areas in Peru, creating a vast opportunity for ecotourism. Considered by Conservation International as one of 17 mega-diverse countries in the world, Peru is home to 10% of the world’s flora and fish species, 695 bird species and 460 mammals located in 84 of the world’s 103 existing ecosystems. The country’s ecotourism segment has grown by 17% between 2007 and 2017, with 59% of international visitors participating in some form of eco-activity. According to the “2017 Foreigner Tourist Profile,” a report produced by the Export and Tourism Promotion Commission (PromPerú), 44% of international tourists travel to Peru for nature-related activities and 35% visit for adventure-related activities. Furthermore, according to a study published by the Conservation Strategy Fund, in 2017 alone, tourism in protected natural areas generated $720m. The study also reported an estimated return on investment of 40 times for this segment. Ecotourism’s economic impact reaches far and wide as it provides job opportunities to remote communities. In 2017 ecotourism in protected areas created 36,000 jobs related to lodging, food, and other services, which translated to the provision of $165m in direct income to local households.
Of course, when nature is the primary attraction in tourism, there is a need to ensure sustainability. Although there is not yet a national policy that sets visitation parameters, the Peruvian government has recognised the importance of conserving these protected areas by its involvement and support of national and international organisations whose missions are, broadly speaking, ecosystem conservation.
One of the country’s top ecotourism destinations is Cordillera Blanca, one of the world’s most extensive tropical ice-covered mountain ranges. It is being directly threatened by another known risk factor – climate change. Over half of the glaciers in the Cordillera have been reduced in the past 55 years due to changing and more extreme weather patterns.
However, Peru is acting as a climate change policy pioneer in the region by being the first nation to pass a regulatory framework on climate change that adheres to the Paris Agreement commitments of 2016 and the 2014 National Strategy on Climate Change. The Climate Change Framework Law was passed in March 2018 by the newly inaugurated President Martín Vizcarra Cornejo, who told local media that the move was yet another affirmation of Peru’s continued commitment to sustainable development for the benefit of its current and future population.
Culinary Tourism
Although international tourists’ primary reason for visiting tends to be to see cultural, historical and natural sites, they are increasingly attracted by Peruvian cuisine. According to a 2017 tourism survey conducted by the second-largest bank in Peru, BBVA Continental, 13% of those surveyed selected Peruvian cuisine as a reason to visit the country and according to PromPerú, 82% of tourists consider Peru a gastronomic destination, with 25% saying that Peruvian gastronomy is becoming more accessible in their home countries. This is in line with Peru’s global gastronomic prominence, having been recognised for the sixth consecutive year as the “Best Culinary Destination” in the world, according to the 2017 World Travel Awards. The award comes as Peruvian cuisine now has three restaurants in The World’s 50 Best Restaurants list for 2017, two of which were ranked in the top 10. Aside from Mexico, Peru dominates Latin America’s 50 Best Restaurants list, and has earned a total of eight different places, including the first and second spot with Lima’s Maido and Central, respectively.
Indeed, Peru’s gastronomy has helped boost the country’s tourism sector, especially in Lima. “Interest in the tourism sector has risen due to the growing tourist demand and the number of international events hosted in Peru annually. Lima has established itself as a prominent tourism hub based on different elements, including its gastronomy,” Miguel Deustua, general manager of Granadero Inmobiliaria, told OBG.
From near & Far
In 2017 a total of 3.7m international visitors were registered by Peru’s Tourism Observatory, 276,415 more than the previous year. The number of international visitors is set to increase by almost 7% in 2018, for a total of 3.9m visitors. The majority of the international tourists come from Chile (39%) and the US (16%); however, they do not spend the most, nor do they stay the longest. Those that stay the longest tend to be from further afield, such as Canada, France, Germany, Italy, Spain and the UK, staying for an average of 14 to 15 days. Tourists from Japan, Australia and Ecuador tend to spend the most, at $255, $243 and $187 per day, respectively.
Recent BBVA research shows that national tourism attracts approximately 15m tourists annually. Unlike international tourists who like to travel to higher-profile locations such as Lima, Cusco and Puno, national tourists’ most-visited sites include Ica, Ancash, Junin and La Libertad. Their average length of stay is five nights, with 84% staying in three-star hotels.
Peru’s government is promoting foreign tourism, which accounts for 28.7% of travel and tourism’s current GDP, whereas domestic travel spending generates 71.3%. Currently international tourism in Peru is considered low, hovering at 0.3% of global tourism. If international tourism increases, the sector could be more profitable as international travellers tend to spend seven times more than nationals. Domestic tourism is expected to grow by 4.3% in 2018, to a value of around PEN38bn ($11.7bn), due to a growing middle class with more disposable income.
