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Tourism industry evolving to lure new business

Article - October 16, 2012
The spectacular beauty that Peru boasts is there for all to see, but the tourism industry is looking at other ways to attract people and the country is preparing for an influx of visitors
When one thinks of Peru, the first image that springs to mind is that of the ancient city of Machu Picchu - one of the seven Wonders of the World - and the legendary Inca empire. However, the country holds a wealth of archaeological sites that are the vestiges of even more ancient times, whose civilizations have bequeathed a legacy of art, and customs, rituals and wisdom.

This archaeological and cultural legacy has long been the mainstay of Peruvian tourism. However, the sector aims to enhance its future prospects by redesigning tourist circuits and looking for new markets at home and abroad. This shift in approach is also designed to incorporate a growing hotel industry, eager to keep up with international standards, and to be ready for a forecast increase in business and leisure tourists that Peru will enjoy in the coming years. 

At present, tourism is the third most important sector in Peru, after mining and fisheries, and contributed 3.7% to GDP in 2011. In addition to this, the number of tourists who visit Peru is rising despite the global recession. In 2011, 2.5 million foreigners visited Peru, a 9% increase from the year before. The Ministry of Foreign Commerce and Tourism (MINCETUR) estimates that these numbers generated around $3.3 billion (U.S.) in spending in 2011, marking a 16% increase in revenues from 2010.

During 2012, the government expects to see a 12% rise in the number of visitors to Peru, bringing the total number of foreign visits to 2.8 million.

While the number of tourists who visit Peru is rising, the demographics are changing. Many foreign visitors are now coming from other Latin American countries, as compared to the more traditional markets of Europe and the U.S. Tourist arrivals during  2011 clearly demonstrate this trend; while North Americans represented 20.1% of  the total  and Europeans 17.6%, South American visitors amounted to 55.1%.

South American tourists may be the key for Peru to consolidate this boost in tourism. Several factors support this assessment, including the proximity of the location; since many foreign visitors from regional countries return to Peru on second trips, visiting areas they did not cover the first time around.

Asia is another huge potential market for Peru. An agreement with Korean Airlines , expected to take effect by the end of the year, would provide direct routes from Seoul to Lima and increase the number of Korean tourists to triple, to an estimated 54,000.

Business travel is an area that can be exploited more. Due to business thriving in other sectors of the economy and an increase in foreign investment, Peru is seeing more corporate travellers. This segment represents around 20% of all arrivals and, according to the Commission for the Promotion of Peru Export and Tourism (PromPeru), this will continue to grow in the coming years. Most business travellers come from nations that are important trading partners for Peru, like Spain, the U.S. and South American countries.
There is no reliable way to measure business travel, due to it often overlapping with leisure tourism. However, its potential for Peru is very positive for the industry, since it leads to increased spending and benefits numerous parts of the economy.

According to the World Travel and Tourism Council (WTTC), Peru’s business travel spending in 2012 is likely to increase by 2.2% to PEN 8.5 billion ($3.11 billion U.S.), and projections suggest that in 2022 it should rise by 4.6% to PEN 13.3 billion ($4.87 billion U.S.). This situation is also changing Peru’s tourism dynamic, which has essentially been focused on cultural attractions and activities. Demand is being generated for other kinds of hotels, catering for the needs and expectations of people who travel for business purposes.

Peru’s National Chamber of Tourism (CANATUR) president, Carlos Canales has said he believes that Lima would generate around $1 billion (U.S.) from the business segment, determining that international business travellers tend to stay in Peru for five days and spend on average $300 (U.S.) per day, much more than average daily spending by leisure tourists, which PromPeru estimated to be $100 (U.S.) in 2010.

CANATUR has caught on to this trend and aims to contribute by transforming Lima into a major venue for international conventions. Although business and convention tourism are divided into separate categories in PromPeru’s statistics, according to the CEO of CANATUR, Luis Villa Prado, more conventions attract more business because they showcase Peruvian industries and services to international visitors, and establish personal contacts that can lead to future deals.  

If Peru, and Lima in particular, are to hold more events, subsequently attracting more people to the region, infrastructure will need to be developed to accommodate these larger numbers. Plans to enlarge the Jorge Chavez Airport in Lima will enable it to receive more international visitors, whether for business or leisure travel. The country’s motorway infrastructure continues to be an obstacle for time-pressed travellers. Likewise, further development of regional airports – for example in Iquitos and Cuzco – will make it easier for tourists to access some of the most impressive and culturally valuable sights.

After problems in the past over government regulations on the expansion of hotels, airports and infrastructure in general – meaning projects either took years to complete or never got past the planning stages – President Ollanta Humala is showing support for the sector.

This is a very positive sign for investors. In its one year in office, his government has displayed its dedication to the industry, strengthening and expanding destinations and infrastructure, which has bolstered confidence in the private sector. PromPeru research coordinator Roxana Patricia Perez hopes tourism will surpass fisheries by 2016, therefore making it the second most important GDP contributor.

While affordable lower-scale hotels will continue to cater for the needs of travellers on a tight budget, the quality of these facilities will have to keep up with the benchmarks set by competition. Reducing bureaucratic processes and increasing private sector participation are two areas that will need to be addressed to expand the hotel industry. Awareness of these issues exists among authorities and promoting collective investments has become institutional policy, creating present and future conditions for a friendly business atmosphere. This is crucial as according to Claudia Cornejo, the Vice-Minister of Tourism, the sector has the potential to create more jobs than others and they expect one million direct and indirect jobs in 2012 will be linked to the industry.

There is much evidence to suggest that Peru is performing well below its potential when it comes to visitor numbers. While Machu Picchu undoubtedly has international appeal, being the main attraction for around 70% of tourists that visit Peru, the site’s daily restriction of 2500 visitors limits the possibilities for growth. The numbers are capped to prevent environmental damage to what is regarded as a national treasure as well as a global attraction.

Peru’s cuisine is also gaining international recognition. This year, the country was chosen as the best South American dining destination by the World Travel Awards (WTA), regarded as the Oscars of Tourism by the Wall Street Journal. It will now compete in the world final in New Delhi, India on December 12. 

Peru already has a great deal to offer tourists. In order to diversify the options available for the consumer and strengthen provincial economies, MINCETUR in 2011 invested heavily in eight tourist destinations across the country. This move was long overdue, according to those involved in the industry, and should help to not only diversify the country’s overall tourism offering, but to strengthen each individual component of it as well so all of the targets that have been set, regarding revenues and people entering the country can be met. The wheels are in motion, but one thing is attracting people, another is satisfying the consumers’ growing wants and needs.

However, the Peruvian tourism sector is showing signs of great progress and if all of the proposed plans are carried out, the country will become an even more popular destination for business and leisure travellers alike.