ARGENTINA'S TOURISM SECTOR CONTINUES TO EXPERIENCE

UNCLAS SECTION 01 OF 05 BUENOS AIRES 000727

SIPDIS

SIPDIS
SENSITIVE

E.O. 12958: N/A
TAGS: ECON AR
SUBJECT: ARGENTINA'S TOURISM SECTOR CONTINUES TO EXPERIENCE
RAPID GROWTH AND INVESTMENT


1. (U) Sensitive but unclassified, not for internet
distribution

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SUMMARY
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2. (U) Argentina received a record number of 3.7 million
foreign tourists in 2005, a twelve percent rise over 2004.
Argentina's tourist sector was the third most important
source of foreign exchange revenue, amounting to USD 2.6
billion and employing 1.5 million people in 2005. The
Ezeiza International Airport continues to be the primary
gateway to Argentina. Cruise liners are docking in Buenos
Aires in increasing numbers, leading to a proposal to create
a separate port. The hotel industry has made large-scale
investments throughout Argentina and the construction of
hundreds of new hotels is underway. The GOA's current
tourist plan has made a firm commitment to place the tourism
sector on an expansionary path. End Summary.

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TOURIST GROWTH IN 2005
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3. (U) Argentina received a record number of 3.7 million
foreign tourists in 2005, a twelve percent increase over

2004. Argentina's tourism sector was the third most
important export industry in terms of national income in
2005, representing 2.5 percent of GDP. Tourists spent USD
2.6 billion, a 9 percent increase from 2004. The tourism
sector directly and indirectly employs 1.5 million workers
or 8 percent of the country's workforce. The industry has
been expanding at a rapid pace since the devaluation of

2002.

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FOREIGN ARRIVALS VIA EZEIZA INTERNATIONAL AIRPORT IN 2005
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4. (U) The number of tourists arriving via Ezeiza
International Airport was 1.8 million in 2005, up 20 percent
from 2004. The U.S. is second only to Brazil with the
number of foreigners entering Argentina through Ezeiza
International Airport. Tourists spent a total of USD 1.330
billion and over 18 million combined days in Argentina.
Tourists spent an average of USD 75 per day. Vacation was
the primary purpose for tourist travel, accounting for 55.1
percent of total arrivals. Business trips constituted 23.7
percent, visits to family and friends accounted for 17.5
percent and studying abroad and medical treatment provided
the remaining 3.7 percent (see Table 1).

Table 1
Foreign Arrivals Entering Argentina Via Ezeiza International
Airport (in thousands of passengers)

Ranking 2004 2005 Percent Change
05/04


1. Brazil 238.007 304.914 28.1

2. United States 202.038 250.942 24.2

3. Chile 188.589 212.566 12.7

4. Spain 127.937 162.126 26.7

5. Italy 89.118 96.113 7.8

6. Mxico 52.511 69.739 32.8

7. Per 58.521 63.952 9.3

8. France 57.028 62.262 9.2

9. Colombia 43.079 53.029 23.1

10. Germany 46.163 52.568 13.9

11. Great Britain 39.772 46.650 17.3

12. Venezuela 20.899 29.323 40.36

13. Ecuador 24.418 26.542 8.7

14. Bolivia 25.043 26.126 4.3

15. Canada 19.121 25.656 34.2

16. Uruguay 19.879 23.587 18.7

17. Paraguay 16.140 21.226 31.5
5

18. Australia 16.745 20.513 22.5

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19. Israel 14.700 18.235 24.7

20. Japan 15.624 16.678 6.7
Rest of the World 260.712 312.458 19.8
Total 1.473.835 1.769.310 20.0

Source: National Institution of Statistics and Census
http://www.indec.gov.ar/

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CRUISE SHIPS AND PORT ARRIVALS IN BUENOS AIRES IN 2005
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5. (U) 54 cruise liners with 65,000 passengers docked in
Buenos Aires during 2004-2005. It is estimated that 75
cruise liners with 90,000 to 100,000 passengers will dock in
Buenos Aires in 2005-2006. The cruise liners' primary
destination is Buenos Aires and they bring in an estimated
USD 30-40 million per year to Argentina's economy. Cruise
liner tourists spend on average USD 150-200 per day and stay
an average of two days. Cruise liner companies pay between
USD 65,000-80,000 for each stopover in Buenos Aires,
providing an estimated USD five million in yearly port
revenue. The city of Buenos Aires is considering a proposal
to build a separate port for cruise liners because of the
increase of cruise traffic and the congestion in the
existing port facilities.

