Markets Hope for Recovery Year in 2008

September 28, 2007

After several years of consistent growth, Nicaragua s tourism industry the country s number-one economic motor and the lifeblood of an emerging economy along the Pacific coast has entered into a period of flux due to the continued energy crisis and a rudderless Nicaraguan Tourism Institute (INTUR), which has gone through three ministers in the past eight months.

Yet despite the difficulties and recent lack of international promotion, the good news is that the tourism industry is not on the decline, according to industry leaders.

Tourism may have leveled off temporarily, but it is not in a recession, said Juan Ivan Bugna, president of the Small- and Medium-Sized Tourism Business Chamber (CANTUR), which represents a majority of the country s tourism businesses.

The preliminary tourism numbers from INTUR show that 386,244 tourists entered the country during the first six months of 2007, for a 3.1% increase from the same period last year. The majority of those tourists were Central Americans, representing more than 63%, followed by North Americans, at around 28%. U.S. citizens represented 21.5% of the market.

While Managua s AugustoCésarSandinoInternationalAirport has reported a dramatic 32.6% increase in the number of tourists during the first semester of this year, the number of tourists entering Nicaragua by land at the Peñas Blancas crossing on the Costa Rican border has dropped equally dramatically, by 27.8%, according to INTUR.

The government claims the decrease in traffic over the Peñas Blancas crossing is due to the recent implementation of a tourist visa charge to Costa Rican citizens entering Nicaragua. But the statistics clearly show that the number of North Americans and Europeans crossing into Nicaragua by land has also dropped, almost by half.

Many in the tourism industry claim that the country s politics matter little to tourists, who come here for the beaches, sun and fun, not revolutionary discourse. The ongoing daily blackouts, Bugna insists, have hurt national tourism more than anything else.

With the blackouts, Nicaraguans don t want to travel and leave their homes dark and unattended, he said.

There are, however, some notable exceptions, especially among wealthier Nicaraguans who can afford guards to watch their homes.

Mauriel Soto, of the Villas de Palermo condominium project than rents units overlooking San Juan del Sur, says that in the first week of August alone his development broke their all-time single-month occupancy record.

At nearby Pelican Eyes… Piedras y Olas, a luxury resort geared toward high-income foreigners, owner Chris Berry reports no slowdown in tourism traffic. Berry said that despite the recent expansion to the project, Pelican Eyes is maintaining a near 75% occupancy rate this year.

Farther up the coast, at the popular Vista Mar resort in Pochomil, marketing manager Alfredo Gónzalez reports that the tourism numbers dipped during the first half of the year, due to international cancellations, less national tourism and a decrease in the number of conferences and other events.

However, he added, the tourism market is already showing some signs of recovery in the second semester and international guests that canceled at the beginning of the year are already starting to reserve for next year.

The real estate market, too, has slowed along the coast, according to developers and brokers.

While the knee-jerk reaction is to blame the slumping market on the return to power of revolutionary President Daniel Ortega, industry insiders note that the whole picture is a bit more complicated, including a slumping U.S. market due to the crisis in the sub-prime mortgage sector, and an overinflated Nicaraguan market that is starting to adjust itself.

Another factor has to do with an increase in competition among real estate development projects, which have gone from a handful several years ago to more than 100.

The end result is that sales have dropped 20-30%, construction has slowed and in the case of less-established development projects prices have started to come down.

According to Henkel Smith, president of Water s Edge International Realty in San Juan del Sur, the dip in the market is not just due to one thing, but a multitude of factors, with each one affecting a different segment of the market.

However, he noted, as is always the case in sales, all things can be spun accordingly.

The hype now is that this is a buyers market and that now s the time to make a play in Nicaragua, Henkel said.

 

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