COLOMBIA BANKING ON TOURISM BOOM -- BUT IS IT

UNCLAS BOGOTA 000713

SIPDIS

SIPDIS

E.O. 12958: N/A
TAGS: ECON EINV CO
SUBJECT: COLOMBIA BANKING ON TOURISM BOOM -- BUT IS IT
READY FOR PRIME TIME?

REF: A. (A) 07 BOGOTA 8592

B. (B) BOGOTA 540


1. (SBU) SUMMARY: A record-breaking 1.3 million foreign
visitors traveled to Colombia in 2007. Improved security,
better facilities, and a booming cruise business contributed
to the growth. With a new master plan for tourism, more
hotels under construction, and increased flights to the U.S.
and Europe, Colombian officials believe the number will
continue to grow, perhaps reaching four million by 2010.
Still, Colombian needs more tourist infrastructure, security
problems could hurt the industry, and the number of overland
visits might dry up if relations with Venezuela continue to
deteriorate. END SUMMARY

Record-Breaking Number of Tourists
--------------


2. (SBU) Travelers arriving by air and sea hit a record 1.3
million in 2007. In addition, 825,000 overland visitors
entered Colombia in 2007, raising the total to over 2.1
million. Oscar Rueda, Vice-Minister of Tourism, estimated
that the industry generated close to USD 3 billion in 2007,
or just over two percent of GDP, and directly employed
400,000 Colombians. While tourism's contribution to GDP in
Colombia grew, the numbers remain low compared to other
Latin American destinations such as the Dominican Republic,
Mexico and Argentina where tourism accounted for 6.3, 4.9 and
2.8 percent of GDP respectively in 2007. Rueda noted that
tourism to much of Latin America has been flattening in
recent years, opening more space for the Colombian market.
He predicted that the total number of visitors to Colombia
will grow to four million by 2010, with corresponding
increases in revenue and jobs.

"Real" Tourist Potential Even Greater
--------------


3. (SBU) Jean Claude Bessudo, the president of Colombia's
largest travel agency Aviatur, noted that up to now only a
fraction of 2007's 1.3 million foreign visitors were "real"
tourists, i.e. those who come solely for pleasure. Bessudo
explained that the GOC does not distinguish between those
coming to Colombia for family reasons, business or pleasure.
Bessudo estimated the number of "real" tourists in 2007 at
100,000, while Rueda estimated closer to 400,000. But both
agreed the percentage growth in such tourists since 2003 far
exceeded the growth in overall visitors. More importantly,
both said that while the market for business tourists would
continue to expand with increasing economic growth and
security, the pleasure tourist market offered Colombia the
greatest upside potential for substantial increases in the
overall number of visitors.

Security and GOC Support Critical
--------------


4. (SBU) Rueda called improved security the key to the 20
percent annual increase in tourism since 2003. He noted that
the number of homicides and kidnappings has declined
dramatically since 2002, creating a more positive
international image that has helped alleviate tourist fears.
Rueda added that the GOC also offered incentives to the
industry through legal and regulatory reforms. In 2006 the
GOC enacted a comprehensive tourism law with mechanisms to
regulate and rate hotels, and established a fund to promote
Colombia as a tourist destination. Jaime Alberto Cabal, a
former Minister of Economic Development and the head of the
hotel association COTELCO, expects the fund to grow from USD
1 million in 2007 to USD 15 million in 2008.


5. (SBU) Cabal described Law 788 of 2002 as critical since
it created "the world's most attractive hotel operating
environment." Under the law the national government waives
all hotel income taxes for 30 years for new hotels and a
percentage for remodeled hotels (e.g. if a hotel owner spends
USD one million renovating a hotel worth USD two million then
the GOC waives one-half of the tax). Cabal noted that law
788 sparked an explosion in hotel construction -- from USD 4
million in annual investment prior to the law to over USD 150
million in 2007. Occupancy rates also increased from 45
percent in 2002 to 58 percent in 2007. Cabal projects
construction of 25,000 new rooms between 2007-2010, with each
new 100 hotel rooms generating 76 jobs. Planned hotel
investments include a USD 33 million Royal-Radisson in
Cartagena, a USD 27 million Hilton Hotel in Bogota, two new
Marriotts in Bogota, and a new Holiday Inn in Medellin.
Colombia is also focused on increasing conference tourism,
recently inaugurating a new convention center in Cali, with

others planned for Santa Marta, Barranquilla, Armenia,
Popayan, Villa de Leyva and San Andres.

Easier Access By Air and Sea
--------------


6. (SBU) From 2003-2007 international and domestic air
passengers increased an average of 15 percent and 5 percent
per year, respectively. Bessudo said these numbers should
accelerate with a new U.S.- GOC aviation agreement that
increases flights by 50 percent (ref A) and other agreements
to increase flights to Spain and Brussels. Bessudo added
that the addition of low cost carriers, such as Spirit and
Jet Blue from the U.S. and Colombia's EasyFly, should reduce
costs for both international and domestic flights.


