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 -------------- SUMMARY -------------- ¶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. -------------- TOURIST GROWTH IN 2005 -------------- ¶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. -------------- -------------- FOREIGN ARRIVALS VIA EZEIZA INTERNATIONAL AIRPORT IN 2005 -------------- -------------- ¶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 BUENOS AIR 00000727 002 OF 005 ¶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/ -------------- -------------- CRUISE SHIPS AND PORT ARRIVALS IN BUENOS AIRES IN 2005 -------------- -------------- ¶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. -------------- GAY TOURISM IN 2005 -------------- ¶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. -------------- HOTEL GROWTH IN 2005 -------------- ¶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. -------------- -------------- THE GOVERNMENT'S NEW TOURISM LAW AND TOURISM PLAN -------------- -------------- ¶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 -------------- TOURISM GROWTH IN 2004 -------------- ¶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 BUENOS AIR 00000727 004 OF 005 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 -------------- U.S. TOURIST DESTINATIONS IN 2004 -------------- ¶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 BUENOS AIR 00000727 005 OF 005 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 -------------- COMMENT -------------- ¶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. ¶16. (U) To see more Buenos Aires reporting visit our classified website at: hhtp://ww.state.sgov.gov/p/wha/buenosaires Gutierrez