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GAY TOURISM IN 2005
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6. (U) Gay tourism represented 20 percent of all tourism in

2005. The gay tourists' main destination is Buenos Aires
which is followed by Patagonia, Cordoba, Mendoza and
Rosario. An estimated 80 percent of the gay tourists are
from the U.S. Europe, Canada, South Africa, and Australia
provide 18 percent, and Latin AMERICA forms the remaining
two percent.


7. (U) Buenos Aires will host South America's first gay
five-star hotel which will be inaugurated at the end of

2006. The hotel will be owned by the Spanish-owned Axel
hotel chain and will cost USD 3.5 million. It will be
located in San Telmo, a growing gay quarter of Buenos Aires
which markets itself as "gay friendly." Cruise liners are
also catering to the growing number of gay tourists.
Atlantis, a five-star gay cruise liner, recently docked in
Buenos Aires and ticket costs for the cruise liner range
from USD 2,500-6,500 per person.

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HOTEL GROWTH IN 2005
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8. (U) Argentina's hotel sector is expected to attract
investment totaling more than USD 1.4 billion in 2006, a 207
percent increase over the USD 456 million invested in 2005.
There are building projects for more than 200 new hotels
underway, a sharp increase from the 45 hotels built during
the 1991-2001 period. For example, Cordoba Province has
confirmed hotel investments totaling ARP 170 million (USD
58.9 million) until 2007 while Neuquen province has
prospective hotel investment totaling ARP 46 million (USD
15.9 million) for 2006.


9. (U) The rapid growth of hotels is attracting
international hotel chains to come to Argentina. The
Spanish corporation Husa gave its brand to the traditional
Gran Hotel Buenos Aires earlier this year. One condition
imposed by the Spanish chain on the current owners is that
all rooms 40 years or older must be remodeled. The total
investment for this remodeling is estimated at ARP 3.4
million (USD 1.2 million). Husa's entrance into the
Argentine market is the company's first experience in South
America. Officials from the Husa Corporation have stated
that their intention is to add more hotels in Argentina,
Brazil, China, and Uruguay. France's Sofitel hotel chain
has opened two five-star hotels in Buenos Aires in recent
years. The Hilton international hotel chain will invest USD

BUENOS AIR 00000727 003 OF 005


15 million in building a five-star hotel in the Iguazu
National Park, in a nine-hectare property provided by the
government of Misiones Province. Misiones Province Governor
Carlos Rovira is reported to have said that including this
and other initiatives, there is about USD 100 million in
hotel investment in the Iguazu Falls area alone. The Hilton
hotel chain also has plans to give its name to a new five-
star hotel in Ushuaia in Tierra del Fuego Province. The
Sheraton hotel chain also gave its name to two brand-new
five-star hotels in Salta and Cafayate in the wine country
of Salta Province.

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THE GOVERNMENT'S NEW TOURISM LAW AND TOURISM PLAN
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10. (U) Law 25,997, passed in August 2004, is designed to
outline a national tourism plan for the country. The law
applies a five percent tax on international flights, and
directs the appropriated funds into an account that is to be
used solely for the development of Argentina's tourism
sector. The original law, Law 14,574, passed in 1958,
established a national tourism fund that applied only a one
percent tax on international flights. Law 23,522, enacted
in July of 1987, modified the 1958 law and raised the tax on
international flights from one to five percent. The
national tax fund was insolvent until 2002, when the GOA
decided to direct the flow of funds back to the fund.


11. (U) The GOA invested ARP 1.6 billion (USD 554 million)
in the tourism sector in 2005. Of this amount, ARP 490
million (USD 159 million),or 88 percent, was appropriated
to enhance the infrastructure in underdeveloped tourist
areas. The GOA's plan is designed to increase cooperation
between the public and private sectors. The plan is to be
completed by 2016, and is to be initiated in four stages,
the first began in 2004. The GOA is expecting the second
stage to be completed in 2007, and the third and fourth
stages to be completed in 2010 and 2016. The GOA
conservatively predicts that the revenue earned from the
tourism sector will double to USD 4.727 billion by 2016 (see
Table 2). We believe this number understates Argentina's
potential.