7. (SBU) Bessudo noted that although cruise ship passengers
represented less than 10 percent of tourists in 2007, they
nonetheless climbed significantly from 50,000 in 2006 to over
125,000 in 2007. Bessudo, whose agency handles 98 percent of
all cruise ship passengers arriving in Cartagena (the
destination of 75 percent of incoming cruise ships),expects
the number of port calls to increase from 75 in 2007 to 125
in 2008. He said that while ships land for only 3-4 hours,
each visit contributes an average of USD 200,000 to the local
economy. In addition, Bessudo estimates that ten percent of
all ship passengers who visit Cartagena return as tourists.
He highlighted last year's return of Royal Caribbean stops in
Cartagena after a six-year absence, and the company's recent
decision to initiate cruises from Cartagena, as factors
further contributing to substantial cruise tourism growth.

Developing a Master Plan
--------------


8. (SBU) Bessudo complained that the lack of a master plan
has hurt the tourist industry. He called the two year-old
"Colombian is Passion" country brand "ambiguous," and felt
the new slogan for tourism, "The biggest risk is that you'll
never want to leave," had negative connotations given
Colombia's kidnapping history. Ricardo Galindo,
vice-president for event tourism at Pro-Export Colombia, said
the GOC had recently started developing a tourism master
plan. Under the plan, Colombia will move from
"destination-driven" to "product-driven" tourism focusing on
eco-tourism (the Amazon, two coastlines, the coffee country),
cultural tourism (colonial cities, museums, fine
restaurants),and adventure tourism (scuba diving, sailing,
mountain sports). Pro-Export is working with the hotel,
airline and tour industry to put together product packages,
and Galindo hopes that within a year a tourist who wants to
scuba dive will be able to buy a single package with lodging,
in-country transportation, and diving. While recognizing
that Colombia cannot yet compete with Costa Rica for
eco-tourism or Mexico for cultural tourism, Galindo hopes
Colombia can become a second destination for experienced
travelers interested in something new, and offer the best
overall combination of multiple products.

But Challenges Still Exist
--------------


10. (SBU) Cabal recognizes that for Colombia to become a
prime destination it desperately needs to improve its tourist
infrastructure. The GOC's plan to build USD 6.5 billion
worth of better roads, and close to USD one billion in
airport improvements (ref B) should help. Still, Cabal
worries that the use of private concessions to fund most
projects could prove problematic given their checkered
history in Colombia. He also notes that additional flights
will generate increased pressure on Bogota's overtaxed El
Dorado international airport. While the airport started a
USD 650 million upgrade in September 2007, Cabal said tourism
will suffer if the upgrade fails to deliver a world-class
airport, or if construction problems make the airport worse.
The quality of the tourist product is also of concern; while
the GOC claims that one-half of the projected new 25,000
hotel rooms will be in four and five star hotels, Cabal
admitted that this is an internal Colombian rating and that
rooms and services regularly fall short of international
standards.


11. (SBU) Cabal, Rueda, Galindo and Bessudo agreed that if
security worsens all other efforts to strengthen tourism
would likely be for naught and terrorism directed against
tourists could crush the industry. While foreign government
travel warnings, particularly that of the U.S., hurt tourism,
they acknowledged that foreign governments were not likely to
remove warnings in the near future, particularly after events

such as such as January's kidnapping of six tourists from a
beach on the Pacific coast. Bessudo suggested creating
"Tourist Safe Zones" that had a GOC-guaranteed level of
security that foreign governments might agree to specifically
recognize in their travel warnings.

And Venezuelan Visitors Could Dry Up
--------------


12. (SBU) Rueda said that the 825,000 overland visitors who
stayed at least three nights in Colombia in 2007 were not
technically considered "tourists." Still, he said they play
a significant role in the economies of border departments as
many, particularly the 60 percent from Venezuela, come to
Colombia to buy goods not available in their countries.
Rueda noted that the number dropped from 875,000 in 2006 to
825,000 in 2007, and expressed concern that Venezuela might
restrict overland travel if bilateral relations continue to
deteriorate.

COMMENT: Not Yet Ready for Prime Time
--------------


13. (SBU) With Caribbean and Pacific coastlines, an Amazon
port, colonial towns and biodiversity second to none,
Colombia offers a potential tourist package that could be the
envy of the region. President Uribe recognizes this, and has
made tourism development a focal point of the GOC economic
development plan. But years of industry neglect have taken
their toll on infrastructure, hotel space, and a service
culture not up to international standards. Colombia is
determined to have the same tourist cache as Costa Rica,
Mexico and the DR -- and it can get there over time -- but
only if progress on security remains unabated. Despite the
security gains familiar to insiders, there is little margin
of error for a country whose international image is still
dominated by images of drugs and violence.
Brownfield