New construction in tourism industry – signs of recovery or misplaced optimism?

In 2006, the Tourism Ministers of various countries in the region came together at San Ramon for a conference and told Central American news providers that the tourism industry for the region as whole had grown by an average of 11%, which account for, on average, 5% of the region’s GDP for that year, in addition, there was astounding growth in the number of European tourists travelling to Central America, a 147% increase in fact.

This upward trajectory continued, the future was bright was the region, and so it should have been. Central America is, after all, one of the most beautiful regions in the world with dramatic scenery and landscapes, as well as a very stable regional political model with the Central American Integration System providing a substantial degree of cooperation and close diplomatic ties between member countries (CAIS).

It is a safe, affordable and exotic place to visit then. So exotic that Costa Rica alone account for 5% of the entire world’s biodiversity, and all along the region’s Caribbean coastline there are lush rainforests, sandy white beaches and hotel resorts.

Then disaster struck in late 2008. It is said that when American sneezes the world catches a cold. In this case, America sneezed and the world caught the flu, while Central America suffered pneumonia. When the United States broke the world’s economy visitor numbers in Central America dropped away dramatically, across the region countries were seeing double-digit declines in visitor numbers.

Costa Rica, the former golden child of Central America, was forced to spend $500,000 on an ad blitz in the US that did little to stem the tide of the economy.

Tourism related services suffered, workers were let go, hotels battened down the hatches and hoped for the worst while balance sheets became bathed in red. A regional forum on the tourism industry, held in Granada in 2009, saw all Central American countries coming together to discuss the situation, but Central American news media reported that little had been decided by way of what to do…everyone simply agreed that the situation was bad. Very bad.

The situation wasn’t helped by military coup in Honduras in 2009, which reflected badly on the entire region, painting a region once known for its political stability with a wide-brimmed brush that made it seem volatile and unsafe.

Now as the Great Recession of 2009 (as some are calling it), begins to release its icy grip, the region is somewhat poised for recovery, construction is up around the region, new resorts are being built, expanded or upgraded and, while the Ash crisis of 2010 made a temporary blip in the recovery, it is expected that tourism this year will be better than the last.

There are a total of over 11,000 rooms currently being constructed around the region, with the majority of them (around 50%) catering to the upper-upscale to upscale market segment. Those in the field seem to expect tourist numbers to increase significantly in the near future then, and furthermore, they seem to expect those tourists to pay good money to come and stay in Central America.

Perhaps the worst is over then, or perhaps a massive over-supply of hotel rooms, like the situation facing Dubai’s tourism industry, will hamper our recovery yet further.

It’s simply a case of wait and see, as usual.