NICARAGUA: SLOWER GROWTH IN TOURISM SECTOR IN 2007

UNCLAS MANAGUA 000122 SIPDIS SENSITIVE SIPDIS USDOC FOR 4332/ITA/MAC/WH/MSIEGELMAN 3134/ITA/USFCS/OIO/WH/MKESHISHIAN/BARTHUR E.O. 12958: N/A TAGS: ECON EINV NU SUBJECT: NICARAGUA: SLOWER GROWTH IN TOURISM SECTOR IN 2007 REF: A) 07 MANAGUA 2551, B) 07 MANAGUA 1789, C) 07 MANAGUA 452, D) 07 MANAGUA 341, E) 07 MANAGUA 2376 SUMMARY -------------- ¶1. (SBU) The Nicaraguan Tourism Institute (INTUR) reported that the tourism industry grew 6% in 2007, down from 2006's 8.6% and did not fulfill industry's expectations. Some industry experts question the veracity of INTUR's data, noting that sales for many tourism entrepreneurs have dropped by an average of 30-40%. The reasons for the sector's slowdown include unreliable electricity and water supplies, policymaking paralysis at INTUR, and unhelpful political rhetoric by senior Government of Nicaraguan (GON) officials that have scared off foreign tourists and investors alike. Granada, a bellwether for the industry, has been particularly hit hard and many businesses have either closed or laid off workers. Entrepreneurs are cautiously optimistic that the tourists will come back in 2008. TOURISM SECTOR GROWS -- BUT BELOW EXPECTATIONS -------------- - ¶2. (SBU) On December 27, Mario Salinas, Executive President of the Nicaraguan Tourism Institute (INTUR),reported that Nicaragua's tourism income grew by 6% in 2007, versus an 8.6% hike in 2006. The government counted 819,801 foreign visitors to Nicaragua in 2007 (including family visits, business travel, and leisure travel) who spent $244.8 million. In 2006, 773,398 foreigners visited Nicaragua and spent $231 million. Salinas conceded that INTUR and industry had hoped for 12% to 16% growth in 2007 -- and reported that INTUR's goal for the tourism sector in 2008 was 10% to 11% growth. SOME INDUSTRY EXPERTS SKEPTICAL OF INTUR'S DATA -------------- -- ¶3. (SBU) Raul Calvet, president of a tourism and real estate services firm, noted that INTUR data is poorly prepared and does not distinguish between family visits, business travel, and leisure travel (tourism). According to Calvet, failure to disaggregate these types of visitors makes it difficult to identify industry trends. For example, experts suggest that business travel was strong in 2007; the managers of three major hotels in Managua report that hotel occupancy rates across the city were very high during the year. ¶4. (SBU) Leisure travel, on the other hand, appears to have declined. Alfredo Gutierrez, President of the Nicaraguan Association of Receptive Tourism (ANTUR),and Ivan Bugna, President of the Nicaraguan Chamber of Small and Medium Tourism Companies (CANTUR),both were publicly skeptical of INTUR's claim that the tourism sector achieved even 6% growth. Gutierrez reported that his contacts in the tourism industry have complained that their sales were down by an average of 30-40%. REASONS FOR THE SLACK IN TOURISM -------------- ¶5. (SBU) Lucy Valenti, President of the National Chamber of Tourism (CANATUR),identified the primary reasons for slowing tourism growth in 2007 were unreliable electricity and water supplies, unhelpful political rhetoric from senior Government of Nicaragua (GON) officials that scared off foreign tourists and investors, and policymaking paralysis at INTUR. This paralysis has affected the active promotion of Nicaragua's tourism sector, the approval of projects in a timely manner, the compilation of statistical data, and the formation of a strategic vision for the industry (Ref A). Valenti and Calvet added that property claims disputes in areas such as Tola (Ref E) had a negative impact, particularly on U.S. investors interested in the tourism sector. Communities that rely on leisure travel, such as Granada and San Juan del Sur, were especially hard hit. GRANADA HIT HARD -------------- ¶6. (SBU) Granada, a colonial city located 20 miles south of Managua, is Nicaragua's leading leisure tourist destination and a bellwether for the sector. According to INTUR, 80% of all foreign tourists who come to Nicaragua visit Granada during their stay. The town is also a popular weekend destination for Nicaraguans. However, the lack of reliable electricity and water supplies, coupled with political uncertainty, took their toll on Granada in 2007. Granada tourism experts and entrepreneurs told us that sales dropped by an average of 30%, and that more than 230 small businesses closed their shops last year. Businesses that remain open have reduced their inventory, especially for perishable goods, and some have had to cut staff. ¶7. (SBU) Several hotels in Granada that normally operate at full occupancy in November and December -- the beginning of the high season for tourists in Nicaragua -- experienced higher vacancy rates than anticipated. The manager of Hotel Alhambra estimated that his sales were down 20% because of unreliable utilities, noting that many foreign tourists visited only for the day. The manager of Hotel Casa de Alto reported that his sales dropped 60% because of unreliable power and international visitor perceptions that the Ortega administration is hostile to foreigners. The manager of Roadhouse Bar and Grill, one of the most popular restaurants in Granada, said his sales were down between 40% and 50% because of unreliable electricity and water supplies. Blanca Coronel Kautz, INTUR's local representative in Granada, dismissed these concerns, claiming that tourism for 2007 was normal -- and that the businesses had closed their operations because of bad management. COMMENT -------------- ¶8. (SBU) Business owners are cautiously optimistic about prospects in 2008. They believe that tourists will return to Nicaragua after they realize that the Ortega administration's "bark is worse than its bite." However, they doubt that the GON fully understands or can take the necessary steps to resolve the sector's problems -- the importance of maintaining a welcoming international image, improving electricity and water supplies, and the crucial need for building better roads. If Granada is any indication about the trajectory of the sector, the outlook is indeed bleak. End Comment. TRIVELLI