Table 2
Government Expectations for Tourism Sector

Year Total Revenue Earned Revenue
Per
Foreign from Tourism Tourist
Tourists Sector (USD Billion) (USD
Million)

2004 3,352,572 2,491 1,345
2007 4,015,759 3,346 1,200
2010 4,419,466 3,867 1,142
2016 5,087,904 4,727 1,076

Source: Secretary of Tourism
http://www.turismo.gov.ar/esp/menu.htm

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TOURISM GROWTH IN 2004
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12. (U) The GOA has not published extensive tourism data
for 2005 although comprehensive tourist information is
available for 2004. Argentina received a record 3.3 million
foreign tourists in 2004, surpassing the 1998 record of 3.0
million. Total tourist arrivals to Argentina increased 11.9
percent in 2004. The majority of tourists arrived from
neighboring Chile, Paraguay, and Uruguay. The growth in the
number of tourists was driven by an increase in visitors
from Chile, Uruguay, Europe, and North AMERICA (see Table
3).

Table 3
Number of Foreign Tourists-By Country of Origin


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Country 2003 2004 Percent Change
04/03

Bolivia 590,678 690,321 16.2
Brazil 350,298 361,699 3.25
Chile 767,758 831,938 8.36
Paraguay 429,792 458,967 6.8
Uruguay 363,107 429,681 18.3
North AMERICA 224,472 259,360 15.5
Rest of S.A. 229,630 242,411 5.6
Europe 455,998 242,411 21.7
Rest of The world 114,538 144,337 26
Total 2,995,272 3,352,572 11.9

Source: Secretary of Tourism
http://www.turismo.gov.ar/esp/menu.htm


13. (U) Tourism revenue of USD 2.491 billion in 2004
surpassing the grains sector (USD 2.704 billion) and oil
exports (USD 2.200 billion) and has more than doubled that
of meat exports (USD 1,200 billion). European tourists
generated the largest percent of foreign revenue (29 percent
in 2004),followed by Chileans (17 percent),North Americans
(13 percent),and Brazilians (9 percent). European tourists
had the longest average stay with 19 days, although they
spend the least, USD 62 per day. Chileans, Brazilians, and
Paraguayans have shorter average stays, 6 days, but spend
the most, USD 91 per night. This is because many of the
South American visitors come to take advantage of
Argentina's low exchange rate (see Table 4).

Table 4
Revenue from Foreign Tourists-By Country of Origin
(USD Millions)

Country 2003 2004 Percent
Increase
04/03

Bolivia 26 34 30.8
Brazil 195 226 15.9
Chile 346 425 22.8
Paraguay 173 225 30
Uruguay 117 154 31.6
Rest of S.A 195 231 18.5
Europe 529 723 36.7
United States 247 315 27.5
Rest of World 114 158 38.6
Total 1,942 2,491 28.3

Source: Secretary of Tourism-
http://www.turismo.gov.ar/esp/menu.htm

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U.S. TOURIST DESTINATIONS IN 2004
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14. (U) Buenos Aires was the primary tourist destination
for U.S tourists in 2004. Some 87 percent of U.S. tourists
visited Buenos Aires where they stayed an average of 8.5
days in 2004. Approximately 75 percent of businesses that
operate in the tourism sector are concentrated in the city
of Buenos Aires and Buenos Aires Province. The second-most
popular location was Patagonia, attracting 14.9 percent of
the U.S. tourist population with an average stay in of five
nights. Iguazu falls attracted 7.1 percent of U.S tourists
with an average stay of two nights. The Atlantic coast, Mar
del Plata in particular, took 4.9 percent with an average
stay of five nights. Cordoba received 4.8 percent but had
the longest average stay of 11 nights. Mendoza, Argentina's
largest wine producer, secured 4.1 percent with an average
of eight nights (see Table 5).

Table 5
Percentage of U.S. Tourists that Visited Tourist Locations
and
Average Nights Stayed 2004

Area Percent of

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Tourists Number of
Nights

Buenos Aires 87.1 9-10
Patagonia 14.9 5
Cataratas de Iguazu 7.1 2
Atlantic Coast 4.9 5
Cordoba 4.8 11
Mendoza 4.1 8

Source: Secretary of Tourism: National Tourist Development
Agency

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COMMENT
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15. (U) The collapse of the convertibility regime and move
to a market-based exchange rate regime in 2002 made
international travel to Argentina relatively inexpensive
leading to the rapid growth of international tourism.
Argentina is now considered a "dame dos" country in that
tourists from neighboring countries now buy two items
instead of one because the prices are so attractive in their
own currencies. The rise in tourism has spurred investment
and created employment in all parts of the country which
helps explain the GOA's commitment of resources and revenue
to the tourism sector. Tourism revenue could easily exceed
the GOA's 2016 estimate of USD 5 billion, according to some
industry analysts.


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