Lawmakers from five political parties agreed this week that the country’s tourism sector is in a state of emergency.
On Tuesday, 150 members of the Costa Rican tourism industry traveled to the Legislative Assembly in downtown San José to support the creation of the Association for the Protection of Tourism, or PROTUR, a new tourism organization. The new head of PROTUR is Boris Marchegiani, president of the Gaia Hotel and Reserve in Manuel Antonio.
PROTUR was formed to address the growing concerns of tourism businesses in Costa Rica, which include a low exchange rate that has remained stationary recently, increased costs for services such as water and electricity, and employee payments into the Social Security System (Caja) that many consider to be too high or unnecessary.
Marchegiani describes PROTUR as a grassroots movement created nearly a year ago with a membership of more than 500 tourism business owners from each of the six national provinces. Tuesday afternoon, legislators of the five largest political parties welcomed PROTUR members to the Legislative Assembly and pledged to support the organization.
“Tourism is the hen that lays golden eggs for Costa Rica, and we as legislators are responsible to remind our government of the importance of tourism in the country,” said Mireya Zamora, legislator for the Libertarian Movement Party. “The lack of government response to the problems in tourism isn’t a small problem. It has become an emergency in this country. We as legislators are responsible to represent the voice of the more than 500,000 people that work in national tourism, and we plan to do that.”
Zamora was one five speakers who delivered fiery speeches to tourism-sector employees, drawing thunderous applause and a standing ovation. The speakers reminded lawmakers that small-scale tourism accounted for nearly seven percent of the gross domestic production in 2010. A record 2.1 million tourists visited Costa Rica last year, generating more than $2 billion in revenue.
“The government hasn’t invested enough in improving tourism after the crisis of 2008 and 2009,” said Rita Gabriela Chávez, a legislator in the Accessibility Without Exclusion Party (PASE). “If we don’t work to fix the problems in the industry now, it will affect many, many families across the nation… Tourism is a national treasure that is being robbed day by day.”
A lack of investment in the tourism industry was one of two primary issues addressed by members of the panel, who also noted that a lack of investment in infrastructure, roadways and airports would stunt tourism growth well into the future.
Increases in electricity bills, service fees, water bills, and public health and benefits payments are also hurting businesses’ bottom lines, say owners. While the exchange rate continues to hover around ₡500 per $1, service costs continue to rise. With a devalued dollar and fewer colones, lowered revenues can’t keep pace with increasing costs.
The exchange rate has remained almost unchanged through the first three and a half months of the year, despite an annual ₡20 deprecation average against the dollar during the last 10 years.
“The tourism industry is being attacked by multiple institutions with multiple heads biting the industry all at the same time,” Marchegiani told The Tico Times. “You can’t blame just one area for all the problems. The Central Bank has set the exchange rate at ₡500 to the dollar, the Caja is charging more and the Costa Rican Electricity Institute [ICE] is raising the prices of electricity. While the government is happy that tourism is doing well, the enterprises that make up the tourism industry are suffering.”
In turn, increased operating costs have forced owners to let workers go, driving up unemployment figures in the last 12 months. In many cases, other local jobs are hard to find.
“In rural areas tourism is the economy,” said Robbie Felix, owner of the Hotel California in Manuel Antonio. “If an employee loses a job, the family loses an income they cannot replace because there are no other options. I’ve had to let people go because I could no longer afford to employ them, and then I see them walking down the streets days later with nothing to do. Their well-being relies on tourism.”
In October of last year, the Costa Rican National Tourism Chamber, or Canatur, held a conference to address an almost identical concern. National tourism chambers warned that the devalued dollar would wreak havoc throughout the sector due to smaller returns on colones. With the majority of tourism expenses paid in dollars, when the exchange rate dropped, each dollar exchanged resulted in fewer colones.
“When the exchange rate drops, you still have to pay your employees and your service fees in colones,” said Dan Wise, the owner of the Río Colorado Lodge in Barra del Colorado, last October. “But you are getting paid dollars. When the exchange rate is at ₡570 per dollar one day and then at ₡500 per dollar six months later, you are losing ₡70 on each dollar. When there is a ₡70 loss on each dollar, after about $10,000 you’re looking at some serious losses.”
According to Canatur, since 2006, average operating costs have increased 11 percent, service costs have risen 31 percent and the minimum wage is up 46 percent.
“We are earning 2006 levels of income with 2010 costs,” said Carlos Lachner, the President of the Costa Rican Hotel Chamber (CCH) in October (TT, Oct. 28, 2010).
At Canatur’s presentation six months ago, the organization’s president, Juan Carlos Ramos, hinted that potential hotel closures could follow if the dollar didn’t begin to appreciate against the colón. On the day of presentation, Oct. 28, 2010, a dollar could be sold for ₡517. As of Thursday, it was ₡505.
“We’ve been warning people about this for about 10 or 11 months,” Marchegiani said. “But nothing has been done. The government agencies are compartmentalized and not unified, so they don’t even realize the overall damage they are doing to the industry. It is affecting everyone from the woman who sells empanadas in town to tourists, to the taxi drivers, to the canopy tour operators, to the hotel employees, to the hotel owners. The entire chain of the tourism industry is being affected by this.”
What Can the Government Do?
At the end of Tuesday’s meeting, lawmakers promised to support PROTUR, but there was little floor time devoted to how that would happen. As legislators moved on to their next agenda item, PROTUR members filed back onto their buses to begin their long treks back to Guanacaste, Puntarenas and other tourism regions.
Marchegiani said the organization considers the support of five political parties to be the first step toward tangible action.
“It’s good to see that [members] of the Legislative Assembly have heard us,” Mar-chegiani said. “But if we want to see any action, we must continue to be persistent. The government doesn’t want to admit that there is a tourism crisis, but there is, there absolutely is.”
The goal of PROTUR is to convince the government to establish discounted rates on certain services for the members of the organization, such as electricity rates, cellphone service, broadband Internet connections, cable television, food products, car and shuttle services, and other costs associated with tourism businesses. Marchegiani said that reduced rates for certain staples of the tourism industry would ease the current strain on the sector.
“Most of the services used by members of the tourism are uniform. We all need electricity, water, food, Internet access, transportation and employee insurance,” Marchegiani said. “We purchase so much of these services that we have purchasing power. For example, if we show up at ICE and say ‘members of the tourism industry want to connect 10,000 cellphones,’ you would think we would be able to get a discounted rate on the bulk buy. Right now, members of the tourism aren’t being rewarded for their purchasing power, and that’s what we hope PROTUR will serve to do.”
While Tuesday was a monumental day for the upstart organization, the response of the government remains to be seen. As members of PROTUR wait, the exchange rate remains low, service costs remain high and the “tourism emergency” continues, which is exactly the same predicament facing the sector six months ago.