Place-making Policies
In an effort to expand and increase tourism outside of already established locations and to reach the international tourism targets set by the previous administration, the government focused on regional and local tourism development in 2017 and 2018. In March 2018 Peru’s Congress passed a modification on the General Law of Tourism to open collaboration between the national and regional governments as well as other local entities. As part of modified articles in the law, regional governments are expected to develop a Strategic Regional Plan for Tourism (Plan Estratégico Regional de Turismo, PERTUR) that aligns with the National Plan, while serving as a planning and management tool for regional needs. It also provides increased autonomy to regional and local governments by allowing them to identify their own tourism development locations.
Supreme Decrees
An even more targeted policy with a direct tourism revenue impact is the assignment of non-work days through Supreme Decrees. The N 021-2017-TR Supreme Decree assigned four non-work days to prolong weekends in 2018 where already established national holidays occur. The decree’s intention is to ensure tourism rates and revenue from national tourism, as it accounts for the largest tourism percentage. The extended holiday is projected to mobilise 1.3m national visitors and up to $178m in revenue. These types of decrees are also utilised when events might impede or affect public sector employees, particularly in metropolitan Lima. Additional holidays for Lima’s residents result into higher revenue for the tourism sector, as they account for 87% – the highest in national tourism. Although a boost for the tourism sector, it is uncertain what parameters are required in order for an event to trigger the granting of a decree, especially as Lima continues to grow as a meetings, incentives, conventions, and exhibitions (MICE) location.
Event Centre
Peru is increasingly becoming an international events hub, with Lima at the heart of it all, benefitting the tourism sector as it diversifies its attractions and provides further visibility as a desirable destination, with 2017 seeing approximately 75 International Congress and Convention Association certified events held in Lima. As for larger-scale, non-professional events, between 2018 and 2019, Peru is scheduled to hold prime events accounting for significant revenue for the tourism sector.
Early 2018 was particularly busy with the visit of Pope Francis and the Dakar Rally in January bringing in an estimated revenue of $450m. Considering the scope for each event, tourist profiles were extremely different, highlighting Peru’s versatility to address tourists’ varied needs and interests. Dakar visitors maxed out lodging capacity in the Paracas area just south of Lima, where the race commenced, while an estimated 80,000 visitors came from neighbouring countries to see Pope Francis.
In 2019 the Pan American Games will be the primary sector driver. A first-time host to this event, Peru was selected on the first voting round by the Pan American Sports Organisation (Organización Deportiva Panamericana) in 2013 over other South American countries, such as Chile, Argentina and Venezuela. Ministry of Foreign Trade and Tourism (Ministerio de Comercio Exterior y Turismo, MINCETUR) estimates nearly 75,000 tourists will visit for the event which is projected to generate up to $300m. The benefits from an event of this size and scale will be direct and indirect, as not only athletes will be coming to Lima, but also the visitors and human infrastructure required for the third-largest sport event in the world. The event will contribute to hotel, transportation and food services in and around the city.
Tourism Campaign
The government continues to promote tourism by participating in international tourism fairs (14), business roundtables (22) and calling to action over 300 tour operators. In November 2017 a tourism campaign was launched by PromPerú at the World Travel Market event.
The “Peru, the richest country in the world” campaign illustrates Peru’s wealth in culture, history, biodiversity and gastronomy, demonstrating its versatility in tourist attraction and positioning itself to reach its own international tourist target for 2021. Peru’s marketing campaigns have proven effective, albeit with room for growth, considering that the country is ranked 39th out of 136 in perceived effectiveness.
Recognising the relative well-being of the sector while seeing room for growth, Peru is targeting China and India as countries with potential to supplement the sector, due in part to their strengthening business partnership with each country. The first half of 2017 saw the number of tourists from China increase by 32% as compared to the same period in 2016 and is a result of the Peru government facilitating entry into Peruvian territory with an 180-day, hassle-free visa for Chinese passport holders who also hold a valid visa for the US, Canada, UK or Australia.
A similar visa was issued to India’s citizens in an effort to increase tourism by 37% in the first two months of 2018 compared to the same period in 2017, according to MINCETUR. Additional business-to-business (B2B) strategies are being implemented in both countries to promote tourism.
Outlook
Peru’s brand is well established and the tourism sector will continue to grow. In the short to medium term, the outcome of the Peruvian governments efforts to increase tourism diversification while maintaining ecological integrity could be a model for the region to emulate. Peru faces the challenge of maintaining its momentum as an international destination, preserving the historical and ecological integrity of its sites and increasing international tourism rates while removing obstacles for the sector to contribute a larger portion towards the GDP.
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