Tourism is regaining its place in Colombia’s economy, after being put on hold for several years due in particular to the actions of the Revolutionary Armed Forces of Colombia (FARC). Today the government is working to reestablish internal security in the country and this has no small effect on the destination’s economic health. All indicators are now in the green, especially as far as concerns the hotel industry. In constant search of new investors to develop its supply, Colombia promotes all its assets: growth in business tourism, fiscal advantages for the tourism sector. The right choices remain to be made to preserve the prosperity of the hotel market.
- Population: 46 million- Surface: 1,141,748 km²- Hotel number: 9000- Room number: 155 000- Tourism arrivals: 3.35 million tourists in 2011- Key Source markets: United States, Venezuela, Ecuador
The relentless struggle of the former president Alvaro Urine against the Revolutionary Armed Forces of Colombia (FARC) and drug trafficking made it possible for Colombia to achieve positive economic indicators. Implemented in 2001 and continued by Santos’s government, with a more marked social component, the « democratic security » policy ended with a decrease in the insecurity in the country and the liberation of close to 500 hostages held by the FARC, including the high profile release of Ingrid Betancourt in 2008. Since 2003, Colombia’s economy has experienced steady growth by around 4% a year and its GDP is up by 5.9% for 2011, to 321.5 billion dollars. With such indicators, the country climbed to 4th position in the classification of South America’s economic powers, just after Brazil, Mexico and Argentina. The conflict with the FARC is nonetheless not yet over, but peace negotiations between the revolutionary forces and the government began last November 19 in Havana, Cuba, and should end in November 2013 at the latest. In the meantime, thanks to implemented policies, the country’s «security perception» index dropped from 13.11 in 2000 to 0.44 in 2012.Tourism takes off After being on standby for several years because of security problems that tarnished the destination’s appeal, tourism regained dynamic growth. With stable and positive activity indicators, the sector imposed itself as the second source of revenue in Colombia after the oil industry. According to the World Tourism and Trade Council (WTTC), Colombian tourism represents 5% of the GDP in 2011, or 30 billion dollars, and forecasts announced growth by 4.8% in 2012. That same year, the occupancy rate in the destination reached 3.35 million visitors, or 7.3% more than the previous year. On the whole, close to 2 million come from international markets, up by 10%, with the United States in the lead (20.1% of occupancy), Venezuela (14.5%) and Ecuador (6.9%). These results are well above the 790,000 international travelers who crossed Colombia’s borders in 2004. This uptrend should be confirmed by 2012, since the World Tourism Organization (WTO) expects 3% to 4% growth in international arrivals in Colombia, confirmed in the first nine months of 2012 with +0.6% growth in occupancy. The government hopes to reach new Bogota records in the near future with a goal of 4 million tourists for 4 billion dollars in revenues to reach by 2014, versus 3 billion dollars in 2011. Most of the tourist activity in the country is concentrated in the cities of Bogota, Carthage and Medellin, especially for their Business sector and cultural dynamism. The capital alone receives close to 50% of tourist visits on the territory, with over 1.6 million visitors in 2011.Business tourism makes a place for itself worldwide The success of tourism in Bogota is naturally linked to its Business activity, which is very dynamic like that throughout Colombia. In all, more than 2,500 international businesses are established in the country, allowing it to create a position for itself among international business destinations. In 11 years, the country presided over by Juan Manuel Santos climbed 18 positions in the ranking for international events, realized by the International Congress and Conventions Association (ICCA). Thus, with 113 events organized versus 73 in 2008, Colombia left behind its position on the 50th rung in 2011 to climb to 32nd place in the global ranking and 4th in Latin America. In 2011, the number of business travelers in Colombia grew by 40% over 2010, with more than 124,000 foreigners participating in the different events. Business tourism thus represents 8% of the total of travelers who came to the country in 2011.The destination’s rapid rise on the business tourism market is partly due to improved airline service and its infrastructures. Since 2000, the number of international airline connections from Colombia increased by 125%, to reach 800 direct weekly connections to different airports in the country. The destination also offers 18 convention centers and traditional auditoriums, belonging for the most part to upscale hotels. The growing demand for several years pushed the government to launch the construction of a new exhibition and convention center in the city of Barranquilla. Representing an investment of close to 300 million dollars, the complex, which is scheduled to open at the end of 2014, will be spread over 40 hectares and will be one of the biggest convention centers in Colombia.This development corresponds to the government’s will to reinforce its reception infrastructures in order to position itself as an ideal destination for organizing events with an international reach. These efforts paid off since Colombia should accommodate seven additional international events in the years to come. These will include the World Energy Council (WEC), the Latin American Council of Social Sciences (Clacso), and the Sociedad Design & Emotion.A reinforced and modernized hotel supply To accompany the growth of its business tourism and leisure activity, Colombia boosted the whole of its hotel supply. “Thanks to the economic development of the country, its fiscal advantages and its international notoriety, major national and international hotel players invested in Colombia, generating around 11,000 new rooms on the market during the last seven years,” explains a representative at Proexport, the entity responsible for promoting Colombia abroad. The country’s hotel supply thus grew by 25% during this period, with 11,700 other rooms renovated. The National Register of Tourism estimates the number of hotels in the country to be 9,000 for 155,000 rooms. Bogota alone has 654 hotels for 27,300 rooms, Cartagena has 423 properties for 10,000 rooms and Medellin has 210 hotels representing 8,600 rooms. Colombia has also implemented a program to modernize its tourist services with the launch of «Calidad Turistica» certification, which defines qualitative standards for all the tourism properties in the country. Today, 76 hotels are certified: 35 five star, 22 four star and 19 three star.In 2012, 22 new properties reinforced the hotel supply in the country, representing 2,500 new rooms. International hotel groups actively participate in the development of Colombia’s supply, especially in the city of Bogota which currently has more than 39 properties for 5,400 rooms operated under international brands. But the capital hopes to reach 6,800 rooms on this segment by the end of the year 2015. Among the international chains present in Colombia today may be found Hilton, Holiday Inn, Marriott, Sofitel, Ibis, JW Marriott, Tryp Hotels, InterContinental, Radisson Blu, NH Hoteles, Hyatt, Wyndham, Meliá, as well as Aloft. Despite the strong development experienced by Colombia’s hotel industry in recent years, the occupancy rate at properties in the primary destinations remains high, especially in upscale and luxury categories, which represent one third of the room supply in Colombia. Certain sectors even show an insufficient supply to meet the demand, such as Business tourism, leisure resorts and ecotourism destinations. As far as concerns the country overall, occupancy rates for hotels have been steady for several years at more than 50%. In January to August 2012 they reached 53%, or 1.8 points more than last year on the same period. To make up for this shortage of rooms at major tourist destinations in Colombia, the government plans to increase the hotel supply in the country by 22,000 rooms by the end of 2014, by building or expanding some 355 hotels. The World Tourism Organisation (WTO) thus expects to see growth by 10% to 12% of the number of rooms in Colombia in the years to come. According to Proexport: «The hotel occupancy rate in August 2011 was around 53%. This rate always stayed above 50% and did not drop, even after the hotel supply grew.”Future investments In order to reach its goals for growth in the hotel supply, the Colombian government implemented an incentive policy to encourage foreign investments. International groups that wish to open properties in the destination benefit from tax exemptions on revenues for 30 years for all investments made between 2003 and 2017 to build, develop and renovate hotels. Other measures have also been launched on the market: tax exemption on revenues for 20 years for all activities concerning ecotourism (since 2003), total or partial suspension of customs duties and the transfer of the VAT to equipment used for the importation of tourist services. Several opportunities are available to international hotel groups, whether they are luxury hotels in Bogota, resorts in Cartagena, business hotels in Barranquilla, or hotels with limited services in Medellin.The implementation of these fiscal measures revitalized the hotel investment rate in Colombia in recent years. From 1.7 billion dollars in 2010, it grew to close to 2 billion dollars in 2011. Recent developments mostly concern the fivestar segment and the cities of Bogota, Cartagena and Medellin. The capital thus awaits the concretization of nine projects by international hotel groups in the course of the next three years, for a total of 1,568 rooms. International chains consider Bogota to be the fourth most favorable market for investments after Buenos Aires, Lima and Santiago, Chile. Among the forecasted openings, the W Bogota should open its doors in the year 2014. Starwood Hotels & Resorts Worldwide signed an agreement with Terranum Hotels for the development of the 168-room property, including 20 suites. According to the co-president of the Americas for Starwood Hotels & Resorts, Osvaldo Librizzi, “Bogota is one of the economies experiencing the strongest growth rate in Latin America, and is also a destination recognized in the fashion, music and gastronomic worlds.” Spanish hotel groups are actively participating in the development of hotel infrastructures, for example Hotusa Hotels, which is taking over the management of the BD Bacatà project through its brand Eurostars Hotels. Located in the urban center of Bogota, the 240-meter tower has 40 of its floors dedicated to the hotel business, for 323 rooms that will be opened in 2014. Other properties are planned for the Colombian capital: a 261-room Wyndham hotel in 2012, the Urban Royal Calle 26 with 90 rooms in 2013, the 90-room Tryp Park in 2013, the 65-room Estelar Calle 100 in 2013, the 125-room Four Points by Sheraton in 2013, and the 297-room Grand Hyatt in 2015. As far as concerns the whole of the country, the Colombian Minister of Commerce, Industry and Tourism announced it will create 25 tourism infrastructures in order to optimize, among other things, regional destinations for nature, beach, water sports, cultural and health tourism. Hoteliers are also present since Hyatt plans to reopen a Hyatt Regency in the city of Cartagena, NH Hoteles announced nine new properties at the destination in the forthcoming years, and Melià International will open two hotels: in Medellin and Cartagena. In light of this increasingly dynamic rate of investments, especially in the cities of Bogota, Medellin and Cartagena, some Colombian hoteliers are concerned the offer will outgrow demand in the years to come, thereby affecting their properties’ rates. «Investments made in the cities of Medellin, Cartagena and Bogota will considerably increase the hotel supply in these areas, which could affect rates for certain hoteliers by creating a surplus of the supply with respect to demand. At Cotelco, we believe it would be more prudent to determine together with the government which cities and sectors are open to investment so that the hotel supply does not grow disproportionately, thereby negatively influencing rates,” explains Juan Leonardo Correa, president of the Colombia National Hotel & Tourism Association (Cotelco), in Colombia’s press. On the other hand, as far as concerns the capital of Bogota, the president is not worried: “In a way, it is certain that the investments are very dynamic in cities such as Bogota. Colombia must attract brands with international renown and we know that today this is done through franchises. In these areas, growth must not be excessive.”In addition to problems related to the dynamism of its development in recent years, Colombia’s tourism and hotel industry must now face new challenges. A 6-point increase in the percentage of the VAT for the hotel industry threatens the sector. It could increase from the current 10% to 16% in the months to come. Cotelco firmly opposes this new measure and warns against the negative effects that it could have on the hotel sector. Properties would thus find themselves forced to increase their room rates in the short term, particularly in certain cities where operating costs are high, as is the case in Bogota and Cartagena. The competitiveness of the market with respect to other countries in the region would thus be affected, opening the way to irregular practices in the tourism accommodations sector and slowing the industry’s reinforcement and modernization process.
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